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01-03-2011 03:22 PM |
Can Virgin Gold Afford High Dividend Payout?
3/1/2011
“Can Virgin Gold afford to pay high dividend to shareholders in the long run? Is the company’s financial portfolio stable? Is Virgin Gold overpaying? How long can Virgin Gold keep its commitment to CPS holders? When will Virgin Gold go for public listing?”
The company is being asked questions similar to the ones above by many of its shareholders around the world time and time again. Being the Chief Financial Officer of Virgin Gold, I am the person in the best position to answer these questions. With over 20 years of mining, investment and financial experience, I am sharing with you the latest insights of this corporation and industry from a financial perspective.
Let us start by looking at real market scenario and what we all experience on a daily basis regardless of whether we are from Europe, the Americas, Asia or Africa.
Now, how many times have all of you seen a listed company’s share appreciate from $1 a share to $3 in 3 months time following a profit call or a rating upgrade to outperform? How often do you see a company shares appreciate from $1.00 to $5.00 per share within 1 year as a result of corporate restructuring, a new contract with clients and a better business operation model? Let me refer to some examples here.
Shares of BAIDU, Inc (BIDU) rose by 2500% over 5 years, with an average raise of 500% per annum. In January 2009, BAIDU was trading at around USD15 per share and in January 2011, the share cost had risen to approximately USD120 per share.
Allied Nevada Gold Corp’s (ANV) share price rose from about USD2.00 in November 2008 to USD30.00 in February 2011. This represents an appreciation of about 1500% in just over two years.
For FORTUNE 500 companies, the best stock in 2010 was CC Media Holdings (CCMH) with a 222% appreciation whilst Las Vegas Sands (LVS) who held the second place, appreciated by 204%.
When you invest in these companies’ shares, you earn zero to 5% dividend per year but you earn somewhere between 200 – 500% return in monetary value from stock price appreciation.
What does all this have to do with Virgin Gold Mining Corporation? I am telling you that Virgin Gold is just like all these typical examples I quoted above. The only difference is that Virgin Gold’s share price appreciates by 5-10% per year but dividend and other incentives amount to about 200% per year.
While in the common market, listed companies pay you 5-10% dividend per year and stock value appreciates by 200-500%; Virgin Gold’s stocks appreciate 5-10% per year but dividend and incentive payout amounts to about 200% per year. As a non-listed corporation, we are able to control or rather suppress the appreciation of our stock value as it is not openly traded. When stock value is low, dividend seems high.
As you can see, there are no secrets in Virgin Gold. What Virgin Gold does is that it pays dividend, incentives and bonuses just like what other, very well run and profitable corporations do. It is just the other side of the coin. This is indeed a revolutionary financial technique and application. My staff in Asia heard some CPS holders call this the Virgin Gold – CPS REVOLUTION! I personally thank our Middle East investors for this term.
Your choice is between investing in the open stock market which will yield higher stock value with a lower dividend payout, or the consistent Virgin Gold stock value and a high dividend payout. In terms of monetary return on investment, your returns would be pretty similar in either case.
Having said that, if you are looking for getting the highest return of investment in the shortest period of time, subscribing to Virgin Gold Convertible Preferred Shares (VGCPS) would not be the ideal form of investment for you. When investing with Virgin Gold, both your dividend and share price is roughly fixed while in an open market, the value of your stocks is unlimited. However if an investor is taking a long term investment view, investing with Virgin Gold could yield a higher return as reinvestment of profits or dividend in a consistent environment over 3 to 5 years which will have a return of more than 10 times of the initial investment.
Putting what I have mentioned above aside, I want to highlight a few other facts that are often overlooked by many of our shareholders.
First of all, as Virgin Gold raise its capital from issuing fresh CPS with no borrowing, the corporation has no need for any loans and have neither short or long term debt. This enables the corporation to channel more of their operational profits into income generating operations after paying shareholder’s dividend.
Secondly, the corporation does not need any advertising, and neither does it have any need for promotional or corporate image expenditures like most public listed companies or companies that are actively seeking funding from the venture capitalist do. Our reasonable high dividend is enough to attract more new subscriptions from all over the world.
Thirdly, we use high information technology all across our business operations, management and administration. Having an administrative office only in Panama and investors’ relation offices in Asia and Europe coming up this year, we are able to operate at the lowest possible overheads.
Fourthly, being based in a tax-free offshore jurisdiction, Virgin Gold is able to re-invest 15 to 40% (normal onshore tax rate) more of its profits into income generating operations every year compared to its peers.
Taking into account the exponential model of re-investment and opportunity cost, all the extra savings that this corporation has made in the last 5 years may translate into an extra growth opportunity of over 1000%. These are the reasons why Virgin Gold is able to sustain a high growth rate and we foresee this corporation to outperform our peers for many more years.
Listing
As for listing Virgin Gold as a public company, this is still our long term plan. We hope we will be ready for this within 3 to 5 years’ time. Having said that, being ready as a corporation and actually going for it is two different matters. Being ready means we set all our Standard Operation Procedures and Protocols, Accounting and Corporate Governance like any listed company. Going public means we have to change the way we run our business, the way we pay dividend to our shareholders and subject ourselves to the regulations of the security commissions where we list. So our corporate vision is to make this corporation ready for listing by 2015, but whether or not we will actually be listed by then will be subject to many considerations. I hope our shareholders will not misrepresent our vision by informing potential shareholders that VGMC will be listed by 2015.
As the Chief Financial Officer, I just want to reassure you that this corporation has a long term working plan as well as the vision and financial power to fulfill its long term commitment to all shareholders and partners.
Thank you very much.
Peter Nolinski
Virgin Gold Mining Corporation – Chief Financial Officer
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