[GRC] NEWS
October 11, 2011
GOLD RESOURCE CORPORATION IN THE MEDIA; CNBC, FORBES, WALL STREET JOURNAL
CNBC STREET SIGNS: GOLD RESOURCE (GORO) PLANS TO PAY DIVIDENDS IN GOLD BULLION
Link: http://video.cnbc.com/gallery/?video=3000050680
FORBES: UPCOMING DIVIDEND
“…history chart for GORO, showing historical dividends prior to most recent $0.05 declared by Gold Resource Corp…”
Link: http://www.forbes.com/sites/di…ce-corp/?partner=yahootix
WALL STREET JOURNAL: MINER GETS PHYSICAL WITH PAYOUT
By DAVID FICKLING
SYDNEY—Some banks are accepting gold as collateral for loans, and developer Donald Trump will take it as a security deposit in his new skyscraper in Manhattan. Now, a Colorado gold mining company has another idea: make dividend payments in bullion instead of cash.
Jason Reid, president of Gold Resource Corp., whose Colorado Springs, Colo., company is developing projects in southern Mexico, said Gold Resource plans to make the first dividend payments within months.
To prepare for the novel payout, the company in August began exchanging $1 million of its cash into metal with the idea of minting one troy ounce gold and silver coins to be distributed monthly.
"Many investors would rather hold physical gold or silver rather than fiat currencies that will continue to be debased," said Mr. Reid.
Some think the idea of paying bullion instead of cash just might catch on. Ian Lawrence, managing director of in Cobar Consolidated Resources Ltd. in Melbourne, said he has had discussions with several investors about getting dividends in physical metal and personally thinks it is a "great idea."
"There's been a lot of interest from shareholders," he said.
Dividends in gold are another example of the metal's new allure as an alternative currency. Hedge funds have allowed investors to denominate holdings in gold, and exchange-traded funds backed by physical gold have become some of the most popular investment vehicles.
Although gold is down 13% from its August record settlement of $1,888.70 a troy ounce, prices are up sixfold from 2001. Front-month gold for October delivery on Friday fell $17.40, or 1.1%, to $1,634.50, up 0.9% on the week.
Chris Mancini, an analyst with the Gamco Gold Fund, said Gold Resource approached the fund about its plans for a gold dividend.
"We said, 'Yes, it's potentially a good idea,' " he said, adding that it probably would be a positive for the stock.
Behind the desire to hold gold are concerns that central banks' monetary easing and countries' fiscal woes will undermine faith in currencies like the euro and dollar.
But paying out a dividend in bullion comes with a unique set of logistical challenges that could scare off many companies. It would be cost-effective only for shareholders holding tens of thousands of shares, limiting the appeal for individual investors.
"There'd be too many complications" to such a move, said Ross Smyth-Kirk, chairman of Kingsgate Consolidated Ltd., a producer with mines in Thailand and Australia. "It's a bit gimmicky."
For one, it is easier to divide up a total dividend payout using currency rather than gold. For example, an investor in Barrick Gold Corp., the world's largest gold producer by volume, would need to hold nearly $23,000 of shares to garner enough annual dividend for a one-tenth-ounce American Gold Eagle coin. Similarly, it would take about £3,400 ($5,250) of stock in Fresnillo PLC, a large silver miner, to earn dividends sufficient to buy a one-ounce silver Britannia coin.
And while dividends usually can be transferred electronically to bank accounts, moving precious metals is so notoriously difficult that it has spawned a whole genre of heist movies.
Nigel Moffatt, manager of the Perth Mint, said those problems can be tackled. Established when gold was discovered in Western Australia at the end of the 19th century, the mint has in the past held discussions with producers about facilitating dividend payments.
Gold's purity already is measured down to three decimal places, so physical gold prices can be divided into increments of as little as $1.92, Mr. Moffatt said. In addition, shareholders could open accounts with a depository vault. That way, gold wouldn't have to actually move: A dividend payment could be recorded by making changes to an ownership registry.
A bigger problem may be investor demand. Small- and midsize gold and silver miners have given up paying dividends over the past decade, betting that shareholders would rather have the money spent increasing production and consequent earnings.
Gold-mining stocks are now seen as leveraged plays on the price of gold itself, said Laurie McGuirk, chief executive at AgAu Capital Ltd., a Sydney fund that invests in mining stocks. With some analysts expecting the metal to resume its upward climb due to worries about the debt of Greece and other euro-zone nations, dividend yields in the low-single-digit percentages don't provide much of a lure.
"Anyone who's looking at gold for dividend flows at the moment is probably not looking at it in the right way," he said.
LINK:http://online.wsj.com/article/…WSJ_hps_sections_business