Gold prices to stay elevated with higher volatility - Newmont CEO
(Kitco News) - Gold pushing to all-time highs above $2,000 has been a significant boon for the mining sector; however, companies still have to focus on growth and delivering value to shareholders, according to the CEO of the world's biggest mining company.
In an interview with Kitco News, on the sideline of the Mines and Money Online Connect global virtual mining conference, Tom Palmer, CEO of Newmont Corp., said that even with all the difficulties in the first half of the year due to the COVID-19 pandemic, he expects his company to see solid performance in 2020.
He added that rising revenue and increased cash flow will ensure the company's success as it develops its production pipeline.
"We manage our business, assuming gold's at $1,200. And when we think about growth for us, it's about growing margins at that $1,200 mark," he said. "For every $100 increase in the gold price above that base plan assumption that we have. We generate an extra $400 million of free cash flow a year. If current spot prices were to be maintained for the next five years, we would generate $19 billion of free cash flow. So our focus is on running the business and ensuring we've got a sustainable, profitable business at the bottom of the price cycle and then leverage nicely to the gold price."
As for the gold price staying at the current level, Palmer said that it is difficult to see prices significantly lower given how much fiscal and monetary stimulus has been pumped into financial markets to support the global economy.
"There are a lot of signals that say that gold prices could stay at elevated levels with quite a bit of volatility for some time," he said. "So, that's nice for our business."
Looking at the company's current development path, Palmer said he is confident that the company can sustain current production around 6 million ounces a year for the next 10 years. He added that with the company's exploration program, they are developing projects to maintain the current trajectory for the next three to four decades.
"We've got an exploration program and an exploration team that is the best in the industry," he said. "The great thing about the Newmont story is what we have organically that can sustain our performance over the very long term. And that's something that is unique."
Along with investing money into the ground, Palmer said that the company is also committed to giving back to shareholders. He noted that the company currently has the highest dividend in the sector, raising it 79% this year to $1 per share.
"In the last 18 months, we've returned $2 billion to shareholders and that is more than the next eight gold companies combined," he said.