As Gold and Silver prices have been on the rise this year, mining companies are now discussing to resume dividend payments.
Gold and Silver price falls since 2011 peak hit mining companies hard
Prices of gold and silver usually rally in times of economic uncertainty and low Fed rates, which indicate lower interest paid on other interest earning assets. The precious metals last peaked in 2011. Gold reached US$1900 per ounce and silver rallied to US$47 per ounce.
However, from 2012 until the start of 2016 gold dropped a more than 42%. Silver fell as much as 70%.
The lower prices hit mining companies specialised in the dealings with these precious metals hard. Many abandoned dividend payments to their investors as they accrued large deficits.
Gold and Silver began new rally this year
Since the start of 2016, economic uncertainty has however pushed more investors back into gold and silver, considered as safe-haven-assets.
Gold rallied 26.5% since the beginning of 2016. Silver jumped 41.5%.
The price hike in gold and silver, as well as lower currency rates, have greatly improved the position of gold and silver miners. This will largely benefit their investors.
“The amount of free cash flow the industry is generating has increased significantly in recent months,” said Jonathan Guy, analyst at Numis in London. “Gold is up and costs have been falling and so there is much more potential for companies to resume or increase dividends. The market is going to be looking for companies to deliver messages on higher payouts.”
Gold Mining companies increase pay-out to investors
Centamin plc, a UK based gold mining company focused on the Arabian-Nubian Shield, doubled its’ interim dividend last week. The company’s share prices this year to date rose by nearly 176%.
Randgold Resources stated that by the end of the year it could have accumulated enough cash to its’ debt free balance sheet to increase its’ dividend payment. The company saw shares rally 105% on the London Stock Exchange this year to date.
South African AngloGold Ashanti, the world’s third largest gold mining company by volume, on Monday reported its H1 interim earnings and results are very promising as well. The company managed to reduce its’ net debt from US$3.079 billion in H1 of 2015 to US$2.098 billion in H1 2016. It also reported that adjusted headline earnings more than doubled to $159 million compared to the same period last year. The company decided to halt paying dividends in 2013 after frequently under-performing due to decreasing gold prices. In eye of the positive earnings report, AngloGold has stated that it thinking to resume dividend payments by 2017.
Silver miners have bettered performance as well
The small Canadian silver mining company, Silver Wheaton Corp, saw share prices rally nearly 150% this year to date. It reported its’ third quarterly dividend payment for this year last week.
Hochschild Mining UK has also stated that it is considering to resume dividend payments, on the back of improving earnings for the first time since 2013.
Gold Funds dominate top 10 of best performing funds this year
Funds specialising in investments in gold and silver have outperformed all others this year due to the positive developments for the gold and silver industry. On our list of the ten best performing funds in 2016, the overwhelming majority is made up of gold funds, which, after years of reporting considerable losses, have in 2016 taken the lead in generating returns for their investors.
Nickel and Copper suffer under slower Chinese growth in 2016
While gold and silver have been the best-performing metals, other metals have suffered this year. Nickel and copper in particular were hit by slowing economic growth in China, which caused the world’s largest consumer of such mainly industrially used metals to cut down on its’ demand.
The mixed climate in the metal sector has caused some more diversified mining companies to regard pay-outs to investors with more care in order to preserve cash.
While BHP Billiton and Rio Tinto have cut payment commitments to investors recently, Glencore and Anglo American abandoned pay-outs altogether for now.
Katharina Fleiner 17/08/2016