I was recently sitting comfortably in a reading room of the Library of Congress, going through some papers left behind by Hermann Hagedorn, William Boyce Thompson’s biographer. I was minding my own business, trying to speed-read interviews related to the Magnate’s acquisition of a mining venture in Ely, Nevada, dreaming of my next cup of coffee, when this bizarre vision presented itself.
Here I was in an exclusive club in the Great Beyond. I’m sitting at an ornate mahogany boardroom table surrounded by William Boyce Thompson’s lieutenants, who are explaining to this greenhorn the inner workings of the Ely, Nevada deal. Apparently all these guys do is sit around all day smoking Cuban cigars, drinking expensive whiskey, playing cards, and telling stories about the Good Old days, when it was a point of pride to “make a killing.”
I can’t count how many times these old timers shook their heads and laughed as they told the story about how Thompson (1869-1930), the wily financier, miner, and stock-market manipulator, outfoxed the Guggenheim Brothers, who were putting together a nationwide smelting and mining business, ASARCO. Listening to the banter, it’s not clear whether Thompson and his partner in Cumberland-Ely ever made a dime mining the mine’s low-grade copper ore. But it doesn’t sound like that was ever the intention anyway. They made their money every other possible way.
Even Hagedorn, biographer and poet, was there at the table, keeping the record straight at key junctures. Hagedorn described Thompson’s partner, George Gunn, as a “rough Nevadan with a heart of gold.” Gunn, he said, was tall, heavy, and fond of a good shot of whiskey but never drunk. He also loved to gamble, one of the many traits that he shared with Thompson.
“One of his driving ambitions was a passion to beat WB at Canfield, an ambition that cost him $50,000 over 20 years. WB never kept the money; he invested it in churches,” says Hagedorn, drawing a quick laugh from the others, who no doubt had an intimate, if not stinging, appreciation of Thompson’s prowess at the card table.
Partnership Made in Heaven
The partnership between Gunn and Thompson, Hagedorn points out, dates back to 1893, when Thompson was in his early 20s and got the Dutchman’s mine in Montana. Gunn was in charge of operating the mine, and the pair used to spend weekends together. During the next couple years, they ran all over Montana looking over their claims. They had numerous leases on lands.
“WB first came in touch with George Gunn when the latter was a miner in Phillipsburgh, Montana,” recalls William Star Bullock. “Gunn later became a shift-boss and then a mine superintendent. He was seemingly all right on small properties but not capable of handling large operations, as WB found out later. Gunn was a field expert for the Guggenheim interests for a time, locating and investigating likely mining properties.”
“WB had an extraordinary gift for picking the right man for the job,” seconds Charles F. Ayer, a long-time Thompson employee. “Gunn was an instance in point. He was not a trained engineer but he had an extraordinary nose for smelling out copper possibilities and had the run and gossip of all the camps. WB used him as a kind of pioneer. When he reported favorably on a property, Thompson would send his engineers.”
“Well, all through the summer of 1906, there was constant hubbub of excitement upstairs and down,” recalls Cornelius Kelleher, an assistant to Thompson, talking about the Magnate’s office in Manhattan. “George Gunn was around the private offices. Tall figure with a black hat. Trick of blowing his nose with his fingers, even on a carpet. Very quietly mannered, and well-conducted.”
Gunn, the group agreed, made a fortune speculating in mining stocks during the boom in the Nevada mining camps of Tonopah and Goldfield. He resigned his position in 1905 and was going to make a trip to Honolulu when Thompson urged him first to investigate what was happening in Ely. At the time, Ely was generating a great deal of talk, remembers Henry Krumb, an engineer who first worked for the Guggenheims then joined Thompson in 1908.
“What kind of talk?” I ask.
Though most of the ore deposits in the region were low-grade, I’m told, there was talk of doing large-scale processing of the ore. Thompson apparently saw that industry concentration, led by ASARCO and others, was going to revolutionize the copper industry and make mining low-grade ore profitable.
Next Stop: Ely, Nevada
“Gunn went to Ely and was so impressed with the possibilities that he abandoned his Pacific trip,” says Krumb, “and began to take options on mining claims for the joint account of Gunn and Thompson. He invested all his own savings, and borrowed all that he could. Among the properties taken up by Gunn and Thompson were the Veteran group of mines and the Cumberland-Ely mines.”
Very interesting, I interject. But why wasn’t the company named Thompson-Gunn? Thompson had already struck it big with his Shannon Mine in Clifton, Arizona, and earned a fortune making Wall Street trades. He was the bigger fish. Fred Ayers, another Thompson employee, had the explanation for that.
“WB knew George Gunn inside and out. When it came to choosing a name for the firm…he insisted on Gunn’s name preceding his. WB knew Gunn’s weakness for a prominent place, and knew that he would work three times as hard if his name was at the top.”
“Gunn realized the importance of water for concentrating the ore in the mills and for smelter operations,” says Krumb. “He took options on the McGill Ranch near Ely and its water rights, and on all other water rights that he could get. As the Cumberland-Ely needed money to take up the various options that Gunn secured, including the option on the McGill Ranch, Mr. Thompson interested the Guggenheims, and they acquired a block of stock in the Cumberland-Ely Company.”
