(Kitco News) Gold producers are increasing capital returns as higher metal prices and strong third quarter margins improve free cash flow, says Joe Mazumdar, Editor of Exploration Insights.
Speaking with Kitco Mining’s Digging Deep, Mazumdar said Newmont returned more than 60 percent of its free cash flow earlier this year, while Barrick lifted its payout to roughly 46 percent. “Shareholder returns work for basically getting a better price on your stock,” he said, adding that stronger operating performance has helped companies sustain higher dividends and buybacks.
Buyback activity has slowed as valuations have risen, which is pushing producers toward stock-based M&A rather than large cash transactions. Mazumdar pointed to recent all-share deals by Coeur Mining - as well as Barrick’s higher base and bonus dividend, totalling 17.50 cents per share - as examples of companies balancing growth ambitions with tighter capital discipline. He added that investors appear more supportive of steady capital returns than aggressive spending in higher-risk jurisdictions.
Rising costs remain an important consideration for gold producers. Mazumdar noted that “Electricity costs in the States have gone up,” and highlighted labour and diesel as additional pressures. He said operations mining lower-grade or harder rock remain especially sensitive to higher energy use. Oil prices would introduce another challenge if they reverse their recent weakness.
Stronger metal prices are also improving financing conditions for exploration companies, with several juniors recently raising capital at modest discounts and without warrants, a trend Mazumdar said reflects better sentiment toward discovery-stage opportunities. Exploration Insights remains positioned toward higher-risk names where returns depend on results rather than broad market moves. “We’re actually interested more in the alpha part of the return than in the beta part,” he said.
In copper, Mazumdar highlighted the limited number of mid-tier producers and said Marimaca Copper stands out for its infrastructure, low capital intensity, and proximity to roads, power, and water. He noted that private equity owners Greenstone and Assore together hold about 40 percent of the company, a structure that may support a build-first strategy rather than a sale. “Once it’s in production, it’ll be worth a lot more,” he said.
Watch the full interview on the Kitco Mining YouTube channel to hear Joe Mazumdar’s analysis of gold producer strategy, cost trends, exploration financing, and the outlook for copper and silver developers.