The price of gold has risen for a number of factors including all governments around the world have been running their printing press or deficit financing to as much as possible. One day although not in the near future, but sometime in late 2021 or 2022, policy makers and politicians will begin to talk about government deficits and higher inflation. The Central Bankers are ensuring the time frame is not this year. In normal times, whenever a commodity price increases and stays increased for a period of time, new miners are coming out of the woodwork to start mines or mine existing mines that became unprofitable at a lower price and the big companies since they are flushed with cash, want to spend it buying other companies. The cycle continues and then the price drops and consolidations will need to be done.
At a recent virtual conference, as reported by Tanisha Heiberg and Arunima Kumar of Reuters, the bigger gold mining companies are trying to damper their desire to spend money. Scotiabank estimated as of June 30 the top and mid-tier miners were holding over $5 billion in cash.
7 of the top 10 global gold miners including Newmont, the world’s biggest gold miner, Barrick Gold Corp, and South Afruca’s Gold Fields have cut planned output for the year by 7%, regulatory filings show.
The last time gold prices rose was in 2011 and gold miners spent like drunken sailors, overpaid for assets and then had to write off billions in assets when prices declined.
This year, Barrick increased its dividend 14% and Newmont boosted its payout 79%.
Linking to dividend paying stocks, one of the reasons you buy the shares is consistency. You want a dividend every year, if the company feels it wants to increase the dividend so much the better. Often times when companies, and people, have extra cash their is a desire to spend on acquisitions. Some go well, many do not. Giving money back to your shareholders is always a good idea.
There are more questions than answers, till the next time – to raising questions.