Gold Stocks (GDX) Climb, Goldcorp Hikes Dividend

GOLD STOCKS NEWS – Gold stocks climbed Monday as the Market Vectors Gold Miners ETF (GDX) rose $1.08, or 1.9%, to $59.33 per share.  This morning’s strength in gold stocks and the GDX was driven by a broad-based rally in U.S. equity markets, as the S&P 500 Index added 1.7% to 1,265.62.  Gold stocks and the GDX were also helped by a rebound in COMEX gold futures, which earlier fell to $1,732.20 but rebounded to $1,747.80 per ounce.  The S&P/TSX Global Gold Index, Canada’s leading gold stocks composite, jumped 1.3% alongside the GDX.

Despite today’s advance in gold stocks, the GDX remains lower on a year-to-date basis by 3.8%.  This compares quite unfavorably to the price of gold, which is up 22.8% in 2011.  As a way to enhance their leverage to the gold price, several of the world’s largest gold producers have begun to provide their shareholders with a greater portion of free cash flow in the form of dividends.

Last year, U.S.-based Newmont Mining (NEM) became the first gold miner to implement a dividend linked to the price of gold.  Since that time, several other gold stocks have followed in Newmont’s footsteps.

One gold miner that has maintained a traditional common share dividend is Goldcorp (GG), the sector’s second largest company by market capitalization.  This morning GG rose $0.89, or 1.7%, to $52.28 per share after the Canadian-based gold miner announced a 32% increase in its annual dividend to $0.54 per share.  This marks the third dividend hike in the past 13 months, and is effective immediately.  The Company also noted that it is the only gold producer to pay its dividend to shareholders on a monthly basis.

Chuck Jeannes, Goldcorp’s President and CEO, commented that “This action underscores Goldcorp’s unique ability to generate the cash flows necessary to both invest significantly in the strongest growth profile in the gold sector and to provide regular dividend growth for the benefit of our shareholders.  We will continue to review dividend levels at regular intervals in the future.”

Goldcorp also provided an update prior to an upcoming analyst and investor tour at Cerro Negro, a project that includes several high-grade veins located in Argentina’s Santa Cruz province and is scheduled to begin production in mid-2013.  The Company noted that “with production expected to average approximately 550,000 ounces of gold in its first five full years in production, Cerro Negro is well-positioned as Goldcorp’s next cornerstone gold mine.”

Other notable gold stocks moving higher this morning included GDX components Agnico-Eagle Mines (AEM), Yamana Gold (AUY), and Randgold Resources (GOLD).  AEM rose by 2.1% to $43.95, AUY by 2.2% to $16.49, and GOLD by 2.0% to $106.38 per share.