INTERNATIONAL – Glencore will double the size of its buyback plan by purchasing another $1 billion (R14bn) of stock just 11 weeks after starting the programme, adding to a growing number of moves by the world’s biggest miners this year to return more money to investors.
The announcement comes less than a week after second-largest miner Rio Tinto Group unveiled a $3.2bn share buyback following an asset-sale spree.
BHP Billiton in August paid out a record dividend and pledged to hand shareholders most of the $11bn reaped from selling its US shale assets.
Glencore chief executive Ivan Glasenberg said in August that the world’s biggest commodity trader was focusing on cutting debt and returning money to shareholders.
The serial dealmaker noted there was little of interest for the Swiss miner and trader on the acquisition front.
The second buyback this year comes earlier than many investors would have expected after the company suggested in August that it could extend the programme in November or December, rather than waiting for full-year results in early 2019.
Glencore has almost completed its first buyback, having bought $940m of its own stock after the shares fell to a 14-month low in September as part of a wider commodity sell-off.
While its rivals have been returning money from disposals, Glencore has been using cash from the business.
The trader announced its original $1bn share buyback in July after the company’s shares came under pressure when it was hit by a US Department of Justice probe. The buyback program will be extended to February 20, the company said on Tuesday.
The US probe extended a tough year for Glencore, mostly due to challenges linked to its business in the Democratic Republic of Congo, where it operates giant copper and cobalt mines.
Glencore climbed 1.9 percent to 335.15p by 8.58am London time.
Even after the initial buyback and a record first-half profit, Glencore’s shares have underperformed rivals this year. The stock has dropped 14 percent in London, compared with a 9.1 percent gain by BHP and Rio’s 1.7 percent decline. Anglo American has climbed 11 percent.
The share repurchase is a sign Glencore’s management will “work to address any discount in the valuation, including the potential for further buybacks,” RBC Capital Markets said. “At $9bn of net debt at the half year and the high free cash yield, the company continues to have more firepower for buybacks.”