Glencore will buy back $1bn of shares

GLENCORE will buy back as much as $1 billion (R13.67bn) of its shares, a move that may soothe investor concerns after the world’s top commodity trader was hit by a US Department of Justice (DoJ) probe earlier this week.

The buyback programme will start on Thursday and last until year-end, the Swiss miner and trader said. Glencore shares rose as much as 4.7 percent, the most since April.

The announcement comes two days after US authorities demanded documents relating to possible corruption and money laundering regarding Glencore’s business in Nigeria, the Democratic Republic of Congo (DRC) and Venezuela over the past decade. That wiped about $5bn 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 DRC, where it operates giant copper and cobalt mines. It’s also facing the possibility of a bribery investigation by UK prosecutors over its work with Israeli billionaire Dan Gertler, a close friend of DRC 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 said yesterday.

Further info

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

Analysts at Liberum Capital said on Wednesday that Glencore may use a share buyback programme 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, Rio Tinto Group and Anglo American 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. Yesterday’s announcement, along with a bigger than expected 2017 dividend, helps to allay those concerns for investors keen to see returns.

Glencore traded at 331.70 pence (R59.94) by 9.15am in London, recouping about half its losses since the probe was announced.