Finweek English Edition - - SIMON SAYS -

Lots of bad news is com­ing out of re­source stocks as they pub­lish re­sults and pro­duc­tion up­dates. The one that struck me was Kumba Iron Ore’s an­nounce­ment that it had can­celled its in­terim div­i­dend. Many peo­ple used to hold Kumba for that div­i­dend, and now it is gone. Div­i­dends are only great as long as there is cer­tainty they are se­cure go­ing for­ward, and in min­ing, div­i­dends are never se­cure. Min­ers can boom – Kumba is not the only ex­am­ple. The plat­inum min­ers also did in the lead up to the 2008 cri­sis when they kept pay­ing large spe­cial div­i­dends. But the next div­i­dend cut is pretty much al­ways as­sured in sin­glecom­mod­ity pro­duc­ers and, as such, they re­main trad­ing stocks rather than the long-term buy and hold ones. Diver­si­fied min­ers are slightly dif­fer­ent – and An­glo Amer­i­can and BHP Bil­li­ton* have held on to their div­i­dends. But in these cases we’re see­ing a f lat div­i­dend (An­glo) or a mod­est in­crease (BHP Bil­li­ton). And as we saw in 2009 with An­glo, if things get re­ally tough, even the diver­si­fied min­ers can cut a div­i­dend to zero. The bot­tom line is that se­cure div­i­dends are to be found else­where.

In min­ing, div­i­dends are never a sure thing.

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