JOHANNESBURG (miningweekly.com) – Gold major Gold Fields will not adopt the novel gold-price-linked dividend payment initiative that has been introduced in North America to reward shareholders optimally at a time when gold is on centre stage.

The company is also against the payment of dividends at a quarterly frequency.

Gold Fields CEO Nick Holland told Mining Weekly Online at a roundtable discussion – also see attached video – that there was no reason for Gold Fields to change its dividend policy.

While gold-linked dividends were interesting and their introduction understandable – “they’re trying to create a fungibility back to the gold price” – the bottom line was that earnings increased when the gold price rose and dividends were paid from earnings.

“We pay dividends out of earnings. We don’t pay dividends out of the gold price, and if earnings go up, clearly we’ll pay more dividends,” Holland said.

The world’s second-largest gold producer, Newmont of the US, introduced gold-linked dividends earlier this year and then refined them further last month. Newmont increases its dividend for every $100 rise in the gold price.

North America's Silver Wheaton then followed suit by linking its dividends to the silver price and South Africa's AngloGold Ashanti announced that it would pay dividends every quarter.

Gold Fields, Holland said, had a strong history of dividend yield, paying out 27% and 32% of its earnings as dividends.

“I don’t believe in paying quarterly dividends. The real issue on dividends is not whether you pay them quarterly. It’s what you pay out over the year.

“If we have another good quarter, similar to the one we’ve had now, we would like to reward our shareholders for their support over the last year with a nice final dividend, if we’re able to.

“I’ve looked at what everyone else is doing and I’m very satisfied that if we keep doing what we’ve been doing in the past, we’ll be right up with the rest,” Holland said.

Gold Fields has demonstrated its ability to translate the rising gold price to the bottom line with a 62% increase in net earnings to R2 055-million in the three months to September 30.

Over the same period, the gold price increased by 14% in US dollar terms and 18% in rand terms.

Gold production was up from 872 000 gold equivalent ounces in the June quarter to 900 000 gold equivalent ounces in the September quarter, with half of production now derived from operations outside of its South Africa base.

Holland said that progress was being made to achieve five-million gold equivalent ounces, in production or in development, by the end of 2015.

More gold resources have been discovered at Chucapaca in Peru, where the company already has Cerro Corona, which produced 41 900 ounces of gold and 9 814 t of copper in the latest quarter.

“I have had very encouraging meetings in Peru with both the Finance Minister and the Mines Minister, who fully endorsed our continued investment into the country with Chucapaca,” Holland reported.

At the Far Southeast project in the Philippines, the company has eight drill rigs on site and plans to deliver a first copper-gold porphyry resource during the second half of 2012, which will be orders of magnitude bigger than Cerro Corona. The company also has a 15-month option on the Mankayan project in the Philippines.

“We like the Philippines, we think it’s a country that’s well endowed,” Holland said.

At the Arctic Platinum project in Finland, two 50 t pilot plant test programmes have been completed.

Holland expected Gold Fields to be in a position late next year to decide whether to develop, sell, joint venture or spin off the Arctic Platinum project.

At the Yanfolila project in southern Mali, a scoping study indicates that the project requires a minimum 1.5-million ounces resource base.

At South Deep in South Africa, the ventilation shaft and the expansion to the processing plant are due to be completed at the end of next year.

At the Damang openpit expansion project in Ghana, a four-million ounce openpit mining resource has the potential to double production.
 

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