TORONTO (miningweekly.com) – Newmont Mining, the second-biggest bullion producer, on Monday said it would add an extra kicker to its gold-price linked dividend, meaning shareholders will get even greater returns if the yellow metal stays high.
The company first unveiled its plan to link dividend payments to the gold price in April, pledging a $0.20 a share increase for each $100/oz rise in the average realised price of gold.
The enhanced version has the potential to pay equity holders a $4.70 a share yearly dividend should the average realised gold price reach $2 500/oz, the company said.
Last week, Sprott Asset Managment CEO Eric Sprott said he believed the price would reach that level next year.
Under the revised plan, Newmont will pay out an extra 7.5c a share when its realised gold price for a quarter beats $1 700/oz, and an additional 2.5c a share on top of that when its realised gold price for a quarter tops $2 000/oz.
That provides for 10c a share more for every $100/oz uptick beyond $2 000/oz gold.
“Newmont's cash flow and balance sheet strength in the current metal price environment provide us with the flexibility and strength to simultaneously fund our internal growth pipeline and return meaningful cash to our shareholders,” CEO Richard O'Brien said in a statement.
The news sent Newmont’s stock higher on the NYSE to trade at $66.28 a share by 15:16, despite a falling gold price.
Although that is slightly higher than the $63.33 a share the company was trading at 12 months back, bullion has risen 42% over the same time period to trade at $1 780/oz on Monday.
That underperformance isn't unique to Newmont, but has been flagged as an industry-wide problem, with analysts suggesting producers return more excess cash to shareholders to attract greater investment interest and lift share prices.
"This is a company which is paying conscious heed to returning capital to investors in an industry which has historically not done a lot of that,"O'Brien said in a presentation to the Denver Gold Forum, which was broadcast over the Internet.