Major gold mining companies, whose shares have dropped even as the gold price rose, should be paying out more in yields and dividends to attract shareholders and broaden the appeal of gold investment, a key industry figure charged on Thursday.
“You look at the seniors (major companies) who have had just a terrible performance. They’re not giving any leadership to the industry,” Rob McEwen, chief executive of McEwen Mining Inc told the Reuters Global Mining and Metals Summit in New York.
“They’re actually a deterrent (to investment),” he said of big gold companies, known as seniors.
He noted that since 2006, the gold price has risen 133 percent while shares in Goldcorp, the company he founded two decades ago, are still trading at around the same price. On Thursday, Goldcorp closed down 15 cents at C$44.31 in Toronto. During 2006, it hit a high of $45.99, according to Thomson Reuters data.
“Goldcorp’s production has increased 80 percent,” said McEwen, who is no longer connected with the company. “It used to be that when your production went up, your share price went up. Their share price is flat.”
He cited similar data for other major U.S. and Canadian gold companies. There was no immediate comment from Goldcorp on McEwen’s comments.
“Over the last six years, it’s been a horrible place to have your money,” he said of gold company equities, which have come under recent competition from exchange-trade funds (ETFs) which allow investors to buy physical gold.
“The equities can have explosive growth with discoveries, the equities can provide a yield,” he said. “If the seniors came along and started paying a 3 or 4 percent yield, they would broaden their appeal in this yield-starved market.
“That would start showing some leadership,” he said.
McEwen said an increase in gold equities investment would not mean a shrinking of ETFs. “People will expand their gold portfolios. I think there’s going to be a maturity in the ETF market that will lead to a return to the equities.”
McEwen, who owns 25 percent of the outstanding shares of his eponymous company, also hit out at senior executives who do not hold big enough stakes in their companies.
“They don’t have money in their companies, so when they wake up they are not thinking about how to increase the share price. It’s more about ‘how do I increase my salary or my bonus?'”
“There’s a couple of companies out there that should not have the people running them today, they’ve really screwed their shareholders,” he said, without elaborating.
McEwen himself takes no salary from his company, which has mining operations in Nevada, Mexico and Argentina. “I’m in this business for the capital gains, not the income,” he said.
Well known as a bull on the gold price, he cited historical evidence for maintaining his forecast of gold at $5,000 an ounce in three years. The metal, which hit a record high of $1,920 last September, was trading on Thursday around $1,655.
McEwen Mining stock slipped 5 cents to close at C$4.09 in Toronto.
(Reporting By Steve James; editing by Gunna Dickson)
iPad Version – Pic: Courtesy of US Gold