Newmont Mining CEO: May Consider a Share Buyback to Boost Stock

The chief executive of the world’s second-largest gold miner, Newmont says the company may consider a share buyback if the divergence between gold prices and the company’s stock persists.

The deepest mine in the world. The Mponeng mine owned by AngloGold Ashanti, just one hour outside of Johannesburg.
Naashon Zalk | Bloomberg | Getty Images
The deepest mine in the world. The Mponeng mine owned by AngloGold Ashanti, just one hour outside of Johannesburg.

“Over time, should we see this disparity between rising gold prices and equities trailing, at some point we may consider a share buyback,” Richard O’Brien, CEO of the company told CNBC Wednesday on the sidelines of the summer World Economic Forum in the Chinese city of Dalian.

Gold prices have been hitting record levels in recent months, and are up 29.4 percent so far this year. In comparison, Newmont shares have risen 4.6 percent in the same period.

O’Brien says the company doesn’t have a firm target for its stock price but wanted to reward long-term shareholders.

Earlier this year, Newmont announced a gold price linked dividend to return more cash to shareholders. The company, which operates mines in a number of countries including the United States, Australia and Ghana, will pay an additional $0.05 dividend for every $100 increase in gold prices.

But O’Brien also said the risks from higher inflation, and governments wanting to nationalize mining assets or tax them more heavily, were increasing.

“When you see things like Australia, one of the richest countries around the world in terms of natural resources, starts to levy a tax and business people say we are not certain we want to invest here – it’s that uncertainty we are most worried about,” he said.

Despite some analysts warning that gold prices are in a bubble, O’Brien says the company has no plans to hedge its production or to substantially increase its exposure to copper, a step taken by rival Barrick Gold when it bought Equinox of Canada. Instead, he says, investors could hedge themselves.

The company is looking to raise annual production to 7 million ounces by 2017 annually from 5.1 to 5.3 million ounces this year. But the CEO says the company would rather do that by growing organically via a $7 billion capital expenditure plan, than via acquisitions.

“We will always look at acquisitions to see if they’re profitable relative to our own internal portfolio and I would say at the present time, we don’t really see that,” O’Brien said. He pointed out that even though gold equities had underperformed the price of bullion, growing internally was still relatively cheaper.