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1,TL, IFTON RIIYN COLLIERIES, LIMITED. REPORT OF THE COMltlTTFE OF ENQUIRY. The following report has been issued The committee appointed by the shareholders on the 7th October last, to enquire into the present position of the company and the raising of the further Capital required, beg to present the following report — 1. The company was registered on the 28th February, 1873, and was formed for the purpose of acquiring and working coal and other minerals from underneath a surface of about 1,100 acres, previously leased to Messrs J. and J. J. Holdsworth, by the trustees of the will of the late Viscount Dungannon, for a term of thirty years from 25th December, 1868. 2. J. Holdsworth died, and the surviving Huldsworth, under deed 26th October, 1872. assigned the lease to Colonel George Davison, John Tanner, Frederick Henry Smith, Thomas Randolph Mellor, aud Walter Long Granville This assignment by Holdsworth having been confirmed by Lord Arthur Hill Trevor (the tenant for life), the consider- ation paid to Holdsworth by Colonel Davison and his co- lessees was the sum of £ 500, there being at the time sundry incumbrances on the property which were subsequently discharged by the syndicate. The new lessees then pro- ceeded to form a syndicate consisting of themselves and fifteen others, with the object, as stated in the syndicate deed (13th November, 1872), of working, developing, selling, and disposing of the same to a joint-stock com- pany." 3. James Milne, who would appear from the prospectus to have been the vendor, had but one sixtieth share in the syndicate, and received 2500 presumedly for no other ser- vices than the use of his name. The syndicate then consti- tuted themselves the promoters of the Ifton Rhyn Collieries, Limited, and settled the termi o the prospectus, appointing five of their number directors of the company, another consulting engineer, and another auditor. The company, through !VIr \V. E. Breakspear, purchased the property for the sum of 220,000 in cash and 245,000 in free and paid-up shares in the new company. 4. At the time this purchase was effected iJr Breakspear was the private secretary to Mr Mellor, and Mr Mellor was not only a member of the syndicate,but was, under the articles of association, appointed the engineer of the com. pany, and his name appeared as such in the prospectus. This prospectus and a plan of the property were then drawn up by the syndicate, adopted by the directors whom they had just appointed, and issued to the public, announcing the formation of the company, with a capital of £ 150,00(? of which the public were invited to subscribe £ 105,000. It should also be stated that no independent engineer or colliery valuer was employed to report upon the property on behalf of the company. 5. From the accounts it appears that the syndicate made various payments forming a total of P,13,473 Is 6d in dis- charge of the incumbrances above referred to, and sundry other small claims. The committee are unable to verify these payments, as the syndicate have positively refused to produce their minute book and vouchers; but assuming these claims to be such as ought fairly to have been dis- charged, the cash profit made by the syndicate was £7,237 16s (over and above the 245,000 in free and paid-up shares as already stated), out of which Mr Mellor was paid 22,500, and James Milne 1500, "for services rendered as per agreement." It is, however, necessary, the committee should add, that no money appears to have been expended by the syndicate in developing the property. 6. Out of the proceeds of the shares taken up by the public the 220,000 ia cash was handed to Mr Mellor for dis- tribution amongst the syndicate, and the k45,000 in free shares were allotted to them. The prospectus and plan above referred to, purported to show the position of the collieries, and the facilities which existed both by railway and canal for the development of the property. The pro- spectus stated that, from the reports obtained, there were two upper seams of coal, some 7 feet thick, underlying 200 acres, in addition an aggregate of 35 feet thick of coal in the lower seams, extending over the whole estate also that, when these lower seams were reached, they would provide for an output of 2,000 tons a day for the next century. That, meanwhile, from the upper seams alone, there would within three months be an output of 1,000 tons per week, and within six months an output of 1,500 tons per week, whilst dividends of 15 per cent. were to be paid by simply working the upper seam, and 50 per cent. when the lower seams were brought into working. 