FMG joins call for miners to conform
Fortescue Metals Group chief executive Nev Power has added his voice to a growing chorus of miners urging their industry to become “normal businesses” and prioritise cash flow and dividends over growth.
Miners’ financial returns were a key focus at the Diggers and Dealers Mining Forum as companies stepped up efforts to attract and sustain investor interest.
The gold sector has a poor history of shareholder returns, including dividend payments, a fact recognised by Evolution Mining executive chairman Jake Klein who urged his peers to act like “normal businesses” with more fiscal discipline.
“The fact we say it is rare (dividend payments) and the fact we haven’t really spoken about it much was probably a bit of an indictment on the gold space,” Mr Klein said.
Mr Power, whose efforts to slash Fortescue’s Pilbara iron ore cash costs to among the lowest in his sector have silenced the company’s critics and safeguarded its future, said miners needed to learn from other sectors, including the lesson of not overinvesting during buoyant points in the cycle.
Fortescue’s cost-cutting was recognised last night when the company was named Digger of the Year at the gala night.
“All companies need to focus on returns and, to some extent, we need to make sure we are focused on value always rather than just expanding to push out production,” Mr Power said.
“We have been focused on a (dividend) payout ratio from day one because we recognise that it is important to reward shareholders along the journey.
“And we will be looking very carefully at any investments to make sure we get those returns.”
Northern Star Resources chief executive Bill Beament illustrated the shift in approach, highlighting his gold miner had averaged a return on equity of 39 per cent over the past six years and an underlying return on invested capital of 29 per cent, including 27 per cent in the past 12 months.
FMG chief executive Nev Power