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Silver Mining In Utah

Gold, silver and lead were Utah’s principal mineral products up to the period 1900 to 1905, when copper surged ahead toward its present leading position. Zinc did not become of real value to the state’s mineral economy until 1925 when the new process of flotation made possible the separation of lead and zinc in the ore. Prior to that, zinc was an objectionable constituent of lead ore, for its presence interfered with the lead smelting process. (Utah's Mining Industry; An Historical, Operational, And Economic Review Of Utah's Mining Industry; Utah Mining Association; August 1967, page 8)

The critical effect of transportation is illustrated in Utah's history by the fact that mineral deposits had been found in Utah's famous mining areas before the railroad was completed to Utah in 1869. However, there was little mining other than for silver and gold. The lead, copper and other metals could not be profitably transported in wagon trains to eastern markets. Immediately after the railroad reached Salt Lake Valley in 1870, lead and silver mining became a major industry. (Utah's Mining Industry; 1967, page 11)

Prior to 1893, silver mining was the backbone of Utah's non-agricultural economy. The industry thrived due to high-grade discoveries and favorable government intervention. Before the panic, silver was the undisputed king of Utah mining. After the panic, Utah's mining industry pivoted toward industrial metals like copper and lead to survive.

Utah's history is often synonymous with pioneers and agriculture, but it was silver that fundamentally transformed the state from a secluded territory into an industrial powerhouse, and the railroads and the low-cost transportation they provided played a vital role in that transformation.

In the 1870s and 1880s, Utah's mining was primarily "bonanza" mining; miners seeking high-grade veins of silver and gold that were valuable enough to ship long distances by wagon or early railroads. In the late 19th century, silver mining was the primary engine of Utah's economy. It moved the state away from a self-sufficient, barter-based system toward an important part in the nation's cash-heavy economy.

Mining created "instant cities" like Park City, Eureka, Bingham Canyon, and Alta. In their boom times, these towns featured opera houses, luxury hotels, and a cosmopolitan culture that contrasted sharply with the more conservative rural settlements. Silver mining created "Silver Kings" like Park City's Thomas Kearns and David Keith, whose fortunes built the grand mansions on Salt Lake City's South Temple street and funded local institutions. Districts like Park City, Tintic, and Mercur became legendary. The Ontario Mine in Park City, for instance, was so profitable it helped build the Hearst family fortune.

The need to transport the silver and gold ores led to a massive expansion of railroads and the construction of numerous inefficient smelters near the mines, and massive smelters in the Salt Lake Valley.

Panic of 1893

During the Gilded Age of the 1870s and 1880s, the United States had experienced economic growth and expansion, resulting in increased money supply and gold reserves to back the money supply. But much of this economic expansion depended on high international commodity prices, which fed the growth of reserves of gold in foreign banks. Increased gold reserves meant increased silver reserves.

Some historians identify the Sherman Silver Purchase Act of 1890 as the primary cause for the Panic of 1893. The Act required the government to purchase large amounts of silver using Treasury notes, which were backed by gold. As the money supply grew, investors became uneasy and began redeeming these notes for gold, rapidly depleting the nation's gold reserves and destabilizing the economy.

To meet the growing demand for silver, the Sherman Silver Purchase Act was passed in 1890, requiring the U.S. government to buy 4.5 million ounces of silver every month. This created a guaranteed, high-price market for Utah's silver mines, fueling massive speculation.

Silver mining and silver production went into overdrive to meet the ratio of silver to the inflated stocks of gold. This ratio of silver to gold was set by the 1890 law. Governmnet silver purchases increased the nation's silver reserves, which in turn forced an increase of gold reserves in a self-feeding loop of pending ruin. To make use of the increased silver reserves in the Treasury, the U. S. Mint began producing more coins. And more silver coins meant more money in circulation.

The glut of silver coinage increased the nation's circulating money supply, which fed inflation, forcing banks to call in their loans to beat the increasing devaluation of the money they had lent. Businesses who relied on credit saw their rates begin to climb and credit began to tighten. This in-turn resulted in less business activity overall, thus bringing about the Panic of 1893.

Fears of inflation brought about an increasing demand for gold metal as a hedge against inflation. Gold began to flow out of the treasury in worrying amounts, as investors traded their gold treasury notes for actual gold, which in turn sparked rumors that the government was low on gold. As private ownership of gold metal grew, and government inventories fell. Government silver reserves were reduced as the ratio of gold to silver went into free-fall as government gold reserves fell.

The price of gold stayed low because its price was set by the Treasury (set at $20.71 in 1834). Of course, gold was still being mined, but its set price and its scarcity kept mining activity at a minimum.

In the years since the Sherman Act of 1890, the increasing amount of silver in the Treasury had resulted in more silver coins in circulation. The low inventory of gold forced the government to reduce its reserve of silver metal, which in turn ended the minting of silver coinage. The demand for silver metal plummeted, since at that time the government was essentially the only buyer of silver.