7. The committee will not criticise these assumed dividends. The shareholders are equally aware with the committee that, at the time this prospectus and plan were issued, coal was selling at high prices, and hopes of large dividends from the working of all new collieries were indulged in by pr jmoters aad subscribers alike. But in the case of the Ifton Rhyn Collieries the com- mittee have to call the attention of the shareholders to a mere serious matter as affecting the syndicate and the directors. The existing facts were strangely at variance with the statements set forth in the prospectus, and nothing could justify the issue of a prospectus and plan of so misleading a character. In the first place, not one of the lower seams had been actually proved. In the next place, the limited workings in the two upper seams mentioned rendered it totally impossible for the output from those seams to be otherwise than of the most insignificant character. This is best shown by the fact that, at the time the prospectus was issued, the two pits at Ifton were full of water, had not been worked for more than a year, and the previous year's working had only resulted in sales to the amount of L312 Ss 5d. 8 8. Again, even assuming that the tonnage of coal raised could have been lirgely increased, no means existed for its removal. Instead of the Shropshire Union Canal passing close to the collieries, as stated in the prospectus, the pits are fully a mile and a halt distant from the canal. As regards railway com- munication, it is true that the plan shows what is called a Itaitway Siding" connecting the collieries with the Great Western Railway; but no such siding existed then, nor even now exists, and, as a matter of fact, the collieries were then, and are still, more than three miles away from any point where it is possible to effect a communication with the Great Western Rail- way. 9. The syndicate deed was signed by twenty gentlemen, many of them of high standing as members of the Stock Exchange, and the committee consider the syndicate as being clearly responsible to the shareholders for the issue of these documents. The committee are informed that, at the time the syndicate authorised this prospectus and plan, none of the members, except Dr Bennet, who was interested as mortgagee of the property, Mr Mellor, and possibly a Mr Granville, who has since died, had ever seen the property. Being thus, as the committee are also informed, unacquainted with the facts, the syndicate accepted the statements and reports of Mr Mellor, who, as the committee are also informed, initiated the formation of the syndicate and the sale to the company. 10. In his letter of the 27th October last addressed to the com- mittee, but also printed and issued to the shareholders, Mr Price, the chairman of the syndicate and the board, says that the directors have been victims of the delusion equally with the shareholders. The committee would gladly adopt that view, but it must be borne in mind that the shareholders generally knew nothing of the Ifson Rhyn Collieries except from the prospectus and the plan. These prospectuses and plans were sent all over the kingdom, in order that the company might be floated, and that sufficient applic itions for shares might ensure a quotation on the Stock Exchange. It was manifestly unlikely that investors generally could examine the property for themselves, and they were fairly entitled to assume that the directors had satisfied themselves of the position and state of the colliery, and the means of access to it, before they allowed their names to appear on the prospectus 11. The committee do not hesitate to say that no applications for shares would have been made if the prospectus and the plan had been in accordance with the facts of the case. It is true the prospectus contains extracts from reports purporting to bo made by one or more colliery engineers, employed by the syndicate, but the directors neglected to call in any engineer to test the accuracy of such reports in the interests of the company, and under these circumstances it is obvious that no value can attach to reports made simply in the interest of the vendors. Whatever may be the ultimate value of the property, it is clear to the committee that no justification existed for representing it as a going concern of appreciable value, still less as being in any way worth the (15,000 in cash and in shares divided amongst the syndicate afterthe public had been induced to come in and subscribe. 12. The committee are also of opinion that the payment by the Directors of X-500 to Messrs Sandeman and Co., and zC500 (irrespective of broker's commission) to Messrs Peppercorne and price (chairman), for allowing their names to appear as brokers to the company, were payments which, even if legal, were never. theless an unjustifiable use of the shareholders' m Iley seeing that a member of each of these firms was in the syndicate and interested in the sale of the property to the company. 13. In order to get a quotation on the Stock Exchange a declaration was made by the chairman that none of the shares were allotted conditionally whereas it was stated by the chair- man on 6th January, 1874, that a large number of shares were subscribed by the directors upon an understanding that the second payment of 92 10s per share should he deferred. The decree of Vice-Chancellor Hall in the suit of Bennett)). Mellor, is also evidence of the manner in which some (at any rate) of the subscriptions were obtained. The committee will now proceed with their report on the manigement of the Ifton Rhyn Collieries after the syndicate had appointed the directors. 