A Really big deal in Yellowknife

The following is the last of three excerpts from the book Quin Kola: Tom Payne’s Search for Gold, published by Crossfield Publishing in Okotoks, Alta. The author is the daughter of Tom Payne and president of Calgary-based Arctic Enterprises.

Alice Payne: “It was important for Dad to do development work on his claims before there were any offers from larger companies. He was sure the property would prove to be a mine, and he didn’t want to sell too cheaply. This was his one big strike and it wasn’t easy to hang on. Tom had to get the money from J.A. (Jim) Pawsey in England. Jim’s daughter, Rosemary, was once married to Bill Payne, Dad’s brother, the physician and surgeon.”

David Payne: “My mother, Rosemary, asked the family if they could help Tom to prove up his claims. Apparently when Jim gave the money to Tom he said, ‘This is a gift, and I don’t expect you to repay it. But if your hopes come true, don’t forget us.’ I don’t know how much was involved, but we were not forgotten.”

Nell Wheeler: “Tom later paid it all back, and double. You couldn’t talk him out of it. He said the loan meant the difference between hanging on or losing out, and there weren’t too many people you could ask money from in those days.”

Bill Jewitt: “A little group in Edmonton grubstaked Tom so that he could work on the claims. It was the smallest grubstake anyone ever had. Bob Armstrong was up there, and helped out a bit. It was freeze-up, and already cold. Tom had nothing, not even a tent, just a tarp.”

Steve Yanik: “But the clothes he wore! He would try to patch them up with a needle and thread, his socks and everything else. Because that was all he had, and they simply wore out. And they weren’t very clean either. There was no way of washing or anything else, you know. My wife remembers Tom coming in from the bush. His breeches were tight, torn, and greasy, there was bare leg showing, and the seat was missing. Harry Hayter and a few of us were having a poker game, and we all put in a dollar to buy him another shirt so he wouldn’t freeze to death. That was fairly common practice in the north.”

Bob Armstrong: “I arrived in Yellowknife in September 1936. The company suggested I pack only my shirt and a bed roll, but I ended up staying seven years. Bill Jewitt flew me in, ostensibly to sample the trenches, make a ground map, and get an assay plan going. Dave McCrae and his crew had prospected the Con group of claims, and found a number of veins. The highest grade was on the Con 10 claim, right next to the Con 4. Then George Kilburn, the head of exploration from Trail, B.C., came in to size things up. He decided right then to sink a little shaft, a decline on the Con 10 vein system. I stayed on to help. Tom’s holdings were pretty close to the Con camp. After he staked his claims, he used to come down for lunch at our old camp. There were no hard feelings about Tom staking his claims. We all knew the tags on that property were going to lapse, but we were not as quick on the trigger.

“I was in a tent down in the draw, and there was a little bridge across a creek. One day Tom came running down the trail full-tilt, crossed the bridge, clomp, clomp, clomp, and banged on my door. He had a big chunk of rock with quite a lot of gold in it and said, ‘It’s worth millions!’ And he was right.”

Tom Payne: “In the spring, the Ryans [brothers Pat and Mickey] decided they wouldn’t sink any more money into the ground. The few dollars they had invested in my mining licences and in recording the claims were already too much. I could have bought them out for a hundred dollars, but I didn’t have it. Pat Ryan and Billy Wilson had grubstaked me all those years, but Mickey Ryan had no faith and wouldn’t help any more.

“The only thing we could do was form a new million-share company, take out four-hundred thousand shares for ourselves, and sell another hundred-thousand shares to the public at fifty cents each.”

Alice Payne: “Quin Kola Gold Mines held all the claims that the Ryans had recorded for Tom while they grubstaked him. That included the four P&G claims adjacent to the Con holdings, and three more claims groups on both sides of Yellowknife Bay. All these properties were transferred into the new company, called Ryan Gold Mines, which was incorporated on Feb. 8, 1937. Mickey Ryan was persuaded to act as president, Tom was vice-president, and Pat Ryan was treasurer. Billy Wilson became a director, along with Moe Lieberman, an Edmonton lawyer who had tracked down and purchased Gordon Latham’s shares.

“The partners produced a prospectus, obtained a broker’s licence from the Board of Utilities by posting a two-thousand-dollar bond, and purchased a miner’s licence for fifty dollars. It took three months to complete the public share offering of a hundred-thousand shares, which was soon oversubscribed. The only customers missing on the list were eastern mining men and investors, who, in the words of one Cominco employee, ‘did not think much of gold veins outcropping in the Yellowknife area.’

“In contrast, many northerners who knew and trusted Tom rushed to sign up. First was Slim Semmler, a trader from Aklavik who worked in opposition to the Hudson’s Bay Co. and whose wife had a reputation for shooting fifty muskrat before breakfast. Then came Bishop Breynat of the Roman Catholic Church, who lived in Fort Smith. Breynat was associated with Father Gathy, the renowned Oblate missionary. Jim Darwish from Rae, whose wife had nursed Tom throughout the winter of 1934, bought some shares, along with the engineer of the Distributor, and Kingsley Langfeldt, an officer of the Royal Canadian Mounted Police, who had shut down Tom’s grub pile at Great Bear Lake.”

Ralph Keeping: “I invested what to me was a princely sum of twenty-five pounds sterling, along with my dear old friend, Mike Martyn. We solemnly sat down after dinner and wrote out the cheques payable to Mr. Lieberman. I must admit that ‘gold’ frightened us but for the knowledge that my uncle, Jim Pawsey, and father knew all about Tom’s dangerous and exciting prospecting. He had earned their confidence.”