The open-market price of silver continued to decline, and mining it became barely profitable. Many mines closed, throwing men out of work, and those who remained were forced to accept severe pay cuts. The mines of Park City and the Tintic district saw an immediate decline. Mercur was primarily a gold district by that time and was only minmally affected.

In an attempt to stop the drain on government gold reserves, President Grover Cleveland summoned an emergency session of Congress on August 7, 1893, for the repeal of the Sherman Silver Purchase Act of 1890.

As already noted, the Sherman Silver Purchase Act of 1890 had required the government to buy millions of ounces of silver monthly. With the repeal of the Act of 1890, the biggest buyer of silver was gone. The government suddenly stopped buying silver, causing the market price to collapse from $1.16 per ounce to around $0.60 within a year. A national economic depression was sparked largely by the collapse of silver prices.

The Panic of 1893 was a severe four-year economic depression in the U.S. sparked by a run on gold reserves, a stock market crash, and the bankruptcy of major railroads like the Union Pacific and Northern Pacific. It caused over 15,000 business failures, over 500 bank closures, and more than 18 percent unemployment at the peak of the depression, marking the worst economic crisis in U.S. history at the time.

The Panic of 1893 was a fundamental shift for Utah mines that ended Utah's "Silver Age" and forced the mining industry to reinvent itself. Across Utah, mines that were only profitable at "government prices" shut down overnight. Production in districts like Tintic, Bingham Canyon and Park City plummeted by over 30 percent. The mines that survived were those that produced silver as a byproduct, along with copper and lead, rather than those that mined only silver.

After the Panic

The "Silver Panic" forced a survival-of-the-fittest evolution. The industry moved away from individual "striking it rich" toward massive industrial processing which almost in every case included mining both silver and lead, together with zinc when all three were found in the same vein.

To continue their profitable operations, mine owners focused on "low-grade" ores they had previously ignored, specifically copper, lead, and zinc. Silver became a "byproduct" rather than the primary goal.

Instead of shipping only high-grade ore, ready for direct input to the smaller smelters, Utah built massive smelting plants in the Salt Lake Valley that could process the lower grades of ore. This allowed for the profitable processing of massive amounts of low-grade ore that was first sent through concentrators and reduction mills.

Bingham Canyon Survived

The Panic of 1893 indirectly paved the way for the Bingham Canyon mine to become the "Richest Hole on Earth." By the early 1900s, copper surpassed silver as Utah's most valuable export, fueling the electrification of America.

Park City Survived

Park City was already a "millionaire's playground" by 1893, home to 23 millionaires. Because its mines were world-class, they were better equipped to weather the storm than smaller operations.

Major producers like the Daly and Ontario mines were so profitable that the Panic had a relatively marginal impact compared to other districts. The Park City mines had enough capital to keep their operations going while other operations failed.

Park City shifted from speculative "bonanza" hunting of silver and gold to massive, corporate extraction of lead and zinc.

Eureka Survived

Eureka was the "financial heart" of the Tintic District, becoming the business for surround towns that included mammoth and Silver City. Unlike Park City's smooth transition, Eureka's experience was defined by a bitter struggle between the mine owners and the mine workers.

It started with a wage war in early 1893, as silver prices plummeted. The Bullion-Beck mine slashed wages by 50 cents (down to $2.50 a day). This sparked a massive strike. It was reported that a crowd of about 40 women led a march to the Bullion-Beck mine to physically prevent strikebreakers from entering the company's mine shafts.

After the strikes, Eureka survived by evolving its technology. They moved away from shallow prospecting mine shafts, less than 200 feet, to deep-shaft mining with shafts as deep as 1500 to 1800 feet.

By 1899, the Tintic District overtook the other districts to become the top mineral producer in Utah.

Pittman Act of 1918

Following the struggle of the 1890s, the Pittman Act served as a massive federal intervention that revitalized Utah's mines during and after World War I.

The Pittman Act of 1918 guaranteed high silver prices, at $1.00 per ounce, and extended the life of silver mining towns into the next decade.

The Pittman Act authorized the U.S. government to melt down up to 350 million silver dollars to sell to Great Britain, and its colony of India. Crucially, it required the U.S. Mint to replace those coins by purchasing newly mined domestic silver at $1.00 per ounce.

At the time, in 1918, the market price for silver was higher than $1.00, but the price varied widely on national and world markets, so the Act was essentially a massive subsidy. It guaranteed a profitable price for the Utah mines, leading to a boom in the Tintic district and in Park City, keeping the industry afloat through the early 1920s.

The Pittman Silver Act was passed on April 23, 1918, and allowed silver dollars to be converted to silver bullion for re-sale due to shortages during World War I. Of the $270 million silver dollars converted to bullion, 95 percent, or $259 million, was converted to bullion and sold to Great Britain and India at $1 per ounce. Then, the same quantity of silver was purchased from the silver mining industry and converted to silver dollars.

The Pittman Act expired on June 15, 1923, which in-turn affected the operations of the Tintic and Park City mines, which were shipping silver and lead, with varying amounts of gold and copper. As a result of the expiration of the Pitman Act, the price of silver in the United States collapsed from $1.29 before the Act, down to 65 cents by the end of 1923.

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