Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
The world’s biggest gold producer sees the price of the precious metal remaining “elevated” as governments continue pandemic stimulus spending, but don’t expect that to change Newmont Corp.’s focus on fiscal “discipline” any time soon.
Gold skyrocketed to record heights above $2,000 an ounce in August, helping lift miners’ cash flow, stock prices and likely the hopes of shareholders expecting higher returns. Spot gold has since dipped a bit, but the haven metal is still trading in record territory above $1,900.
“There are a lot of signals that point to gold staying at these elevated levels — with I think a lot of volatility around it — for some time to come,” Newmont Chief Executive Officer Tom Palmer said by phone.
Investors want the gold industry to remain disciplined and “actually achieve the margins that we’re seeing at the moment”
Despite the high prices and cash flow those generate for miners, Palmer plans to stay focused on such things as improving margins, investing in existing projects that make money at lower prices, and ensuring that balance sheets are well maintained.
“At Newmont, when we talk about discipline, it’s about continuing to run our business profitably at the bottom of the price cycle, at $1,200,” Palmer said. Investors want the gold industry to remain disciplined and “actually achieve the margins that we’re seeing at the moment.”
Palmer said he believes issues around capital allocation along with environmental, social and governance will be the two hot topics of discussion at the Denver Gold Group’s annual Americas conference, which begins Sunday.
At the same time, he said the Greenwood Village, Colorado-based company is discussing further shareholder returns.
“We lifted our dividend by 79% earlier this year, and we have the leading dividend in the industry at $1 a share” on an annual basis, Palmer said.
“As we now look at the strength of our balance sheet, the discipline we have in running our business and our sustainable portfolio,” he said, “we are actively debating and assessing opportunities for further shareholder returns.”
There has been speculation that Palmer, 53, might be a candidate to run Rio Tinto Group after CEO Jean-Sebastien Jacques was forced out last week over the destruction of ancient Aboriginal heritage sites. Palmer spent almost two decades at Rio, including a stint as chief operating officer of the company’s iron ore business.
So is Palmer interested in the job?
“I’m already very privileged to be leading one of the world’s great mining companies,” he said. “I have an exceptional team and look very much forward to working with that team to deliver significant value to all of our stakeholders, and that’s my focus.”
(By Steven Frank)
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