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Investors warn gold miners to keep lid on ambitions

Section: Daily Dispatches

By Henry Sanderson and Neil Hume
Financial Times, London
Sunday, September 15, 2019

Gold miners are facing pressure from investors to keep their animal spirits in check as the precious metal trades at its highest levels in six years.

As the industry gathers this week for its annual gold conference in Denver, some of the sector's largest investors have warned gold miners not to repeat the mistakes of the past.

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"We don't want to see the poor decisions that we've seen in previous cycles," said Joe Foster, a fund manager at VanEck in New York. "The emphasis will continue to be on more conservative management styles, in terms of debt and financial management."

Gold miners have outperformed this year, rallying 31% according to the VanEck Gold Miners Exchange Traded Fund. The gold price has risen 17% to about $1,500 a troy ounce.

But investors are fearful that soaring gold prices will lead to a repeat of the last boom, which peaked in 2011 when they rose above $1,900 a troy ounce. Encouraged by bankers, miners splurged cash on ambitious deals and projects that ultimately destroyed value for investors when gold crashed in 2012.

"The big thing we’d like to see is for companies to grab the margin expansion from higher gold prices and return that to shareholders as dividends," said Mark Burridge, managing partner and fund manager. "We don’t want to see a massive shift to growth." ...

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