August 2008

Economic Geology

Homestake, South Dakota (Part 1)

By R. J. Cathro

“Hostilities there have grown out of the avarice of the white man, who had violated our treaty stipulations in his search for gold… Gold had actually been found in paying quantities, and our efforts to remove the miners would only result in the desertion of the troops that might be sent in there to remove them.”  ~ U.S. President Ulysses S. Grant, in a message to Congress in 1876-77

(Cash, 1973)

The excitement and success of the California Gold Rush and the Comstock Lode led to an unprecedented surge of prospecting and mining development throughout the U.S. Southwest after 1860. Among the thousands of lode and placer showings, occurrences, deposits and mines that were discovered in the following decades, a special few stand out for the information they provided on the origin of mineral deposits and their contribution to the new field of economic geology. One of the most important was the Homestake deposit in the Black Hills of South Dakota, which became the largest gold mine in North America. It produced 39.61 million ounces of gold and about nine million ounces of silver between 1877 and 2002 from workings that extended to a depth of over 2,440 metres (8,000 feet).

This impressive history was tarnished, unfortunately, by the circumstances surrounding the birth of the camp. The Black Hills will always be associated with a tragic period in the history of the United States government and the mining industry, when stampeding prospectors triumphed over attempts by the government to defend the rights of the native population.

The search for gold in the Black Hills probably began before 1811, when natives reportedly brought small nuggets to a trading post at the forks of the Cheyenne River. When a wave of prospectors were drawn to the Hills in the early 1830s by persistent rumours of gold and by government surveys and military expeditions that described the geology as favourable, they found old adits, shafts and mining tools. Although minute flecks of gold were present throughout a large region, the amount had been insufficient to warrant a sustained effort.

Moreover, exploration was violently discouraged by the dominant native tribe in the region, the Lakota (Sioux), which considered the Black Hills (called ‘Pahá Sápa’) to be the holy centre of their world. Although early governors of Dakota Territory lobbied for intensive exploration of the hills, the U.S. government signed the Treaty of Fort Laramie with the Lakota people in 1868. The treaty created the Great Sioux Reservation, including the Black Hills and all of South Dakota west of the Missouri River, for the exclusive and perpetual use of the Lakota people, ensuring that white men could not enter or alienate the reserve.

Within the next few years, various groups, some with political rather than economic objectives, advocated entering the treaty area by force. When these efforts gained momentum due to a serious U.S. economic depression, the U.S. Army dispatched an armed force in 1874 under the command of the infamous Brevet General George A. Custer, to defend and survey the economic potential of the hills. That by itself ignored the terms of the treaty and Custer, who had led expeditions against the Plains Indian for several years, was a poor choice to lead it. Custer assembled an impressive force consisting of 10 cavalry companies, two infantry companies, 100 native scouts, 110 wagons, 1,000 cavalry horses, 300 beef cattle, and three machine guns, accompanied by an engineer, a naturalist, a botanist, two practical gold miners and newspaper correspondents.

By July 1, expedition miners found a trace of placer gold on the site of the present city of Custer, and when Custer moved to the site of the Gordon Stockade on August 1, they found a more significant placer paystreak.

“Around the campfire that night, the first mining company organized in the Hills, the Custer Peak Mining Company, was formed. …The excited soldiers, at Custer’s suggestion, called the valley of French Creek ‘Golden Valley’” (Cash, 1973).

By the end of the year, the first sizable party of miners had slipped through the army defences and reached French Creek and, by February 23, 1875, they had drafted mining laws and formed a mining district. The army tried to expel the miners from the Hills on April 7 but more continued to enter. After more negotiations, the government called off the army, which marked the beginning of a stampede to the new goldfield and the last attempt to enforce the treaty and protect the legal rights of the Indians. Is it any wonder that the Lakota killed Custer and all 210 of his troops at Little Big Horn, Montana, in June 1876? In 1877, the U.S. Congress passed another act that abrogated the Fort Laramie Treaty and provided the Lakota with subsistence rations and grazing rights instead.

This wasn’t the first instance when gold had triumphed over the rights of native people in the United States. A placer gold discovery in 1829 on Dukes Creek in White County, Georgia, resulted in a staking rush that occupied land that was under the control of the Cherokee Indians. Between 1830 and 1839, the federal government defused the tension by seizing the land, arresting 17,000 Indians and forcing them to migrate to Oklahoma along what became known as the Trail of Tears. Four thousand are estimated to have died. Their land was then sold off in a lottery.

An example of the racism of the period was contained in an 1867 prospectus for an Arizona company called Specie Basis Mining Company, which was organized by promoters in Philadelphia, New York and Boston. It stated that “the wheels of progress cannot be stopped by the wild, murderous treacherous savages; they must go down as the grass before the scythe” (Sears, 1973).

The Lakota continued to insist that their rights had been expropriated without just compensation but it was not until 1942 that the U.S. Court of Claims ruled that they were owed at least $17.5 million, without interest. The court also remarked upon President Grant’s duplicity in breaching the government’s obligation to keep trespassers out of the Black Hills, and the pattern of duress practiced by the government on the starving Sioux to get them to agree to the sale of the Black Hills. It concluded: “A more ripe and rank case of dishonorable dealings will never, in all probability, be found in our history, which is not, taken as a whole, the disgrace it now pleases some persons to believe.” In 1978, the same court ruled that interest should be added since 1878. In 1980, the U.S. Supreme Court upheld the decision (Findlaw). The Lakota, who want the return of the Black Hills instead, have refused the settlement and in spite of their poverty, they still refuse to take the money. It remains in an interest-bearing account and is now estimated to total over $750 million. By comparison, the value of the gold produced from the Homestake mine was at least $20 billion, using an arbitrary gold price of $500 per ounce.

