Pacific Gold Corp fka PCFG

[WhiteSahara]

Another article today regarding record profits from Gold Miners:

Massive increases in Q3 gold miner profits but no re-rating yet
As gold companies continue to announce strong results from this round of quarterly earnings, dividends continue to be a hot button topic for analysts
Author: Geoff Candy
Posted: Monday , 07 Nov 2011


GRONINGEN -
Stealing shamelessly from Charles Dickens, it is very much the best of times and the worst of times for gold miners at the moment.
With gold prices on a bad day trading around $1,600 an ounce and, more often than not over the last few months, flirting with new records, the companies that are mining the yellow metal should be licking their lips.
And the recent results from some of the world's largest gold diggers bears this out. For the third quarter of 2011, Barrick Gold reported record adjusted net earnings of US$1.39 billion ($1.39 per share) and record net earnings of US$1.37 billion ($1.37/sh). Newmont reported an adjusted net income of $1.6 billion for the first nine months of this year, up from $1.32 billion or $2.68 per share for the same period of last year.
Kinross Gold reported a 134% increase in adjusted net earnings for 3Q11 to $273.4 million or 24-cents per share, while Yamana Gold reported record adjusted earnings of $190 million during the 3Q11, a 63% increase over third-quarter net earnings for 2010.

But, while the cash is beginning to flow through these g]old miners, it needs to be remembered that the price of gold is up over 25% year-to-date, despite a drop from record highs. With gold prices at such high levels a bigger surprise would be if the companies weren't making money.
Despite the jump in earnings, however, gold equities have not performed nearly as well as the metal they haul out of the ground. And, this is where the slightly melodramatic, worst of times bit comes in.
Part of the reason for the underperformance by mining stocks, in relation to the price of bullion is the generally conservative gold prices used by analysts when modelling the stocks.
As Pierre Lassonde recently explained to Mineweb, "Most analysts are using their economist's projections for gold and for the last 10 years it's always been way under the reality. For example today the average is probably looking out five to 10 years as they're using $1,100 gold vis a vis a real gold price of $1,600 so what do you expect... they put out recommendations using $1,100 gold, so therefore the price that most of the stocks are trading at on a net asset value is around $1,100 to $1,200 gold and that is not going to change until, either the street uses todays' gold price, or even the contango."
Another reason for the disconnect was explained to Mineweb by Blackrock Gold and General Fund manager, Evy Hambro.
"Gold equity management teams have been very reluctant to share the higher gold prices with investors with regards to dividends and so on and the uncertainty that exists around that is again another reason for gold equity investors holding back their appetite for gold shares."
This is borne out by the rolling 12 month dividend yields offered by the stocks. Of the top 8 tier one gold stocks, only two, Gold Fields(1.25%) and Newmont (1.21%) have yields above 1%.
And, judging from the number of questions being asked of gold equity management teams both at the recent Denver Gold Group forum about dividends, and the number of times it has been brought up during results conference calls, investors seem to want a little more than just exposure to the gold price from their gold equities -, especially in the current low yield world where, gold ETFs are easily available.

And, the gold companies know this. As DRDGold CEO, Niel Pretorius, pointed out during an interview with Mineweb on the release of its results, "You have to give shareholders a reason to buy your share and not just buy the ETF. That reason is that you pay them for holding your stock and you want to pay them 2%, 3%, 5%."
This desire for "more" seems to have elicited a range of responses from the miners. On the one extreme, you have the board of Newmont Mining, which took the decision in April to link its dividend to the gold price - a decision that was met with strong market approval at the time.
At the other end of the spectrum is the more conservative type of approach, laid out by, the likes of Yamana's Peter Marrone, who said during the Q&A session on the release of his company's latest set of results, that while there was some merit o a gold-linked dividend, it also created significant volatility.
"The philosophy we have adopted is, rather than linking our dividend to the gold price, at the end of the day, whatever the gold price is, it is contributing to our cash flow. And, if we have a view that our cash flow has reached a stepped up point and is sustainable at those levels, then we will increase the dividend so that it represents that stepped up level of cash flow.
"I prefer that approach, our board prefers it because it is more sustainable, it is longer term, it does not have the risk of the volatility in dividends as metals prices move."
The question now, is which answer will investors prefer?