Mining majors are putting emphasis on dividends over capital investment and it will come back to haunt them. Those with long enough memories will recall what happened to Rand Mines, which ended up with a strategy of dying with dignity.
Every single day that mining companies take something out of the ground, that value disappears forever, and unless they do something to replace that value, they are going to end up withering and dying. Mining doyen Sir Mick Davis spelt that out clearly at this month’s Joburg Indaba. But has the penny dropped? Investors, wounded after the 2008 global financial collapse, are continuing to demand dividends to excess, which will come back to haunt them.
It is absolutely essential that investors wise up to mining investments requiring cash to go into giving mining companies an infinite horizon. Mining company CEOs need to go all out to get through to investors and tell them that their current excessive insistence on dividend declarations will end up in share decline and losses for the pension and provident fund monies that they are meant to manage judiciously.