Gold producer Newmont Mining Corporation (NEM) refined its policy for making dividend payments based upon the price of gold, as the value of the precious metal continues to climb. In April 2011, the company unveiled a plan to base its dividend payments on gold prices.
Under the new policy, Newmont's dividend payments will continue to be linked to changes in the price of gold, yet will now allow for an additional 7.5 cents a share when Newmont's realized gold price for a quarter exceeds $1,700 per ounce. When Newmont's realized gold price for a quarter exceeds $2,000, the dividend will increase by an additional 2.5 cents.
The dividend would increase if gold climbed further, with a $2,500 per ounce gold price boosting the dividend to $4.70 per share.
Unveiling the plan in April 2011, Newmont announced its annual payout would rise by 20 cents a share for every increase of $100 per ounce in the average realized gold price, bringing its annual payout to $1 a share.
Newmont bases the payout on its average realized gold price in the preceding quarter. The company stated that at average realized gold prices below $1,700 per ounce, the current dividend policy will remain unchanged.
Subject to Board approval, the first quarterly dividend under the enhanced policy is expected to be payable on December 30, 2011 to shareholders of record as on December 8, 2011, and will be based on the company's average realized gold price for the third quarter of 2011.
In July 2011, the company released its financial results for the second quarter of 2011. The adjusted net income rose to $445 million or 90 cents per share in the second quarter from last year’s $377 million or 77 cents per share. The result was below the Zacks Consensus Estimate of $1.00 per share.
Total revenue was $2.4 billion, up 11% year over year, but below the Zacks Consensus Estimate of $2.5 billion.
Newmont reported attributable gold and copper production of 1.2 million ounces and 44 million pounds, respectively, in the quarter at costs applicable to sales of $583 per ounce, and $1.34 per pound on a co-product basis.
For fiscal 2011, the company reiterated its previous expectation of attributable gold production of approximately 5.1 million to 5.3 million ounces, with attributable copper production of 190 to 220 million pounds. Costs applicable to sales are expected between $560 and $590 per ounce for gold. Costs applicable to sales are anticipated between $1.25 and $1.50 per pound of copper.
The company currently plans to spend $2.1 to $2.5 billion in attributable capital expenditures in 2011, or $2.7 to $3.0 billion on a consolidated basis. Approximately 40% of 2011 consolidated capital expenditures is expected to be earmarked for major project initiatives, including the development of the Akyem project in Ghana, the Conga project in Peru, Hope Bay in Canada, and the Nevada project portfolio The balance 60% is expected to be spent for growth and sustaining capital.
The company faces stiff competition from Barrick Gold Corporation (ABX) and AngloGold Ashanti Ltd. (AU).
Newmont has a short-term (1 to 3 months) Zacks #3 Rank (Hold') and a long-term Neutral recommendation.
BARRICK GOLD CP (ABX): Free Stock Analysis Report
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NEWMONT MINING (NEM): Free Stock Analysis Report
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