Yamana to weigh dividend hike in Q3

By Ben Hirschler

LONDON (Reuters) - Canada's Yamana Gold Inc (YRI.TO: Quote, Profile, Research, Stock Buzz) will consider hiking its dividend in the third quarter of 2008 as it reaps the benefits of record high gold and silver prices, its chief executive said on Tuesday.

"By the third quarter, we will seriously have to look at what we do with that available cash and part of it will be looking at an increase in the dividend," Peter Marrone told the Reuters Global Mining Summit in London.

Yamana spent $4.5 billion on acquisitions last year to turn itself into a top mid-tier gold producer and expects to produce up to 1.3 million gold equivalent ounces this year, mainly in Latin America, with a goal of 2.2 million by 2012.

Marrone said he was looking to match the sort of pay-outs from major gold producers like Barrick Gold Corp (ABX.TO: Quote, Profile, Research, Stock Buzz) and Newmont Mining Corp (NEM.N: Quote, Profile, Research, Stock Buzz), which last year offered a dividend yield of just under 1 percent.

A comparable yield for Yamana would equate to around 4 cents a share per quarter, up from 1 cent at present, he added.

A higher dividend would be "good financial discipline" and would also attract yield investors -- a pool of capital around 10 times the size that focused specifically on gold miners.

Yamana acquired rival Meridian Gold and smaller Northern Orion Resources last year to bolster its portfolio. It plans to increase production progressively this year, with output in the second half exceeding that of the first half.

The timing of these deals leaves it well-placed to capitalize on soaring gold prices, which Marrone said had a "good chance" of breaching $1,500 an ounce this year.

Gold <XAU=> was quoted at $974.10/975.00 at 1345 GMT.

It hit a record high of $991.90 on March 6, a rise of 19 percent since the end of 2007, driven by inflation fears, a weak dollar, record high oil, expectations of further rate cuts in the United States and tight supplies.

Marrone said the company would focus on exploration and bringing development projects to production over the next two years, rather than making more acquisitions.

But he predicted the gold industry as a whole would see more consolidation as major gold miners struggle to maintain growth.

"In an industry where senior companies are experiencing negative growth and cost escalation, buying something that has existing production cash flow and gives growth would be opportunistic and prudent," he said.

"I don't believe that by the end of this year the landscape of gold mining companies will be the same."

Some industry analysts have suggested Yamana itself may be a takeover target, given its growth profile and the fact it operates in stable mining jurisdictions.  Continued...