How Greed and Coal Lost to Black Gold
Million Dollar Mystery Mine
Sept. 6, 1998


The popularly known “Million Dollar Mystery Mine” near Cumberland turns out to be no mystery after all. A rummage among long-ago records shows it was a coal mine sunk in greed- and victim of the rigours of the marketplace.

The main shaft of No. 8 Mine, a few kilometres outside Cumberland, was sunk in January 1912 to the 295 metre level. Underground and surface work, including a tipple, was completed in December 1913.

Exploration was driven on three levels on each side of the shaft on both the upper and lower seams for 200 metres. Suddenly, on August 5, 1914, work stopped altogether. It was closed off, machinery was removed, and water allowed to fill the shaft and tunnels.

At the time, the BC Mines Ministry reported: “On account of the falling-off in the coal trade, it was deemed advisable to temporarily cease operations.”

Henry Fleming, chairman of Canadian Collieries (Dunsmuir) Ltd., reported on October 21, 1914, that the shutdown was because the coal market in July “was so unsatisfactory” and the expense of the rock work “so heavy”.

He added that it would be “comparatively quick and inexpensive” to restore the mine “when the coal market warrants further expenditure” to connect it with a nearby mine.

There was also another reason: The month after the planned new mine- which was to join several producing mines- was closed, Canadian Collieries (Dunsmuir) Ltd. missed its semi-annual interest payment to bondholders.

The company spent $732,645.75 developing No.8 Mine including nearly $300,000 above ground. Twenty years later, consulting mining engineer George Watkin Evans of Seattle said a temporary hoist and tipple should not have been built until underground work proved that a commercial mine existed.

Also, “a mistake was made spending so much money on the surface.”

Under the heading “Mistakes of the Past”, Evans hesitated to blame the company’s general manager of the time, Walter Coulson, saying: “There is no desire on my part to find fault with one who made mistakes and who has since passed away.”

There were also suggestions that money was hard to secure and the company’s finances were needed in other quarters. “This of course, might be a reasonable excuse for closing the mine temporarily.”

Evans said that reasons indicated to him for the company’s action included disappointing quality of the coal, “finances need in other quarters” and the poor coal market.

But he was optimistic, believing”…there is every reason to believe that the coal to be mined at Number Eight Shaft will be comparatively cheap for many years to come. This is all presupposing that coal of good marketable quality is found.”

The mines were bought from James Dunsmuir in 1910 by Sir William Mackenzie who, with his partner Sir Donald Mann, was expanding the Canadian Northern Railway into B.C.

Coulson, a mining engineer, was brought in from Somerset, Penn. He promised in a report in 1910 that coal production in Cumberland and Extension (near Ladysmith) could be more than doubled to 2,000,000 long tons a year and profits enhanced. A Welsh firm of mining engineers, Forster Brown and Rees of Cardiff and London, was almost equally- and just as wrongly- off the mark in its forecast.

In fact, coal mine production went down as oil increasingly became the preferred motive power of industry and commerce. The record production in 1910 of 898,908 long tons was never exceeded. Profits soon vanished.

Mackenzie paid Dunsmuir $11 million (with $1 million earmarked for commission). Dunsmuir, in turn, bought $6 million worth of Canadian Northern Railway bonds. Mackenzie then floated a bonds and shares issue of $25 million, touching off a public scandal over “watered stock.”

British bondholders, forced to buy bonds in the new mining company in 1910 to get government-guaranteed Canadian Northern Railway bonds- (the railway went bankrupt during the First World War)- were fleeced.

After the purchase, $3.5 million was spent modernizing and expanding the mines. Almost $1 million went on electrification.

Later, the B.C. Royal Commission on Coal headed by Justice Malcolm Macdonald said the purchase price “was wholly out of relation to any commercial value of the assets purchased” which he put at $4 million.

Curiously or not, this is exactly the net cash Dunsmuir received in the sale, after paying commission and buying the Canadian Northern Railway bonds.

Macdonald said the capital structure of $25 million “was wholly out of relation to the price paid.” And the capital expenditures after purchase “were wholly out of relation to any business requirements therefore.

The inevitable happened. Canadian Collieries (Dunsmuir) Ltd. defaulted in September 1914 on interest payments to British bondholders who then took over direct control of the company rather than foreclose on their asset.

It fell to Fleming the following year to blame an economic depression, the disrupting effects of the First World War and a strike (unsuccessful) by miners from 1912 to 1914 which slowed but did not stop production as replacements took over.

“During the two years strike, when there was a better demand for coal than at present, but we were not able to provide it, we lost, as a consequence, a good deal of our trade connection, and under present conditions it is slow work getting it back again, though I have no doubt that we shall succeed in doing so in time,” said Fleming. He was wrong, as Coulson and Forster Brown and Rees were earlier in their predictions.

A trade journal, the Mining Engineering and Electrical Record of Vancouver, saw things differently at the time. The Record blamed the “bogus capitalization of the mines in 1910- there has been no more scandalous financial transaction in Canada than this.” Huge expenditures were made in modernization and “a new mine opened which has not been a success.”

“It became necessary to find some excuse in which to fool the English investors still further, and a labor trouble, for which there was neither necessity, nor reason, was engineered" - a viewpoint denied by the company.

“The provincial treasury was put to the expense of scores of thousands of dollars to employ police to guard the mines for the little band of eastern adventurers and frenzied financiers."

No. 8 Mine remained closed until 1937 when it was reopened for market reasons. It was shut for good in 1953 - with their loss of 400 jobs - because of rising costs and falling domestic markets. In the end, oil won. There was no mystery about No. 8 Mine but the catchy nickname will last longer than the mine.

Roger Stonebanks is a retired reporter for the Times Colonist. Sources for this article can be found in the B.C Archives and Records Service in Victoria, especially the Report of the B.C. Royal Commission on Coal and the Buckham Collection.