14. The line marked upon the plan as Railway Siding," and purporting to be the line of communication between the collieries and the Great Western Railway, turned out to be an imaginary railway of some 2l miles long, as proposed by Mr Mellor, but to which LDI d A. Hill Trevor objected as interfering with his es- tate. Under these circumstances, the directors found it neces- sary to seek another mode of communication, and as Colonel Lovett's estate lay between the collieries and the Great Western Railway, negotiations were concluded for a lease from Colonel Lovett of the coal under his estate. This lease was not granted to the Ifton Rhyn Collieries Company, but to Mr Mellor and three of the directors. Even now no deed of trust has been exe- cuted showing that it is held on behalf of the Ifton Collieries Company; but, notwithstanding that, considerable sums have been paid in respect of this Gobowen estate by the Ifton Com- pany. In addition to what has been expended in engines, boilers, and plant, for commencing the sinking of two shafts, and a dead rent of je700 per annum to Colonel Lovett, Mr Davies, the Company's agent at Ifton, has received for his interest in this Gobowen lease the sum of XI,500 in cash and 150 fully paid-up shares of the Ifton Company, purchased in the open market through Messrs Peppercorne and Price at a cost of X650 5s. Mr Mellor has also been paid P,500 in cash "for his trouble and exertions in the matter," so that, with law costs and other charges, and the purchase of smaller properties lying between the Gobowen property and the Great Western Railway, a sum approaching £10,000 has been charged to the capital ac- count of the Ifton Company, in order to discharge claims arising out of the acquisition of a lease over which the Ifton Company have not at this moment an atom of control, except in so far as a Chancery suit may establish their interest. 15. It was not until this Gobowen lease was thus arranged that Mr Melior let the shareholders in the Ifton Company know that it was necessary to construct a railway of some three and a half miles long in order to put their coal upon the railway sys- tem. The prospectus was silent as to any capital being required for the construction of a railway to the collieries, and indeed the line upon the plan marked" railway siding" is drawn in pre- cisely the same form as the constructed line of the Great Wes- tern railway which it is shown as joining. But after the Go- bowen lease had been acquired, the truth came out, for on the ''EAV,'™11"' \8,7i' Mr stated (in his printed report) that £ 50,000 would be required to construct the railway to the Ifton Collieries. 16. In the opinion of the committee, the suppression in the prospectus of all reference to the non-existence of a railwav to the Collieries, and the issue of a plan so desigued a. to lead to the beiii'f that such railway was really in existence, is of itself sufficient to condemn the whole proceedings of the Syndicate irrespective of the other misrepresentations contained in the prospectus. 17. As regards this Gobowen route for the railway, it may probably be true that the directors have now secured the right to make what is termed "a railway by consent pa-sing from Ifton Collieries to Gobowen Station on the Great Western Kail- way. But the question arises—are the committee justified in advising the shareholders to find the money to con-truct such a line? In his report, as read at the specialmeetingof the sharehold- ers, \lrFrance,in alludingto this proposed railwity says, "I should think the shareholders would put a stop to this preposterous ex- penditure." He has also informed tha committee that the con- struction of this line would be fraught with difficulties from one end to the other. Ho says that, immediately after having Go- bowen station, a short tunnel of some fifty yards in length will be rpqui-ed to carry the railway under a junction of four public roads, which the road authorities will not allow to be cro-sed on the level. Then a bridge of some fourteen yards under the iluiyheadroad. Isext, a brook has to be crossed; and, after entering the Belmont estate, the line has to be carried by a tunnel, which Mr Mellor, in his corrected estimate says ou^ht to bo 950 yards long. In addition to heavy cuttings and Em- bankments, the crossing over the canal can only be effected by au expensive bridge; and, in short, Mr France altogether difftlrs from .Mr Mellor in his estimate that this proposed railway and tunnel can be completed for zC50,000 18. As regards the past outlay, the committee are of opinion that there has been a great waste of money under the various heads of expenditure in connection with the Collieries It ap- pears to the committee that from first to last the to has been no effectual check either on the cost incurred or the payments made. The