Conclusions

The best analaysts and market pundits will tell you that dividend yielding stocks perform better in the long run. And, if you are a gold producer, your internal rates of return are rising parabolically as interest rates flirt with the zero bound.

Some gold producers are seeing rising costs, but nobody mentions that gold producers can no longer lie about their 'cash costs' to produce an ounce of gold. Under IFRS, instead of GAAP, you have an all-in cost, rather than a cash cost to consider. Thus you have a margin of net and comprehensiver earnings after costs. (notable to this are Claude Resources cost per ounce of ~$1200/oz., when otherwise they were previously reported at a much lower number.)

Very likely gold producers will be able to pay for everything they want, if only to wait for the gold price to rise. They won't have to wait long for this to occur, depending on the grade of their mining project.

Gold mining companies are priced as if the gold price were crashing, which hasn't occurred, and have been subject now to an incredible rout, as they provide and excellent scenario to generate equity swaps. Derivatives are now at the heart of the markets, rather than a fringe banking effort.

But a persistent problem is the efficiency of the markets when the all-in trade is short the gold miners, and long treasuries. Truly everything not tied down is being sacrificed for yield. But the day has come when no money comes into the stock, making swapping the value into treasuries very difficult, if not to say risky.

So if the gold price rises, or gold miners start to pay robust dividends, then this introduces a massive arbitrage risk into the calculations behind the equity swaps. As easy as it was to enter into an synthetic derivative like an equity swap by choosing your gold company, and presssing the 'F9' key on the keyboard on your trade station, it is becoming apparent that simply trading out of an completely illiquid stock where trading has zeroed is totally problematic.

In comes the hostile buyer. But the card up the sleeve is dividends.

-F6