The Rumor
Many tour guides tell a persistent story in Tombstone that the mines closed when they hit water. That is not true. The first mine with water was the Sulphurett at about 520 feet. After that, the engineers from the various mining companies got together and decided that they would bring in large water pumps to remove water from the deepest shaft, the Grand Central. It was believed that if they could remove the water from the deepest shaft, it would lower the water table in general and, consequently, also drain the other mines. That plan worked.
The pumps, though, required constant maintenance, which became a problem. The worst incident was when watery fuel was used in the pumps at the 1000-foot level of the Grand Central Mine. The pumps seized, but by then, mining was becoming economically unfeasible. Rather than repair those pumps, the owners decided to let the lower levels flood and mine above the 500-foot level.
The Fact
So why did the mines close? This answer starts back with the founding of the United States. From the beginning, the federal government used a “bi-metallic standard” for the US dollar, both gold and silver. Over time, though, that standard seemed to shift with changing administrations, sometimes gold and sometimes silver. The Coinage Act of 1873 embraced gold and de-monetized silver. Then the Bland-Allison Act of 1878 required the US Treasury to purchase domestic silver bullion to mint coins. The mines in Tombstone began in 1878, so they reaped the benefit of the Bland-Allison Act. Also, in 1878, the United States began to issue silver certificates based on the amount of silver held in the treasury. These were boom times, indeed, for the Tombstone mines.
The Sherman Silver Purchase Act of 1890 required the government to purchase 4.5 million ounces of silver every month, used to mint silver dollars and back silver certificates. Unfortunately, that led to overvalued silver prices and undervalued gold prices, so metals investors began to buy silver and exchange that silver for gold and then sell the gold for more than they had paid for the silver. They then repeated that process until the United States was in danger of running out of gold, so in 1893, President Cleveland repealed the Sherman Silver Purchase act.
Between 1878 and 1900, the price of silver dropped from $1.16 per ounce to $0.62 per ounce, about half of the starting price. At that rate, the mines could no longer produce a profit for the investors, so they began to close. So, the mines closed due to the federal government’s manipulation of the price of silver. Eventually, silver became too cheap to be worth mining.