entries of wages paid appears in the minute book down to the 23rt! Decembor, 1S73; but from that date down to 4",h September, 1874, there is no wages entry in the minute book When the entries recommence, the wage; appear to averasre be- tween E400 and £500 per week. It is true that a finance com- mittee existed but it does not appear that this finance commit- tee exercised any effectual control over the expenditure 19. The shareholders are aware that Mr Price in his printed defends Mr Mellor s estimates and general system" of car- rying on the colliery working,, and Mr Price calls upon the committee to retain the professional services of an independent engiueer to decide between Mr France's report and Mr Mellor's Views. Mr France tdls the committee that, whilst he is quite prepared to stand by his report, Mr Price's proposal to call in an engineer is a fair one, and ought to be adopted by the commit- tee. The committee are, however, nnwilliog to thus add to the cost of their enquiry, especially seeing that the Board have so recently bad the joint report of three collierjT engineers at a cost to the company of X236. These engineers avoided comment- nnoPJgfi,34 of l\Ir report, containing his estimate of P-50,000 as the cost of constructing the railway. 2). The decision of the committee that they would not, on their own responsibility, call in another engineer has led to Mr France resigning his seat at the committee, on the ground st -.ted in the following letter :— "18, Cavendish-road, 13th November, 1875 "Ifton Rhyn Collieries. ~?e ,r ^aj°r Little,—I regret to inform you, as Chairman of the Committee of Inquiry appointed by the shareholders that I feel it my duty to send to you my resignation as a member of that committee. You are aware that, having no previous con- nection with the company, I was asked by Mr William Froom on behalf of himself and his clients, to examine the statp of the works at the Collieries, and to report to him on the position of the company generally. My report was read at a special of the company generally. My report was read at a special meeting of the sh areholders, when they did me the honour of electing me a member of the Committee of Inquiry, which they felt it necessary to appoint. "MrPrica, the chairman of the company, afterwards issued to the shareholders a letter, in which, at great length, he wished to justify the Board in nearly everything that had been done, and he, moreover, challenged the accuracy of my renort from beginning to end. It is true Mr Price admits he has uo nrofes sional knowledge of the details of colliery workings, and it is also true that his co-Directors disavow any responsibility for the statements in his letter. But Mr Price is nevertheless the chairman of the company and he not only admits his individual responsibility for what he has written, but he also calls upon the committee to obtaia the report of an impartial engineer or colliery vainer to decide between his statements and tnosa con- tained in my report. Personally I much prefer the committee taking the opinion of an engineer, but you .are aware that when I proposed it at our committee meeting yesterday, there was a decided expression of opinion that too much money had already been spent in these reports of colliery engineers, and it was added that other mem- bers of the commitee had by personal inspection satisfied them- selves of the unremunerative expenditure at the Collieries. This decision of the committee places me in a difficulty. On the one hand, Mr Price challenges the accuracy of m v renort whi e, on the other hand, the committee are lookin J Z advise tneni on those practical <ie>tr»iiu wnicH win necessarily nafe to be embodied in their recommendations to the share- holders. I stand by everything in my report, and you may still count upon my giving to you and the committee the best ad- vice I Gan give on any point submitted to me. But, under all the circumstances, 1 think I should place myself in a false position were I to remain a member of the committee and thus have to sit as a judge between Mr Price's statements and my own. If the committee hesitate to incur the cost of obtaining a report from a professional colliery valuer, the question is one which I think may be fairly submitted to the shareholders for their decision. Having attended all the meetings of the com- mittee, I am aware our enquiry is so far completed that the future policy, and the financial details for carrying it out, are practically the only points yet to be dealt with. If, therefore, the committee decide to remit this question to the shareholders, I see no reason why the special meeting necessary should not be at once convened. The report of the committee up to tkat point can then be submitted to the shareholders, and a decision taken thereon. The committee need not necessarily be dis- solved, and the special meeting of the Shareholders can be adjourned till such day as the committee can make their fur- ther report, the course of tbeir proceedings being meanwhile determined by the