Glencore announces R13.7 billion share buyback

By Nicholas Larkin and Thomas Biesheuvel Time of article published Jul 5, 2018

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Glencore Plc will buy back as much as $1 billion (R13.7 billion) of its shares, a move that may soothe investor concerns after the world’s top commodity trader was hit by a U.S. Department of Justice probe earlier this week.

The buyback program will start Thursday and last through year-end, the Swiss miner and trader said in a statement. Glencore shares rose as much as 4.7 percent, the most since April.

The announcement comes two days after U.S. authorities demandeddocuments relating to possible corruption and money laundering regarding Glencore’s business in Nigeria, the Democratic Republic of Congo and Venezuela over the past decade. That wiped about $5 billion off Glencore’s market value on Tuesday, marking the latest twist in a tumultuous year for the company.

Glencore has faced challenges linked to its business in the Congo, where it operates giant copper and cobalt mines. It’s also facing the possibility of a bribery investigation by U.K. prosecutors over its work with Israeli billionaire Dan Gertler, a close friend of Congo President Joseph Kabila, people familiar with the matter have said.

The share buyback “does not seem a coincidence and, in our view, suggests management also believes the recent price moves are extreme,” Barclays Plc said Thursday.

Glencore said Tuesday that it’s reviewing the DOJ subpoena and will provide further information as appropriate.

Analysts at Liberum Capital Ltd. said Wednesday that Glencore may use a share buyback program to bolster investor confidence, adding that the 8.1 percent share slump on Tuesday was probably overdone. The stock is down 15 percent this year, while other mining majors such as BHP Billiton Ltd., Rio Tinto Group and Anglo American Plc have gained.

Glencore has been less focused on returning cash to its shareholders than some of its biggest mining peers, instead choosing to hoard funds for potential deals. Thursday’s announcement, along with a bigger than expected 2017 dividend, helps allay those concerns for investors keen to see returns.

“A concern for some investors has been that this cash will never be returned to shareholders and instead be re-channeled into perpetual growth and M&A,” Credit Suisse Group AG said Thursday. “Today’s announcement shows in itself this is not true.”

Glencore surprised the market with a $2.9 billion dividend earlier this year, while larger rival Rio Tinto promised a $5.2 billion payout, with an additional $1 billion share buyback. Anglo American has also increased investor payouts.

The first part of Glencore’s buyback will total as much as 350 million pounds ($463 million) and end by Aug. 7, and any ordinary shares purchased will be held in treasury, it said. Citigroup Inc. will conduct the program.


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