Glencore to double size of $1B share buyback program

After publishing first-half results just below analyst forecasts in August, Glencore CEO Ivan Glasenberg said it would favour share buybacks over deal-making. (Image: ComLikes via YouTube.)

Miner and commodities trader Glencore (LON:GLEN) is increasing the size of its buyback program announced in July by purchasing another $1 billion of stock from now until the end of February 2019.

The Swiss company had announced plans to buy back as much as $1 billion of its shares after the US government investigation into bribery and corruption sent the stock down more than 15 percent since the start 2018.

Before that, it had faced challenges linked to its business in the Congo, where it operates giant copper and cobalt mines.

Moves follows a growing number of world’s top miners returning more money to investors this year.

The second buyback this year is a sign that the company’s management will “work to address any discount in the valuation, including the potential for further buybacks,” RBC Capital Markets said in a note. “At $9 billion of net debt at the half year, and the high free cash yield, the company continues to have more firepower for buybacks.”

Giving back

Glencore’s move falls in line with what an increasing number of top miners have been doing lately, that is, handing money back to shareholders. The trend follows a recovery from the commodity rout of 2015-16 and increasing pressure from investors to not buy assets that may never deliver returns.

Less than a week ago, world’s second largest miner Rio Tinto (ASX, LON:RIO) unveiled a $3.2 billion share buyback following an asset-sale spree. Previously, BHP paid out a record dividend and promised it would give its shareholders most of the $10.5 billion it obtained from the sale of its US shale oil and gas assets.

Glencore said it has almost completed its first buyback, acquiring $940 million of its own stock after the shares fell to a 14-month low in September as part of a wider commodity sell off.

The firm’s shares rose as much as 3.5 percent on Tuesday to 341.70 pence on the news by 1:35 p.m. London time.