George Hearst (1820-1891), pictured left, who has appeared in this series twice before, played an important role in the development of Homestake. He was first mentioned in connection with the California Mother Lode, where he mined with limited success in a dozen places over nine years and opened two general stores. That was followed by the very profitable acquisition of a part ownership of the Ophir mine at Comstock, where he played an important role in its success by hiring the experts who invented square-set mining and the Washoe milling process (CIM Magazine, March/April, 2008, p. 61-63).

Hearst’s success was due to his intuitive understanding of mineral economics and his ability to recognize the geological potential of a mining prospect. In the words of Swanberg (1961), “he had the three requisites of the pioneer — strength, courage and ingenuity — and on top of that he had a rudimentary knowledge of mining”. Hearst received little formal education, only two and a half years in school. However, he “quickly learned to read business contracts … had a genuine thirst for knowledge and an ability to grasp and understand the importance of things” and had “a keen nose for ore” (Rickard, 1932). According to legend, local Indians referred him to as “the boy the earth talks to.”

In his unpublished memoir, quoted extensively by Robinson (1991), George Hearst recounted how he was first exposed to mining beside the family farm at St. Clair in Franklin County, Missouri, and while delivering pork to lead mines and crude smelters operated by French miners within the Southeast Missouri Lead Belt. “When I was 15 years old, they found [the Virginia] mine only a mile from our house. … For a long time the miners would not wash anything out but would let us little fellows pick away into the big banks of dirt and we would often thus make from four to six bits a day. … The ore was galena and limestone and a sort of clay. There were a great deal of little nuggets and these would pan out about 70 to 80 per cent galena; in fact there was not a better mine in the world. … The men there were not very scientific, and I soon saw how things were done.” Later, he tried his own hand at mining: “I probably made about four or five thousand dollars from 1842 to 1849, more or less after I was 21 years old.”

Although he was raised on a fairly successful farm where his family owned 19 of the 41 slaves in the area, he remembered being impressed with how well the French miners lived compared to the farmers in his community. When “the gold fever broke out,” he sold his late father’s ‘copper mines’ and seven other mineral tracts for $1,900 to help finance the trip to California and arrived there with “just a five-franc piece left.”

After becoming financially secure due to his Comstock holdings, Hearst began to scour new mining camps for investment opportunities, working with two San Francisco lawyers as partners, James Ben Ali Haggin and Lloyd Tevis. Their arrangement was that Haggin and Tevis would provide the money and Hearst would supply the nose. Tevis was president of Wells-Fargo Express Company and a partner in the Central Pacific Railroad, while Haggin, his brother-in-law, was a businessman involved in Wells-Fargo and other California ventures (Cash, 1973). The syndicate eventually acquired interests in over 100 mining properties.

Their first success was at Park City, Utah, where they bought the Ontario property for $27,000 in 1872. It produced over $50 million of silver in the next couple of decades. Today, Park City is a historic ski resort that hosts the Sundance film festival, was the site of ski races during the 2002 Winter Olympics, and is almost a suburb of Salt Lake City. Their next successful venture was at Pinos Altos, near Silver City, New Mexico, where they paid $20,000 for an option on a silver prospect in 1876 that later became quite profitable.

George and his partners finally hit the jackpot in June 1877, when their agent L.D. Kellogg, a practical miner, acquired a 30-day option to buy the Homestake claim in the Black Hills. The Homestake vein had been discovered in April 1876 by a team of four prospectors that included two French-Canadian brothers, Fred and Moses Manuel, Hank Harney and Alex Engh. ‘Homestake’ was a word in common use that meant ‘a strike (discovery) good enough to enable a man to return home and retire.’ It resembles the word ‘grubstake,’ another prospectors term that described a loan advanced to a prospector for food and supplies.

Moses recalled the discovery of the Homestake lode as follows: “Toward spring … the four of us found some rich quartz. We looked for the lode but the snow was deep. … I kept looking every day for nearly a week, and finally the snow got melted on the hill and the water ran down the draw that crossed the lead, and I saw some quartz in the bottom. … I took a pick and … took some to camp and pounded it up and panned it and found it very rich. Next day Hank Harney consented to come and locate what we called the Homestake Mine, the 9th day of April, 1876.” The claim was 1,350 feet long and 75 feet on each side of the vein, covering a little less than 2 hectares (five acres) (Rickard, 1932).

The Homestake vein wasn’t the first discovery in the vicinity; in fact it wasn’t even the first one staked by these partners. However, whether because of good luck or skill, it was richer and better exposed at surface than the others and turned out to be part of a much larger system of wide veins.

The prospectors raised enough money by selling their other claims to drive a short adit and install an arrastra, but they soon realized that the cost of developing the Homestake was beyond their means. Hearst rushed to South Dakota to complete the purchase negotiated by Kellogg, $60,000 (plus $10,000 for a small interest owned by a merchant who had provided a grubstake). He then purchased the adjacent Golden Star claim to increase the size of the property to 5.7 hectares (14 acres), the start of a long process of consolidation of the key claims held by different owners. The Hearst syndicate incorporated the Homestake Mining Company in November and shipped an 80-stamp mill by rail to Sidney, Nebraska. From there, it was hauled about 425 kilometres to the mine with ox teams. Ore crushing began on July 12, 1878, a little over two years after the discovery, which was a remarkable feat under such difficult conditions.

The geology and development and production history of the mine will be described in the next chapter.

Unless otherwise indicated, the history in this chapter is derived from Cash (1973), Fielder (1970) and Rickard (1932).
Post a comment


PDF Version