Glencore announces $1b share buy-back days after probe

Company has faced challenges in Congo business where it has copper and cobalt mines

Glencore Plc will buy back as much as $1 billion (Dh3.67 billion) 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 probe earlier this week.

The buy-back programme was expected to start yesterday and last through yearend, the Swiss miner and trader said in a statement. Glencore shares rose as much as 4.7 per cent, 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 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 UK 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 buy-back “does not seem a coincidence and, in our view, suggests management also believes the recent price moves are extreme,” Barclays Plc said yesterday.

DoJ subpoena

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 buy-back programme to bolster investor confidence, adding that the 8.1 per cent share slump on Tuesday was probably overdone. The stock is down 15 per cent 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. Yesterday’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 rechanneled into perpetual growth and M&A,” Credit Suisse Group AG said yesterday. “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 buy-back.

Anglo American has also increased payouts.

The first part of Glencore’s buy-back will total as much as £350 million ($463 million) and end by August 7, and any ordinary shares purchased will be held in treasury, it said. Citigroup Inc will conduct the programme.

Glencore traded at 331.70 pence by 9:15am in London, recouping about half its losses since the probe was announced.