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Gold miners are widening their investment appeal as near-record bullion prices boost profits and dividends, according to the chief executive officer of Gold Fields Ltd.
Gold Fields is adding more generalist investors as they search for yield amid low bond-market returns, Nick Holland said in an interview from Johannesburg. The sector, which once largely drew the attention of specialist funds, is now attracting a broader base of investors who previously considered gold miners too leveraged and high-risk. Bullion's surge to a record earlier this month is increasing that allure.
"We can give you the cash yield through a dividend policy that will pay out more at higher prices because of higher earnings," Holland said. "I think we're going to get a lot more interest as people start doing updated valuations on us."
Warren Buffett's Berkshire Hathaway Inc. recently added Barrick Gold Corp. to its investment portfolio after shunning gold producers for years. In the past, Buffett, the billionaire chairman of Berkshire, cautioned against investing in the metal because it's not productive like a farm or a company.
Gold Fields shares have more than doubled this year as first-half profit rose 120%, despite virus disruptions at mines in South Africa and Peru.
"A lot of people are running the rule over us now," the CEO said. "We were able to demonstrate that we can actually do well despite the Covid risks."
Holland, who plans to retire in September 2021, is building an $860 million mine at Salares Norte in Chile. That project will raise annual output to more than 2.5 million ounces, taking the producer's "profitability and cash flow to another level," he said.
During more than a decade as CEO, Holland has shifted focus to more profitable operations in Africa, Australia and the Americas as the gold industry in South Africa dwindles amid geological challenges and soaring costs. Still, South Deep, the producer's last remaining mine in its home country, has started to "make good money," he said. That means there's no pressure to sell the asset.
"I don't think there is any urgency for us to do anything here given the fact that prospects are improving," Holland said. "It's back in the black, it's making money. We are happy, we can see more coming down the road."