With Gold Up, Miners Face Payouts Versus Production Dilemma – by Justina Vasquez, Danielle Bochove and Steven Frank (Bloomberg News/Financial Post – February 24, 2020)


(Bloomberg) — As gold prices rise, miners have been boosting shareholder payouts in the face of a decline in global output. That’s worrying some investors concerned about the longterm growth prospects of an industry built on a depleting resource.

The value of gold, a haven commodity, is driven more by global economics than supply and demand. It’s soaring toward $1,700 an ounce now on fear the coronavirus will harm growth.

Any unexpected event — from a surprising cure for the virus to a positive trade deal — could drop the value significantly. High prices put more gold scrap on the market, low ones boost hoarding and, if miner output remains static, so should profits.

Increasingly, investors are split between their wish for higher dividends in the short run and the need to assure company stability over the long term. Finding the “best of both worlds” in allocating the rising cash pile is key for the future of the industry, according to Josh Wolfson, an analyst at RBC Capital Markets.

“Miners in general are exposed to significant external factors that are out of their control,” said Simon Jaeger, a portfolio manager at Flossbach von Storch AG, a top-10 investor in both Newmont Corp. and Barrick Gold Corp.

For the rest of this article: https://business.financialpost.com/pmn/business-pmn/with-gold-surging-miners-face-payouts-versus-production-dilemma

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