Q&A: Dividend and taxes TG:
Its early regarding dividends since the plant isn't up yet. No question most companies haven't done it but the pressure to do so has been building over the last year. In general, gold producers are generating a 50% margin so unless it is a very low grade, high capex operation, there is no reason not to pay a substantial dividend so that is our goal. Based on the $1000 per oz profitability assumption we think we can pay a dividend especially as we don't have the typical mining company overheads so we can target up to half the available cash flow(after taking care of plant and expansion needs). So for example, roughly the first $5-600k in free cash flow implies a 1 cent dividend at this point. Our role model is GORO -Gold Resource Corp which pays a 5 cent per month dividend. Also, Starcore(SAM) which has a similiar operation east of Pinos is planning to pay a dividend in 2013 after it pays off a hedge which has been costing them $1 million per month. Taxes are a factor, however, historical losses will shelter income for the forseeable future.