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Market Cap £5.43bn
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Gold miners fret about long-term supply even as they boost dividends

Tue 25th February, 2020 10:38pm
By Jeff Lewis
    HOLLYWOOD, Fla., Feb 25 (Reuters) - Gold miners have largely
been boosting dividends to appease long-suffering shareholders
rather than funding fresh exploration projects needed to grow
production, a strategy that executives are warning may pose
long-term risk to the industry.
    The tension comes as gold prices  GCc1  are at the highest
in seven years, near $1,650 an ounce, a surge in part fueled by
a flight to safe-haven assets amid rising global concern about
the coronavirus. urn:newsml:reuters.com:*:nAQN026WZV  
    That has propelled earnings and prompted Newmont Corp
 NEM.N , Barrick Gold  ABX.TO  and others to hike dividends and
share repurchases, which shareholders have been demanding for
years.  urn:newsml:reuters.com:*:nL1N2AK188 
    But miners say a dearth of new exploration poses an
existential risk to the industry as falling ore grades push
production costs higher.
    "If you start moving out a number of years, it'll be a
challenge" for supply to keep up with demand, AngloGold Ashanti
Ltd  ANGJ.J  CEO Kelvin Dushinsky said Tuesday on the sidelines
of the BMO Global Metals and Mining Conference.
    Despite that worry, AngloGold Ashanti earlier this month
approved a dividend of $1.65 per share, up from 95 cents in
2018. Dushinsky said he expects gold prices to be supported as
the number of new discoveries dwindles. 
    The trend is likely to continue and could force more
consolidation in an industry that has already seen several
multibillion-dollar deals in the past year, executives and
industry analysts said.
    "The price of gold where it is now gives the companies an
opportunity to invest," said Kirkland Lake Gold  KL.TO  Chief
Executive Tony Makuch. "The problem is that you're at a period
of time where a lot of the shareholders suffered from not seeing
returns." 
    Paltry spending on exploration pushed the average life of a
gold mine in 2018 to roughly 11 years, down from a global
average of 16 years in 2012, according to consultancy Wood
Mackenzie.
    Barrick earlier this month hiked its dividend by 40%.
Newmont has said it would raise its annual dividend 79% to $1.
    At least one miner is trying to balance both priorities, for
now.
    Kirkland, which bought rival Detour Gold for C$4.3 billion,
said it would double its annual dividend while boosting
exploration spending. urn:newsml:reuters.com:*:nL4N2AK2I5
    Still, Barrick CEO Mark Bristow warned this week that the
industry is headed for a precipice and said he believes global
gold production has peaked. 
    "We, as an industry, haven't invested in our future," he
said in an interview. 

 (Reporting by Jeff Lewis; editing by Ernest Scheyder and Dan
Grebler)
 ((Jeff.Lewis@thomsonreuters.com; +1-416-687-7723))
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