Gold miner minting its own gold and silver coins – looking to pay dividends in kind!
Junior, U.S-headquartered gold miner, Gold Resource Corporation (GRC) has entered into a position of holding some of its in-house treasury in physical gold and silver rather than cash in a move that will undoubtedly further increase its appeal to the gold-owning fraternity..
In reporting strong second quarter figures which have seen new production, revenue and dividend payout records, the company’s board has announced that it has approved the company minting approximately US$1 million worth of its own one ounce gold and silver coins.
As production increases, the idea is to hold an increasing portion of its assets in physical gold and silver and possibly offer shareholders holding certain minimum positions the ability to someday receive their dividends in-kind.
Commenting on this move, the company’s President, Jason Reid, said “Holding physical gold and silver in our treasury provides an excellent means of diversification in light of today’s world economic conditions and not only provides that diversification to shareholders but underscores Gold Resource Corporation’s commitment to precious metals.. Minting Gold Resource Corporation’s Double Eagle precious metal coins, currently underway, not only marks the next Company milestone but takes a large step towards potentially offering our shareholders a future in-kind dividend. With the unprecedented printing of fiat currencies around the world and the potential negative impact of governmental policies of various nations around the globe, Gold Resource Corporation provides investors excellent precious metal exposure from an increasing production profile, from dividends and now with physical exposure in the Company’s treasury.”
Gold Resource has always taken an innovative approach to its gold mining activities, and not one that has always met with outside approval as witness a highly critical article in Barrons in July, which the company has described as a “hatchet job”. Gold Resource is a maverick amongst gold miners having brought its El Aguila mine in Mexico into production without producing an SEC-compliant reserve report prior to moving forward. This is in fact the way many gold, and other, miners would have operated before what some might consider excessively protectionist legislation on SEC compliance, which heavily increases the cost of new mine development, started to be put in place to try and protect investors from possible fraud.
Gold Resource describes itself as a gold producer targeting projects that feature very low operating costs and high returns on capital. The primary focus is on cash flow, with a priority to return a meaningful dividend back to its shareholders. So far, since its start of production just over a year ago it has already declared13 special cash dividends for shareholders. As to its track record to date, Gold Resource successfully declared commercial production in July last year from a shallow, high-grade open pit at its El Aguila project – one of several in Mexico. This has enabled it to reach production and cash flow in an extremely short amount of time. A second operation – on the Arista high grade polymetallic vein deposit – is already producing. In its first 13 months of operation the company has already declared no less than 13 cash dividends for its shareholders – an aggressive dividend policy just not seen these days when juniors plough cash back into their projects and any possibility of dividend payments seems to be deferred ad infinitum.
Because Gold Resource operates in this manner it does raise some suspicions amongst those who feel, in our view misguidedly, that such a totally different approach to mine development and shareholder rewards has to signify some kind of deep down malpractice and fraud. Holding part of its treasury in gold and silver and the announced aim to ultimately pay in-kind dividends is unlikely to reduce such fears from the doubters, but in the meantime Gold Resource continues on its path and at current precious metals prices appears to be going from strength to strength.
Companies nowadays, and gold miners are no exception, often feel the need to take an innovative approach to attract shareholders and boost their stock prices as witness Newmont’s pledge to increase its dividend on a fixed basis parallel with rises in the gold price and also Gran Columbia’s floating of a silver backed debenture noted in a recent interview with Frank Holmes. Gold Resource Corporation is perhaps the ultimate example of such a policy.