Newmont's Gold Dividend Could Offer Volatile Ride

Newmont Mining wants to give investors a volatile ride through its planned dividend linked to the price of gold.

Gold Bars
Gold Bars

"What we’re intending to do is provide investors with some upside," CEO Richard O'Brien told CNBC Thursday.

"For every $100 increment of gold we’re thinking about a 20-cent increase in Newmont's annual dividend rate. It gives investors a direct play on gold through not just the principle of valuation in our stock, but also through direct cash participation."

Volatility, he said, "is a gold harbinger of value, both up and down, and I think some translation to immediate cash keeps people interested. We are competing against the ETFs, which offer absolutely no yield."

And if the price of gold goes down?

"I think this is a company that’s sustained a dividend at lower gold prices for a long period of time, so I think (there's) more upside than downside," he commented. The dividend plan, which needs shareholder approval, would be payable on June 29.

Also Thursday, Newmont said it would boost gold production 35 percent over the next six years. At the current $1,460 an ounce (as of this writing), O'Brien said gold should be a "fundamental piece" of all investor portfolios because it's a hedge against currency devaluation.

"People are afraid of currency devaluation. Nobody can devalue gold but the marketplace," he said. "No government can issue additional gold, and I think with that, it provides this store of value."

O'Brien also said Thursday the company wants to raise copper production from the current 200 million pounds of copper a year to 400 million pounds in five to six years.