The Fabulous Londonderry Gold Bubble

       It is a little known fact that Scrooge McDuck arrived at the Kalgoorlie gold fields in the pouch of a kangaroo. It just goes to show that, although separated by half and century and half the world, the story of the great Western Australian gold rush of the 1890s had come to the attention of a well read cartoonist. Kalgoorie is still a major town, with a gigantic open cut mine, because it is no longer feasible for gold to be extracted except on a massive industrial scale. The site of the first discovery, Coolgardie is now a village living on tourism and its history. But 14 km from Coolgardie stands the ghost town of Londonderry. This was the site which, in 1894, brought wealth beyond the dreams of avarice to the original discoverers, and a huge financial "bubble" which brought disappointment and ruin to innumerable others in its wake.

    The story can be told briefly. When the mining in Coolgardie was in the doldrums in early 1894, a group of six decided to try their luck a bit further out from town. One of them, John Mills happened to sit down for a rest and a smoke a short distance from the others, and casually took a look at one of the stones nearby. To his amazement, it was a lump of quartz literally held together by gold. A quick examination revealed that the whole blessed area was like that; gold was just lying around, waiting to be picked up. Then began a rush to dig up as much as possible and to extract the precious metal in an open furnace before everybody found out about it. So hard and boring did the work become that Mills later admitted that the sight of gold had become positively hateful to him. But in just a few weeks they had produced 8,000 oz of gold.

     No, that is not a typographical error; it really was 8,000 ounces/500 pounds/227 kilograms. You've heard of somebody being "worth his weight in gold", but this would have approximated half their combined weights. And at the going price of gold, it was worth £32,000. Alas! For the whole of the twentieth century we have got used to rampant inflation, so we have lost the significance of any sum cited from decades or centuries ago. To rectify the situation, we need the Measuring Worth Calculator. At the same time, you must understand that Australia decimalised its currency in 1966, when every pound became equal to two Australian dollars. With this in mind, the purchasing power of a pound in 1894 was the same as $135.86 in 2019. Thus, in 125 years, inflation has run at 6,793 per cent! But there's more! The standard of living was much lower then. We've also got used to our standard of living simply increasing all the time, without our doing anything to affect it. The labour value of the 1894 pound in 2019 was more than seven times the inflation value: a whole $975. What that means is that, if you had to work a whole week to earn £1 in 1894, which was probably the case, the same week's labour in 2019 would have earned you $975. In a century and a quarter, real wages have outpaced inflation by a factor of seven, and all of us, prince and pensioner, are seven times as rich as we would otherwise have been. Isn't modern capitalism marvelous!

     At this point, they decided they ought to apply for a lease on what they now called the Londonderry Mine. But the last thing they wanted was for anyone to discover how rich it was, so the two who went to lodge the claim told a tale of hard luck, and how they wanted to lease 24 acres [9.7 hectares] which they hoped would yield half an ounce of gold to the ton. However, prospectors, no matter how hard up, seldom parade their poverty, so the mining agent smelt a rat, and decided to check for himself. Before they knew it, the news was out, and the zone was swarming with prospectors like ants to sugar. Then the speculative syndicates took an interest. Up till then, few would raise more than £50,000, but Lord Fingall bought out the original six for £100,000. Added to the gold already mined, that wasn't a bad sum to take home to their families! I shall let you do your sums to what this represents in the current economic climate. The Golden Hole was sealed off with a strong plate, until Lord Fingall had floated a company which eventually raised £750,000.

     And what did the company, and all the assorted little prospectors get for their money and effort? Next to nothing! I have no reason to believe that the original six had acted in anything but good faith, but it turned out that, by a quirk of geology, the golden lode had been extremely narrow in extent, and had already been largely cleaned out by the time the property was sold.

    You hear similar stories all over the gold fields, and the gem fields. If your name isn't on the treasure, you're not going to get it.

Reference: John Marshall (Dec. 1899), 'John Mills and his "Golden Hole", The Wide World Magazine vol. 4, pp 213-217. The author had been the Honorary Secretary of the West Australian Gold-Diggers' Association.