Barrick and Goldcorp cut dividend 60%, Barrick sells assets
With gold selling at a five-year low, Canada’s gold companies are selling off properties and cutting costs in an effort to stay profitable.
Barrick Gold Corp., the world’s largest gold producer, announced Wednesday it would cut its dividend by 60 per cent after reporting a $9-million loss in the second quarter. The dividend falls from five cents a share to two cents a share.
Barrick is racing to pay down debt and has been selling assets — $2.45 billion to date – to reduce costs.
The Toronto-based company said it plans a further $2 billion in cuts by 2016, including possible sale of its U.S. properties in Nevada and Montana.
Nor is Barrick the only gold company to cut its dividend. Goldcorp, which on July 30 reported net earnings of $65 million or 8 cents per share, also cut its dividend by 60 per cent.
“That would be normal for Barrick and Goldcorp,” says John Ing, CEO of Maison Placements. “By reducing their dividend, they have cost containment.”
Where will gold go?
After hitting a high of $1,785 US an ounce in 2012, the price of gold was in the $1,090 US range on Thursday, with many analysts predicting it will move lower.
With the U.S. Federal Reserve likely to raise rates sometime later this year, investors may prefer to park their money in U.S. dollars, which have the potential to earn interest, rather than gold, which costs money to store.
As a rate rise approaches, the U.S. dollar will likely get stronger, making it ever more attractive than bullion.
Goldman Sachs analyst Jeffrey Currie has predicted gold will drop below $1,000 per ounce by the end of this year.
Ing is not so bearish on gold, believing it’s near the bottom now.
But the low price makes it critical for Canada’s gold miners to cut their production costs per ounce.
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