HOLLYWOOD, Fla. (Reuters) – Gold miners have largely been boosting dividends to appease long-suffering shareholders rather than funding fresh exploration projects needed to grow production, a strategy that executives are warning may pose long-term risk to the industry.
The tension comes as gold prices are at the highest in seven years, near $1,650 an ounce, a surge in part fueled by a flight to safe-haven assets amid rising global concern about the coronavirus.
That has propelled earnings and prompted Newmont Corp, Barrick Gold and others to hike dividends and share repurchases, which shareholders have been demanding for years.
But miners say a dearth of new exploration poses an existential risk to the industry as falling ore grades push production costs higher.
“If you start moving out a number of years, it’ll be a challenge” for supply to keep up with demand, AngloGold Ashanti Ltd CEO Kelvin Dushinsky said Tuesday on the sidelines of the BMO Global Metals and Mining Conference.