“I would advise persons desirous of quartz reef gold mining to commence with sufficient capital. Companies require around say £5000, so as to enable them to operate at once, with four engines on different reefs, whereby the results would be reduced to greater uniformity. I believe that success may be commanded in this as in most other fields of industry, if necessary caution be observed.”

“Before gold can be got nowadays, extensive works have to be undertaken. A large amount of capital must be expended before any return can be expected. Thus work on the gold fields is assuming a totally different aspect, and it will in future have to be undertaken by a totally different class of miner to those who first flocked to the diggings.”

The ’60s were indeed the decade of radical change for the goldfields. By 1866 the heady excitement of just years ago – the Kiandra, Lambing Flat and the Lachlan fields – was way gone. In its place, a simple formula was emerging. There was plenty of gold there – only you had to first spend a quid to make a quid.

Where though was the necessary money to come from? In the middle of an age of massive industrial expansion, there were no lack of glittering speculative investments on offer to potential investors. Similarly there were no lack of spectacular failures to leave people wary of the risks involved with such investments.

The first such bubble had occurred in Britain in the 1840s as railway companies blossomed to capitalise on the new mode of transport. Many of these failed and investors lost badly.

Significantly at this time also, investors could lose much more than their shares.

These were not limited liability companies and so shareholders could be personally liable for the company’s debts.

Alongside this initial problem, company investments in Australian goldmining had been largely unsuccessful up to that time.

The main failure had been the Colonial Gold Mining Company which was floated in London in July 1852 on issuing 100,000 £2 shares to invest in mining ventures in both NSW and Victoria.

A subsidiary of this company – The Great Nugget Vein Company – operated unsuccessfully on the Meroo field and at Tambaroora for several years and the Colonial Gold Mining Company folded in 1857.

Since these initial failures however, a major change had occurred in company structures which held out better prospects for attracting new investors.

This was the limited liability legislation which meant that if a company was established on this basis (rather than being a joint stock venture), then the worst that could happen to shareholders was that they lost their shares.

Here though there could still be a very large sting in the tail, as in a bid to get companies floated, investors only had to pay for part of their shares.

Then if the company was profitable, they need forward no more money and simply wait for the dividends to roll in.

If however it fell into financial trouble it would make a call on shareholders to forward the balance owing on their shares.

This was a massive temptation for people to invest beyond their means, and one that in the absence of tight financial controls left the field open for swindlers to flourish alongside legitimate business ventures.

18th January 1866

As if to highlight the importance of capital investment in the future development of the State’s mining industry, a major article on how to facilitate such investment was published in the Sydney Morning Herald in January 1866.

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21st March 1866

In concert with this call, the monthly goldmining report led off in March with a scathing rebuttal of how NSW’s focus on pandering to the needs of the ‘poor miner’ had driven capitalists off the field.

The article argued miners should be trying to work with capitalist interests through joint ventures as had already happened in Victoria.

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15th February 1866

The gold field report was very succinct in its assessment of the problems facing the fields. The grounds were worked out as far as the ‘poor miner’ was concerned yet local courts established in the wake of the legislation mirroring the Eureka Stockade reforms in Victoria acted to discourage reform and allow for new investment.

Similarly the government regulations relating to the allocation of mining leases discouraged either miner cooperatives or company investments in larger blocks of working ground.

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With calls like this sounding out, the time for government action was at hand. It came in the same year with a complete reworking of the goldfields legislation and its associated regulations.

These reforms were directed squarely at the problems of attracting additional capital investment in the state's gold mines, even at the expense of the interests of the small miner and the possibility of fuelling a speculative investment boom.

11th August 1866

This major re-ordering of the status quo on the fields however did not come without opposition and the voices of the rural press were heard expressing the concerns of their readers.

Chief amongst these were the removal of the local court system, doing away with the Gold Commissioners in addition to repealing the regulations limiting Chinese to cordoned off sections of the fields.

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17th August 1866

The Government however was somewhat more upbeat in relation to the benefits of its legislative changes and the Parliamentary record provides an excellent account of the rationale underlying the changes.

Basically it was about providing a fresh start for gold mining in NSW through encouraging capital investment.

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1st August 1866

For those with an eye to the detail, the actual regulations brought in under the new legislation make for compelling reading.

They are especially intesting for the insight they provide into the operation of how ground was allocated to miners under the older block system versus the newer frontage approach that gave them a section of the actual line of the gold reef or gold lead.

It’s all a bit complex, but if you’d like to find out more, the detail is certainly there to be had.

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This comment was made as part of the parliamentary debate on the new goldfields legislation in August. While the possibility of fraud increasing in the wake of the new legislation was recognised, this was effectively dismissed as not being a government responsibility. The speech went on to note that …

“Every financial panic bursts up a number of rotten undertakings, which had managed to conceal their hollowness under a show of dividends. The sufferers have no remedy. They often sink out of sight, utterly mined, and even where that is not the case they are averse to any movement in the direction of inquiry or exposure which must begin with a confession of their own confiding folly.”

Sadly for the long term future of gold mining this washing of the hands in relation to government intervention to protect the interest of investors set the stage for a speculative boom to be triggered in the event of a reef gold discovery occurring of sufficient richness to generate a public frenzy.

2nd August 1864

It was not as though this issue was unknown at that time. As an article on limited liability noted in 1864 …

“in France companies are subject to a strict preliminary examination before they are capitalised. In England any seven persons can set up a new association without such an ordeal. They have simply to register certain particulars, which may easily be so described as altogether to mislead the public with regard to the real financial position of their enterprise.”

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16th November 1869

Several years later as the ticking time bomb of a speculative gold investment boom started to loom closer, questions were again being asked as to just what could be learnt from the French experience. In the process this article also wrote the manual on how people could set up a fraudulent company and swindle investors. It was timely advice that many would soon take heed of.

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23rd August 1866

At the time the new legislatiion went through, the monthly gold news was as sanguine as ever about events.

It did note however that "it is anticipated that the new Gold-fields Bill will have a very beneficial effect upon the mining interest throughout the country. It provides for the lease of auriferous lands in tracts of 60 acres, for a period not exceeding fifteen years, at a rent of £2 per acre. This will enable gold mining to be carried on by co-operative companies on an extensive scale, and no doubt the system will shortly double our annual yield of gold."

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23rd October 1866

Then suddenly – an optimistic note at last. The news from the goldfields was very good no less.

First up reef gold mining at Tambaroora was starting to record some memorable returns but most exciting of all was the discovery of a new rich quartz vein adjacent the Weddin Mountains north of Young.

Would this however be yet another duffer to add to the large list of finds that never lived up to their early promise?

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18th November 1866

Perhaps not. As the year came to a close the news from the Weddins on the field then being called Emu Creek continued strong with miners flocking to the site and construction of the township that would become Grenfell well underway.

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