RBC Capital Markets, the corporate and investment banking arm of Royal Bank of Canada, last Friday hosted its 10th annual International Gold Conference in London, bringing together 195 investors and senior executives from the world’s leading gold mining and production companies. Participants remain bullish on the performance of gold bullion. They expect the performance of gold equities to improve, with small cap gold mining equities expected to lead the way in 2012 according to those surveyed.With the continued, if narrower, divergence between the price of gold and performance of gold equities, the majority of conference participants expects gold companies to raise dividends with operating margins of $1,000/oz. A small percentage of those surveyed think gold companies should buy back shares or hedge gold.
The majority of those surveyed think that large cap gold mining companies should use the excess capital they generate to increase dividend payouts and pay special dividends. 14% believe that they should use the excess capital to fund acquisitions. A smaller number of those surveyed think that companies should buy back shares or fund organic growth projects.
Speaking at the conference, Stephen D. Walker, Head of Global Mining Research, said: “Gold has traded at record highs amid the ongoing sovereign debt crisis and uncertain global economic outlook. In addition to these macro drivers, net central bank buying, renewed investment demand for gold and record levels of in flows of physical gold into Southeast Asia are providing positive fundamental drivers for the price of bullion. However, despite the rising gold price, investors concerns for the broader equities markets and profit taking have negatively impacted gold equities and contribute to gold equities under performing the gold price in 2011.”
Patrick Meier, Head of Investment Banking Europe, RBC Capital Markets, commented: “With a supportive medium term outlook for the gold price, valuations near record lows and supply-side fundamentals relatively unchanged, there is a strategic rationale for gold companies to pursue growth opportunities via select mergers and acquisitions activity. We expect mining companies to be major contributors to capital markets activity in 2012.”