Alice Payne: “Dad must have been his own best salesman. His pockets were full of gold samples, and his enthusiasm was contagious. The prospectus contained all the known information. The main vein, which could be traced for a thousand feet before it disappeared into the muskeg, varied from one to six feet wide, and the gold-bearing quartz returned spectacular assay results: one specimen of high-grade ore returned an assay of 60.85 ounces per ton, or $2,130. In fact, all of the samples were rich.

“The secret that would give the mining property a long life was in the words ‘The underground results secured by Consolidated on their adjoining claims . . . and the general structure of the main vein in our property [indicate] that the high values will continue to depth.’ By April there was enough money in the bank to send Dad north again. He needed to begin development work, and to determine what further costs would be required to bring the property into production.

“He began these efforts in high spirits, but didn’t last the summer. He spent the summer in hospital, and Ole Hagen and Tom Hansen worked away with their crew on the veins of the P&G Group. Their efforts cost the company about $20,000 for a top-notch camp: diamond drilling, pay rolls, transportation, mine tools, hardware, gasoline, explosives, office supplies, and lots of food.

By dad’s standards, this place would have been absolute luxury.

Next door, Cominco was busy diamond-drilling and trenching their prospects. In late summer, Mike Finland got sick and Bill Jewitt asked Bob Armstrong to assess the situation. The discovery looked good, but the season was running short. Cominco had decided to sink a little prospect shaft by hand-steeling on the Con 10 shear, where gold had been found to a depth of fifty feet.

But only a small tonnage of ore was proven by season’s end, and they had to decide whether or not to order mining and drilling equipment for the following spring. Any delay could postpone development for a whole year, but the wrong decision would be expensive. So Cominco sent their manager of mines, their assistant manager, and their head of drilling to Yellowknife to make the decision.”

Bob Armstrong: “I tried to show them around the area, to examine the whole operation and settle the details of future campsites. But these eminent men got out on the dumps, or the piles of rock chips left over from when the shaft was sunk in the ore zone. They wouldn’t leave. It’s funny how gold affects people. Everyone was excited and shouting ‘Look at this one,’ and I couldn’t pry them away.'”

Alice Payne: “It was a good thing for Dad that they stayed there. The narrow high-grade veins cutting through the green volcanics, or buried in the muskeg, did not look impressive. But the chunks of blue quartz laced with gold, littering the dump, caught everyone’s attention. W.M. Archibald, the manager of mines, decided then and there to make a mine on the Yellowknife claims.

“Dad’s samples from his first prospect pits contained spectacular amounts of gold, and the results of the summer’s drilling on the property next door looked just as exciting. In fact, it seemed that the main vein was on the property of Ryan Gold Mines, which had promised to give Cominco first option. Cominco decided to send Archibald and Jewitt to negotiate a deal with Payne, Ryan and Wilson, and their lawyer, Harry Friedman.”

Tom Payne: “In late August, just before my last bad spell in hospital, in roared Mickey Ryan: ‘Archibald and Jewitt are in town to make the first offer to buy the mine. What shall we sell out for?’ I told him, ‘five-hundred thousand dollars cash and a forty per cent interest. Not a penny less. Promise me faithfully that if they don’t agree, you will say that that was your best offer, as we promised them first chance. And then tell them you now feel free, if the offer is not acceptable, to go ahead and deal with other people. Then leave.’ Mickey said, ‘You’re crazy, they will never pay that,’ and stormed out! So I got Aggie Lee to call him back. I told him I was on my last legs, and begged him to do exactly as I asked. Eventually, he agreed. Later that night I heard the news. Archibald had offered him $159,000 and thirty per cent, or something like that, and true to his promise, Mickey walked out. Earlier, I had written to R.E. Phelan of Hudson Bay Mining & Smelting, to whom I had once given a barrel of Russian caviar. Andy Dorfman of Mining Corp. had learned of the news through my old English friend, George Keeping, one of the signing officers for the Bank of England and the president of the Investor’s Bank in England. They had gathered as a group in the dining room of the Macdonald Hotel! Archibald recognized them right away and sensed the competition that Cominco was up against. He sprang into action, called Mickey and Friedman back, and agreed to their offer. And right then and there, they decided how the cash was to be paid: $300,000 when the agreement was signed and $200,000 in twelve months’ time. Ryan Gold Mines Ltd. would retain a forty per cent interest in a new million-share company, and Cominco was to be repaid the $500,000 out of the first profits of the new company, along with any costs incurred through production. The new company was to be called Rycon Mines.”

Bill Jewitt: “As a relatively young engineer, I remember being somewhat shocked when Archibald said he was willing to pay half a million bucks for a sixty per cent interest in the property. About as surprised as I’d been when he announced we would put a mill on it, having at the time almost no ore reserves. However, we were lucky. Mickey Ryan did most of the talking, and Harry Friedman wrote the technicalities. I was staggered. I’d never been in on any deals like this before. Of course, it was Archibald, the manager of mines, who clinched it.”

Alice Payne: “Reports of the big deal made front-page news in the Edmonton Bulletin on Sept. 3, 1937: ‘Ryan sells $500,000 mine.’ And the following day, the Edmonton Journal carried the story ‘Faith in Yellowknife area pays richly as claims sold.’ The Northern Miner reported that control of Ryan Gold Mines had been sold but didn’t print the details.

“This was the first gold mill in the Northwest Territories, complete with steam heat, and the mine came into production in 1938. The deal for the four P&G claims was one of the biggest sales of its kind in Canadian mining history, Dad, still flat on his back in hospital, told the doctors he would have no trouble paying his bill.”

— Quin Kola: Tom Payne’s Search for Gold sells for $25 each and can be ordered from Crossfield Publishing at (403) 286-1816 or from the Canadian Society of Petroleum Geologists at www.cspg.org