Earlier this week Resolute Mining announced that it was offering shareholders the option to receive their dividend payments in gold directly into a Perth Mint Depository account. The offer is limited to shareholders with more than 5,000 shares, as at a declared dividend of 1.7 cents per share that would only be $85 worth of gold.
David Baker, of Baker Steel Capital Managers, has been championing gold dividends for some time, noting that the costs of mining gold “have stayed steady as a percentage of ounces mined” which leaves on average around 20% of the miner’s gold for shareholders. Accordingly, he has proposed the idea of a Production Linked Dividend, where the “dividend paid to shareholders is defined as a fixed percentage of the company’s annual production or revenue … ideally it is paid in precious metals”.
Resolute seems to have got the message on both fronts, with a “new gold sales-linked dividend policy [that] rewards its shareholders … with a dividend based on a fixed proportion of future revenue from its gold production”.
For Monetary Metals, this announcement is more evidence that investors are interested in receiving income in ounces of gold. Keith is a member of the Arizona House of Representatives Ad Hoc Committee on Gold Bonds, which is exploring if and how the state could sell a gold bond. Investors would likely be happy.
In our view as central bankers continue to push interest down to zero and below, more people will become attracted not only to investing in gold, but also earning a yield on that gold. We encourage mining companies to unshackle themselves from thinking in terms of dollars and look at their business in terms of ounces. As David Baker says, “to produce an ounce of gold takes a lot of blood, sweat, tears and hard work; to produce a dollar takes the press of a button.”
Disclosure: When employed at the Perth Mint I worked on developing the gold dividends service.