At this point, Hagedorn, who has been sitting quietly listening to the businessmen talk, can’t help but interject. He holds up a copy of his notes from an interview with Thompson, who says that it was his idea to buy up the water rights. Hagedorn also knows where Thompson got the money, $50,000, to buy Cumberland-Ely. He secured it from J. Guthrie Hopkins, a Scotchman, who was president of the Arizona Copper Company in Clifton, Ariz.
Up Among the Green Sage
Hagedorn can’t help but wax poetic about the site of the Cumberland-Ely mine. The businessmen willingly indulge him. In their time, it was perfectly okay to use flowery language.
“The Cumberland-Ely mine was situated a dozen miles west of town, up a winding canyon. Its shaft descended from a promontory dotted with scrub cedar and luxuriant apple-green sage and commanding a broad valley, running southward along the steep slopes and jagged summits of the Egan range to a distant circle of lavender mountains, with a silvery gap in the center to let the fancy through.”
In those days, the Cumberland-Ely properties adjoined the Giroux property, which eventually became part of the Consolidated Copper Mines Company. The Cumberland-Ely properties were farther up the canyon from the Nevada Consolidated’s group of claims owned by the Guggenheim Brothers.
Then Hagedorn drops a bomb. Thompson had actually sold controlling interest in Nevada Consolidated to the Guggenheim Brothers in 1905-1906. He had secured options on a large block of stock at about $11 a share from James Phillips, Jr., and S.D. Loring and Co. of Boston.
“He sold it to the Guggenheims for $12.5 a share,” recalls M.L. Requa, who financed the Shannon Mine for Thompson. Requa, who was associated with the Guggenheims, was the original organizer of Nevada Consolidated. After Thompson sold Nevada Consolidated to the Guggenheims, he told Gunn to “look around for another mine” in Ely, said Ayer.
“So, he had already profited on the deal once,” I say, as the complications of the deal began sinking in. “Then he’s thinking, let’s buy another mine up there and sell that to them, since they’ll need some scale to justify putting in a smelter to process the ore.”
The Deal That Keeps on Giving
Hagedorn nods and fills my glass. Then he lets lose another ballistic. Thompson, he says, only became interested in Nevada Consolidated after he received a letter from Gunn, who had tried unsuccessfully to interest the Guggenheims in the mine.
As Victor Herbert’s “The Streets of New York” starts to play in the room, Krumb recalls what Ely was like in the spring of 1906. “It was a booming mining camp in the style of the Old West. Open gambling and dance halls flourished. Construction on the railroad had started, but travelers and all supplies went in there from Eureka – a distance of ninety miles, by sleigh in winter and by wagon in summer….Predictions were made that Ely in a few years would have more inhabitants than Butte, Montana.”
“The town of Ely was boomed with a vengeance,” Ayer concurs. “Streets were laid out with sewers and electric lights. Public buildings were erected. A hotel was built. Lots were sold at high prices, and once a month photographs were sent east showing the improvements. ‘Watch Ely Grow,’ was the slogan. Ely was to rival Butte and surpass it. It was like a gold excitement.”
The boom gave Thompson a real estate bug that he would later regret. He learned that Nevada Consolidated was contemplating building its smelter near the town of Ely. The smelter would bring thousands more people to town who would need homes, places to shop, and entertainment. Gunn and Thompson took up a large area of land near the would-be smelter site and started the town of East Ely.
“They figured they would lay out the town on a plateau, because the canyon had been flooded by cloudbursts several times,” Ayer recalls.
Thompson, an inveterate gambler, went all in.
Krumb recalls, “WB went a mile or two on the desert from the old town of Ely, purchased hundreds of acres, and started the development of a town site with sewers, water mains, fire protection, paved roads, sidewalks and other improvements. He built a hotel, dozens of houses, bake shops, stores, and equipment running to a million and a half. “
Unfortunately for Thompson, engineers for Nevada Consolidated decided that there wouldn’t be enough water at Ely to supply both the smelter and the town’s people, recalls Arthur Smith, who managed the East Ely project for Gunn and Thompson. He arrived in Ely in late 1907.
“They decided that the smelter should be built at McGill ranch near Duck Creek,” says Smith. Duck Creek was about 14 miles from Ely on the line of the Nevada Northern Railroad, where Nevada Consolidated had sufficient water rights to treat 25,000 tons of ore daily, according to a Wall Street Journal article.
“This decision knocked the pins from under East Ely,” says Smith. “There was actually no reason why, instead of moving the smelter to the McGill ranch, the water from the ranch should not have been brought to East Ely. WB himself recognized that later, but said at the time when the matter was in the air he had been too busy to study the situation.”
Says Krumb, “Later he bade his investment goodbye and turned to other things. Probably this brought him a realization of the fact that he was essentially a mining man and not a realtor. So far as we recall, he never attempted another city building operation.”
