Miner Newmont hints at dividend increase as bullion prices soar

TORONTO (Reuters) - Newmont Mining Corp, the world’s second biggest gold miner by market value, hinted on Thursday that it will boost its quarterly dividend later this year, reflecting a 25 percent jump in bullion prices so far this year.

The Gold Quarry pit at Newmont Mining's Carlin gold mine operation is seen near Elko, Nevada May 21, 2014. REUTERS/Rick Wilking

Newmont, which posted market-beating quarterly profits on Wednesday reflecting price, production and cost gains, will review its gold price-linked dividend at an October board meeting.

“It’s certainly worth noting that if today’s gold price is maintained, our gold price-linked dividend would double in the third quarter,” Chief Financial Officer Laurie Brlas said on a conference call with analysts Thursday morning.

“We do plan to reassess the dividend pay-out later this year, as we go through our 2017 business planning process, and would expect to be able to adjust it given our strong cash performance.”

In 2011, Colorado-based Newmont introduced a policy linking its dividend to average gold prices for the preceding quarter.

The policy recommends an annual dividend of 10 cents per share when the average London Bullion Market Association gold price is up to $1,300 per ounce. That doubles to 20 cents a share when gold ranges between $1,300 and $1,399 an ounce and for each $100 an ounce increase above $1,399 the annual payout increases at a rate of 20 cents per share.

The spot price of gold Thursday was $1,329.40, up from $1,060.24 at the start of 2016 as investors seek a safe haven during increasing geopolitical uncertainty and declining real interest rates.

RBC Capital Markets analysts recently increased their gold price target to $1,500 an ounce from $1,300 in 2017 and 2018, but forecast a decline in 2020 to $1,300.

Newmont Chief Executive Gary Goldberg said the board of directors will weigh the use of cash for debt reduction, project investment and shareholder returns. Increasing the dividend is preferable to share buybacks, he added.

Newmont shares, up 2.4 percent at $40.23 on Thursday, have climbed 124 percent so far this year.

Reporting by Susan Taylor