SYDNEY—U.S. gold producer Newmont Mining Corp. has spent the past few years overhauling its business by cutting production costs, buying and selling mines and paying back debts. Now executives have its dividend policy in their sights.

Gold companies were among the first in the mining industry to slash payouts to investors as prices tumbled from the record highs reached earlier this decade. Major diversified mining companies including BHP Billiton Ltd. and Rio Tinto PLC have more recently followed suit: Both this year abandoned policies to keep dividends steady or rising year after year.

For Newmont, however, a turning point is approaching. The miner expects to reach its internal debt targets two years ahead of schedule, Chief Executive Gary Goldberg said. He cited better-than-anticipated gold prices fueled by expectations that the Federal Reserve will hold off from tightening monetary policy while other central banks continue to ease.

Newmont, which has mines across the globe including in the U.S., Australia, Ghana and Peru, has nearly halved its net debt over the past three years to roughly US$2.7 billion.

"We have got our debt down" so now "we'll look at modifying our gold-price-linked dividend policy," Mr. Goldberg said in an interview in Sydney.

That will occur in the final quarter of the year, he said. Meanwhile, should gold prices stay high, Newmont's third-quarter payout could double to $0.05 a share.

Newmont, the world's No. 2 gold miner by output, is the most likely among the North America-based gold giants to soon return more cash via dividends or buybacks, Citigroup said in a note on Aug. 1 as it predicted the miner would end this year with a stronger balance sheet than its peers.

While Mr. Goldberg said payouts will become a higher priority than debt repayments, he is less enthusiastic about other forms of capital management such as special dividends or repurchasing stock.

"We'd assess those, but I don't see them at the top of the list," he said. "When prices are high, it is probably not the best time to do a share buyback."

Newmont has been a top performer on the S&P 500 this year. Its stock has more than doubled and is at its highest level since 2013.

But dividends are unlikely to return to the heady days of that year, when Newmont paid as much as $0.425 a share a quarter to investors.

"We were actually taking out debt at that time and using debt to pay the dividend, and that's not a situation you want to get back into," Mr. Goldberg said.

Gold prices have risen roughly 25% in 2016, to about $1,340 a troy ounce. That is well above the $1,100 an ounce Newmont was budgeting for this year, said Mr. Goldberg.

In addition to monetary easing, the U.K. referendum to leave the European Union has aided gold prices this year, as has what Mr. Goldberg called "an interesting election" campaign in the U.S.

Mine sales have helped Newmont build its cash pile.

In June, the company penned a deal to unload its 48.5% stake in the operator of the Batu Hijau copper and gold mine in Indonesia—one of that country's largest copper deposits—to local company PT Amman Mineral Internasional for $1.3 billion.

Mr. Goldberg said more onerous mining regulations in Indonesia, particularly rules on processing ore locally, were a factor in its decision to exit the country. The deal should close this quarter.

There is "nothing critical" left on the table in terms of possible future mine sales for Newmont, Mr. Goldberg said.

The miner has previously considered selling the remote Tanami mine in northern Australia, but after working to increase output and cut costs, and success in exploring nearby ground, "I don't see us wanting to exit," he said.

"With prices going up, we haven't heard as much" from rivals seeking acquisitions recently either, he added.

Higher gold prices have also damped Newmont's desire to pursue the assets of any competitors. Last year, Newmont purchased the Cripple Creek & Victor operation in the U.S. state of Colorado for $820 million, plus a cut of future returns, from AngloGold Ashanti Ltd. as that miner works to reduce its own debt load.

"Price rises have buoyed the performance of some companies that were a little more distressed and they are no longer so anxious to do something," Mr. Goldberg said.

There is one deal that could still be done, though: Joint-venture partner Barrick Gold Corp. said it wants out of the pair's Super Pit operation, Australia's biggest open-pit gold mine.

Newmont took over management of the site last year, at a time when Barrick has been unloading its interests in the resource-rich country. The Super Pit is Barrick's last operation in Australia.

Buying its partner's 50% stake "is an option for us," Mr. Goldberg said.

"It really depends on the approach Barrick takes in how they sell the asset" as to whether Newmont will have the right to bid first, he said.

He wouldn't comment on media reports that estimated the stake could be worth up to $1 billion, except to say "there's been a lot of speculation, and I think some of it is pretty optimistic." A representative for Barrick wasn't immediately available to comment.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

 

(END) Dow Jones Newswires

August 11, 2016 01:05 ET (05:05 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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