Global gold miners prefer dividends for fear of repeating yesterday’s growth mistakes

THE world’s gold industry is hesitant to embark on new projects preferring to prioritise dividends and other forms of capital return to shareholders, said Reuters.

“Companies still need to take a very conservative approach,” said Joe Foster of Van Eck Associates Corporation which holds shares in Barrick Gold and Newmont Mining. The asset management firm expected gold prices to eventually hit $3,000 per ounce.

Investors have even threatened to dump shares of companies that don’t prioritise payouts, said Reuters.

“If we get to the point where growth versus returns becomes a decision point, we’ll back the companies paying returns,” said Mark Burridge at Baker Steel Capital Managers, which hold shares in Kirkland Lake Gold, Kinross Gold and others.

The newswire cited Newmont CEO, Tom Palmer, as saying that his company would not repeat the mistakes of the past. “The real trap in the gold industry in the past was chasing volume,” he said.

Seven out of 10 of the global gold miners, including Newmont, Barrick and South Africa’s Gold Fields, have cut planned output for the year by 7%, citing Covid-19-related shutdowns, said Reuters. Newmont’s budget this year is $1.3bn, about half levels seen in the previous cycle.

Gold Fields said it wasn’t rushing to change cut-off grades, the minimum grade that can be economically mined, despite the higher price. “It’s not easy to just turn the ship in a different direction,” Gold Fields CEO Nick Holland told Reuters, referring to boosting output with the higher price.