The Millionaires & Madmen of the Comstock Lode

Today, I'm in Virginia City, Nevada. I'll be checking out a gold miner, and I'll post videos and an analysis when I can.

In the meantime, Nevada is so rich with mining history that I feel compelled to share a little of it with you today.

A Precious Find

The first big discovery in Nevada was placer gold in a stream flowing into the Carson River. This discovery was made by ‘49ers on their way to the California gold fields. It led to other discoveries, and finally the outcroppings of the Comstock Lode in 1859.

Two miners, Peter O’Riley and Patrick McLaughlin, prospected on a mountain slope near a small stream. They found some gold, but also large clumps of heavy blue-black mud that made it difficult to sift out the fine gold.

Closer inspection revealed that the blue-black mud was almost pure silver. It could be dug out by the ton with a shovel, and each ton was worth $2,000!

Enter the Villain

Enter Henry Thomas Paige Comstock. Comstock was a shady character with an advanced degree in weaseling. He came across O’Riley and McLaughlin, saw their discovery, and declared that he had a claim on the ground. That was a lie, but the panicked men didn’t want trouble. So they gave Comstock and his partner shares in the claim. This project became the famous Ophir Mine.

The silver rush was on! Prospectors, drifters, and ne’er-do-wells poured into the valley to work silver claims.

Grubby Prospectors Became Instant Millionaires

You probably already know one of those adventurers – a man by the name of Samuel Clemens, better known as Mark Twain. Twain found the mines of the Comstock Lode were a beehive of activity, and Virginia City was a festering den of scum and villainy.

Twain wrote:

“The country is fabulously rich in gold, silver, copper, lead, coal, iron, quicksilver, marble, granite, chalk, plaster of Paris (gypsum), thieves, murderers, desperadoes, ladies, children, lawyers, Christians, Indians, Chinamen, Spaniards, gamblers, sharpens; coyotes (pronounced ki-yo-ties), poets, preachers, and jackass rabbits. I overheard a gentleman say, the other day, that it was ‘the d—dest country under the sun,’ and that comprehensive conception I fully subscribe to.”

We like to think of Las Vegas as the original, 24-hour Sin City. But Virginia City claimed that title much earlier. In 1863, the number of arrests equaled one-third the town’s population of 30,000 people!

The wealth of the mines fueled Virginia City’s growth. Nearly overnight, grubby prospectors became instant millionaires. The boom extended to Wall Street, where stock speculators made fortunes from the Comstock boom.

The Comstock Lode hit peak production in 1877, producing more than $14 million of gold and $21 million of silver that year. But three years later, the mine was mostly played out.

As for the people who started the boom ...

• Henry Comstock took his profits from the Ophir Mine and opened a series of businesses, every one of which failed.  He committed suicide in 1870.
• Patrick McLaughlin, one of the original discoverers of the Comstock, sold his share for $3,000, lost that stake, worked a series of odd jobs and died a pauper.
• Peter O’Riley did better, holding on to his stake and finally selling for $50,000. He spent that fortune tunneling into the Sierras, certain he would find a richer claim than the Comstock. He lost everything, went insane, and died in an asylum.

Now, not everyone who dug for Comstock riches ended up broke. Some great American family fortunes were dug out of the mud in Virginia City.

•  James Graham Fair was a poor Irish immigrant who parlayed his Comstock fortune into a railroad empire and a U.S. Senate seat.
• John MacKay was another Irish immigrant and silver miner. At the time of his death he was worth $30 million.
• George Hearst made a fortune in Nevada, a fortune later parlayed into a publishing business by his son, William Randolph Hearst.

In fact, there were many people who did well in the Nevada boom and stayed rich. But many more made fortunes and lost it all. So this gives lessons we can all live by …

Don’t underestimate the potential of a great discovery. If McLaughlin and O’Riley had stood their ground and hung on to their blue-black mud, they could have given Thomas Comstock the bum’s rush.

Don’t expect every prospect to turn into a winner. Do your due diligence. No whims, tips, fantasies, or wheeling and dealing. Just good, solid research, and discipline.

You don’t have to be a miner to make a fortune. While a minority of prospectors became fabulously wealthy, many more stock investors made fortunes without ever seeing the inside of a mine. The same holds true today: You can build your wealth quite nicely by buying the right stocks.

Importantly, never think you know it all. I learn something new on every trip I make into mining country. I can’t wait to see what I learn this time.