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  • claricepierce

    Which Gold Miner Will Cut Its Dividend Next?

    With all-in sustaining costs of more than $1,200 an ounce, it shouldn't have surprised many investors that IAMGOLD (NYSE: IAG) cut its dividend , though the 11% plunge the stock took following the announcement suggests they were anyway.

    Because gold miners were never particularly generous with their dividends, they sought more gimmicky ways of attracting investors, such as Newmont Mining (NYSE: NEM ) andEldorado Gold linking their dividend to the price of gold or paying it in actual bullion as Gold Resource (NYSEMKT: GORO ) did. Others like Barrick Gold (NYSE: ABX ) , Goldcorp(NYSE: GG ) , and IAMGOLD were wildly hiking their payouts by double-digit percentage increases two years ago.

    While that garnered them attention in a rising price environment, the subsequent collapse of gold's market value has led miners to not only sell assets and cut capital expenditures but to cut or eliminate altogether the payouts they made to investors.

    In March, Australia's Newcrest Mining suspended its dividend payment, followed in April by Newmont cutting its dividend by 18%, and Barrick slashing its payout by 75% in August. What had once been a portfolio of high-flying stars full of promise as gold marched inexorably to $2,000 per ounce and beyond, has instead become a motley assortment of grubby miners scrounging among the seat cushions to find enough spare change to keep their operations going.

    Investors need to ask themselves not only which miner will be next to cut its dividend, but of those who've already done so, will it be enough?

    Gold miners as a group are heavily indebted. Barrick has watched its debt mount to more than $15.4 billion and interest payments surge 20% from the year-ago period; Newmont has more than $6.5 billion worth of long-term debt on its balance sheet; and Goldcorp, $2.3 billion, giving them total debt-to-EBITDA ratios of 2.2, 1.9, and 1.4, respectively. But since that's calculated on a time frame that extends back to last December when gold was trading at around $1,700 per ounce, the yellow metal's precipitous 25% tumble since then means those ratios going forward are likely to soar.

  • claricepierce

    A Troubling Trend Emerging in the Gold Industry


    This past April, Newmont Mining (NYSE: NEM ) cut its payout to investors by almost 18% to $0.35 a share. Last month, Australia's Newcrest Mining said it was suspending its dividend payment for the last quarter of its fiscal year. And on Tuesday, Eldorado Gold (NYSE: EGO ) said it was halving its exploration budget, slashing its capex budget by more than a third, and at its next board meeting would take up consideration of the miner's dividend policy.

    If gold prices don't recover soon, expect more miners to follow suit, particularly those with high debt and capital requirements such as Barrick Gold.

    Budgets for gold miners were set when the metal's price was much higher, but now that they've tumbled, there are few options left. Hitting the capital markets doesn't look palatable at the moment as a means of raising money, since their stock prices are already in the basement, and while many began cutting their capital budgets, they've also pushed further out their production schedules as a means of conserving cash. Now the only piggy bank they have left to stick their hands into are their dividend payments.

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