“Didn’t WBT get sick and tired of that mess,” recalls Cornelius Kelleher, Thompson’s long-time assistant. “The inconsiderate Guggenheim management decided to put the town site at McGill, and most of the employees did not commute….So, WBT, I mean ‘Mr. Thompson,’ puts down a letter he had been reading, thoughtfully, looks at his stenographer and remarks with the famous Thompson million dollar smile, ‘I guess I’d better stick to something I know and let real estate alone.’”
David Makes Goliath a Loan
But all was far from lost. J.R. Thompson, William Boyce’s brother, who was in real estate, went to look at Cumberland Ely at Gunn’s request, interjects Hagedorn.“He thought that Gunn and WB had been stung, but Gunn intimated that there was more in the situation than met the eye. The fact was that the Nevada Consolidated had gone to sleep on the matter of water-rights.”
Cumberland-Ely was also better financed, interjects Krumb. “During the 1907 panic, when the construction work at Ely was going on, the Cumberland-Ely treasury was in good shape, while the Nevada Consolidated had nothing, and the Cumberland-Ely had to loan money to the Nevada Consolidated – the small company had to loan money to the really big company!
“This situation was brought about entirely by the foresight of William Boyce Thompson. He took advantage of the good times and the boom of 1906 to raise not only the money required at the time by the Cumberland-Ely Company, but sufficient money for all of its requirements for several years ahead. He apparently knew that the boom of 1906 would be followed by a panic, and that it would then be difficult to provide funds.”
“Later the Nevada Consolidated decided that they would not have sufficient water at this site to treat the ore,” continues Krumb, dominating the conversation. “The Cumberland-Ely Company turned over to the Nevada Consolidated its option on the McGill Ranch and its water rights, together with other water rights, in return for the right to a half-interest in the railroad which was to be built south to Ely from Cobre on the main line of the Southern Pacific Across Nevada, and also a half-interest in the smelter and concentrator to be built at McGill – that is, the Cumberland-Ely was given the right to furnish half the money required to build these projects.”
“The Cumberland-Ely never had a bond issue, but Mr. Thompson by the sale of stock raised the money for the development of the Cumberland-Ely property and for its share of the cost of building the Nevada Northern Railroad.”
“Let me get this straight,” I say. “Thompson, who is the smaller player in all of this, turns over his water rights for a half interest in the smelter and the railroad. Weren’t those the more profitable parts of the operation?”
There’s a general nod of agreement around the table.
Cumberland-Ely: The Mine That Didn’t Produce
“Cumberland Ely was operated for a number of years,” says Krumb. “It produced considerable copper but never paid a dividend owing to the fact that the ore was not very good, the mining difficult, and expenses heavy.
“While Cumberland-Ely shipped but a small quality of ore over the railroad to the McGill plant as compared with Nevada Consolidated, still on account of owning a half interest in the railroad, smelter and concentrator, it received one-half of the profits on all the ore hauled and treated – that is, it received practically one-half of the profits made on hauling and treating Nevada Consolidated ore.
“Naturally this situation was a sore point with the Nevada Consolidated, and Mr. Thompson used it strongly in bringing about the consolidation.” But another of Thompson’s contemporaries, an Armstrong, notes that the Guggenheims had been interested in Cumberland-Ely even before they bought the water rights.
“After Thompson had taken control of the Cumberland-Ely,” recounts Armstrong, “he and Gunn became conscious that the Guggenheims were trying to corral all the mines in the region. They began in fact shortly to negotiate for the Cumberland-Ely property, sending an ore buyer into the region named Llewellyn Humphries.”
At this point Armstrong starts to laugh under his breath and is forced to take the cigar from his mouth. He takes the occasion to pour himself a little more whiskey. He mutters the name “Llewellyn Humphries” again and chuckles.
“Gunn gave Humphries a hearty welcome and let him live in his shack. Humphries told him that he could not find any ore in the mine. Gunn was disconsolate. ‘There is bound to be ore in there,’ he insisted, and after two days and a night of hospitality, succeeded in sufficiently blurring Humphries’ vision to make it possible for the ore buyer to persuade the Guggenheims to buy the mine.
“Humphries did not lie about it,” Armstrong continues. “He made no misrepresentations but he phrased his descriptions in such a way that the Guggenheims bought the mine. The fact was that they were very much embarrassed by Thompson and were afraid of the development of a serious rival in the region. They did some tall raging later when they found that the mine was no particular value. But it was worth what they paid for it to avoid the competition with [Thompson].”
Nevada Consolidated bought Cumberland-Ely and its Veteran mine on August 30, 1910. Cumberland-Ely shareholders got the opportunity to exchange 3 ¼ shares for one share of Nevada Consolidated. The half interest of Cumberland-Ely in the Nevada Northern Railway and its interest in the Steptoe Valley Smelting and Mining Company were also transferred.
“The essence of WB’s situation in Ely was that he out-stripped the Nevada Consolidated people by securing the only available water supply in the region,” says D.C. Jackling.
Says Hagedorn, “Exactly how much WB made on the transaction, [we don’t know]. But his brother, James, “made about 700 per cent on the money he put into it.”