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Tombstone's foundation, built upon silver, was quickly undermined after a decade of prosperity. Rising water levels in the mines made mining costly, and the lowering of silver's value in the 1890s contributed to the demise of this town.

Edward Schieffelin established the Tombstone campsite in the San Pedro area. Schieffelin prospected in the San Pedro valley, where Chiricahua Apache told him he would find nothing but his tombstone; his first camp received its name shortly thereafter. Schieffelin found rich samples of silver there, but because of his eccentric, vagabond nature, no one paid him any attention. Schieffelin sought the help of his brother Albert, and presented the silver to assayer Richard Grid. Grid declared it the richest silver he had ever seen, and invested with the Schieffelins. The trio found three abundant mines: the Lucky Cuss, the Tough Nut, and the Contention. The Schieffelin brothers sold their shares in 1880 for $500,000 apiece; Grid sold his shortly after. In total their mines had paid out over $1 million in dividends by 1881. These rich mines yielded $30 million worth of silver between 1879 and 1886.

In 1878 the Schieffelins and Grid went to Tucson to record the location of their claims; this created a flood of people heading for Tombstone. The town site, founded March 5, 1879, by Solon M. Allis, contained 973 people in early 1880. By June of that year the camp grew to more than 2,000, and this figure had doubled by 1882. High estimates placed the maximum population at 6,000. In 1886, however, flooding of the mines killed the growth and caused many to abandon the city. Only 1,875 lived in Tombstone by 1890.

Prior to the flooding, Tombstone seemed to convey a feeling of permanency with the arrival of families at the end of 1879 and early 1880. Women and children constituted 20 percent of the population, each representing 10 percent. Unlike most mining camps, Tombstone tried to establish an education system. Schools emerged where space permitted; a rented-out German entertainment hall, for example, held several classrooms. The 275-pupil student body forced the renting of alternative sites, since the number of students exceeded schoolroom capacities. In 1883, the school district purchased bonds to expand the schools, going into debt in the process. Some figured the mining camp would not fail; others thought the town could live off of ranching if it was needed. Water sources existed about three miles away at the San Pedro River, and, they assumed, water would be discovered in the mines.

The stability of Tombstone seemed promising. Faith helped to establish a school system, as well as permanent entertainment centers, such as the Bird Cage Theater. This theater brought some cultural feel to the town. Theater troupes from all over traveled to the Bird Cage when venturing through Arizona. The theater gave the mining town a metropolitan aura, but entertainment and commerce was not left entirely to American-born citizens.

Significant minority groups arrived in Tombstone and contributed to the growth and prosperity of the town. With the Mexican border not very far, Tombstone's Hispanic population, which constituted 8 percent of the total, made up the biggest minority group in this Anglo American–dominated town. Though Mexicans constituted the largest minority by numbers, other minorities had a greater impact. Irish, constituting 6 percent or roughly 550, ran businesses such as hotels, halls, and saloons for entertainment. Germans, though smaller in number, assisted in these sectors as well. Jewish people also contributed a small number (only 400), but owned and operated successful mercantile and dry goods stores. Tombstone had people from all over the world, but the last significant minority group was the Chinese, making up 4 percent of Tombstone's population.

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