decision of the first meeting. This would be tantamount to what, in parliamentary phraseology ia termor! Reported progress, and asked leave to sit again.' In resigning under the circumstauces I have stated. I have the pleasure of acknowledging the great courtesy I have re- ceived at your hands as chairman of the committee, and also from the other members.' I remain, yours very truly, R. S.' FRANCE. Major Iilttle, &c., &c., &c." 21. Under these circumstances the committee find it neces- sary to report to the shareholders at this stage of their inquiry. If the shareholders decide that another engineer shall be called in, and wiil provide the funds for th it purpose, the committee will adopt that course but if not, then they will adopt the sug- gestions contained in Mr France's report as the basis of their recommendations in regard to tke future operations, and the capital required on the modified plan he suggests, both as to the sinking of one pit and the railway. The mattrr is well worthy the close consideration of the Shareholders, seeing that, ac- cording to Mr Mellor's corrected estimate, the carrying out of his plans will involve the expenditure of at least £ 150,000 addi- tional capital.' The committee have obtained from Mr France his suggestions as to the present necessary expenditure in com- parison with the outlay recommended by Mr Mellor, and a sum- mary is enclosed with this report. 22. Pending the decision of the shareholders, the_ directors ha u on the recommendations of tbe com?llttee, diminished the working expenses of the colliery by reducing the wages paid, and by asking Mr Mellor to send in his resignation of the post of engineer to the company. 23. At the late special meeting of the shareholders, Mr Price the chairman, stated his readiness, and that of his co-directors' to resign, if so desired. The committee consider that this ques- tion should be left to the decision of the shareholders —Signed on behalf of the committee, FRANCIS LITTLE, Chairman. 24th November, 1875. Copy of Mr Mellor's Estimate of the Cost of the Works specified in his Report of 30th June. 1874, as revised and corrected to 28th February, 1875. O^GE „ WORK AMOUNT Sundry Requirements £ 1,000 36 COMPLETE NO. 2 PIT 3,600 87 WORK AT NO. 1 PIT 1,250 33 3 9 WORK AT NO. 3 PIT 11 000 4 0 BRICKWORKS AND WORKSHOPS' 4'™ 4 1 EQUIPMENT OF NO. 8 PIT. LVWO 34 Railway Estimate #^oooni Less already done 6'onn f u>000 Working Capital to this point 2,380 4 2 Gobowen Pit 4 3 And further Working Capital.'10,000 X150,000 The latter two items may be deferred for a time. T. RANDOLPH MELLOR, 28th February, 1875. MR FRANCE'S SUGGESTIONS. fhe^hole00/?^^6 Sl\0uld ?dvi?e the Shareholders to suspend ii u n n nr. nL operatl"ns involved in the schedule of further and in lieu therp'f P°Se by Mr Mellor> amounting to £ 150,000, wh n ik2 l! Carry one snaft down to lower seams. ^e!to"ed and fimhSeamS-?a,ve beeQ reached. confidence will be other shafts -.= »! -Ca?lfca readl|y provided for carrying down re^un-fed. The cheapest shaft to carry down is h ,ih 1 Mellor has already sunk 75 yards. A 10-feet shaft wo d have been preferable, hut the 8-feet shaft can be continued as a test shaft. 2 All thoughts of the costly railway to Gobowen should be and no outlay incurred on any railway scheme until the deep seams have been reached. In that event a very cheap line of about equal mileage with the Gobowen route can be con- structed along the side of the canal to a junction with the rail- Qear ^L'ndford. This cheaper linejwould give access to the (j-oboiven Kstate as well as to the Ifton. Meantime it is desirable to complete the tramway to the canal as an outlet not only for the coal from the upper seam now being worked, but also for bricks from the valuable fire clay in that seam. 3-H the least possible cost is incurred in the construction of the tram way the canal ought to be reached, the 8-feet shaft carried down to the deep seams, and a very profitable trade es- tablished in fire bricks, &c., for a sum not exceeding £ 10,000. 4—The Committee are aware that Major Bevilb 's friends have arranged to advance (on a bill of sale) £ 7,000, in order to pay off sundry debts owing by the Company. Arrangements can doubt- less be made for tha.t loan to be continued beyond the six months already agreed to. If so the X10,000 specified will be all thai has to be provided pending a further development of the property, and there ought to be no difficulty in raising a sufficient sum by issuing five per cent. debentures. 5—It may be assumed there will bo no difficulty in the Ifton Company establishing their right to work the coal un ier the Gobowen lease. That being so there can bo no doubt of the very great intrinsic value of the property. Ifl he money absorbed in the promotion of the Company had been expended in sinking to the coal, the promoters, it is true, might not have reaped their harvest so quickly, but, at the same time, there would have been fewer grounds of complaint oa the part of the ordinary shareholders. 20th November, 1875. R. S; FRANCE.