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VANCOUVER— The world’s top gold miners are forging ahead with expansion plans and higher dividend payments, despite worries that bullion is bound for a correction after a spectacular runup beyond $1,900 (U.S.) an ounce earlier this month.
The companies are vowing to tackle the issue of share values that lag gold prices through aggressive growth plans, rising margins and sweetened dividends, despite the challenges of rising costs and increased competition for investors.
Executives believe that the price of gold will continue to rise and that equities will soon catch up and could even surpass physical gold in returns to investors.
“I do think the equities will respond,” Barrick Gold Corp.chief executive office Aaron Regent told investors at the Denver Gold Show in Colorado Springs, Colo., on Monday. “The equities have not reflected the strong fundamentals of the underlying businesses.”
Gold stocks have been underperforming compared with the price of gold in part because of the rise in exchange-traded funds (ETFs) that allow investors to buy into physical gold. That has drawn attention away from gold mining stocks, which are a wider bet on exploration and production of the precious metal.
For example, gold has risen 28 per cent so far this year, while shares of many mining companies have remained relatively flat or have fallen over the same period.
While their shares have not kept pace with physical gold, miners believe that surging profits and a sold long-term growth profile through expansion and acquisitions, as well as higher dividends will help to both maintain and lure investors.
On Monday, Denver-based Newmont Mining Corp.announced plans to boost its dividend payments to shareholders. The company said earlier this year it would link its dividend payments to the price of gold to help attract investors, and now it plans to increase the payment by about 6 per cent to $1.70 a share if gold stays above $1,700 an ounce. If gold goes higher, so too will the dividend.
Toronto-based Agnico-Eagle Mines Ltd. said Monday it is buying Mexican-focused gold explorer Grayd Resource Corp. for $275-million in cash and shares, the latest miner to expand its operations and prove to shareholders it has a long-term growth plan.
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