“The announcement of a buyback is refreshing, and will be welcomed by financial markets given yesterday’s disappointment by BHP Billiton,” BMO Capital Markets analyst Tony Robson said today in a note to clients. The “proposed payout is a relatively nominal sum and indicates the company is retaining most of the Las Bambas proceeds for future acquisitions, which should add to growth.”
It will be completed by the end of March and is part of an ongoing program to purchase shares and comes after the completion of the sale of the Las Bambas copper mine in Peru this month, Glencore said. The company also bought back $639 million of its convertible bonds in the first half.
It “underlines the group’s confidence that it can keep improving cash flows even in the current lower commodity price environment,” Morgan Stanley analyst Menno Sanderse wrote in a report today.
The mining industry’s decade-long $616 billion investment spree was followed by asset writedowns and management clear- outs.
It would be foolish for CEOs of the biggest companies to revert to the “damaging strategies of the last cycle,” BlackRock’s Evy Hambro, who manages the $8 billion World Mining Fund, said in e-mailed comments earlier this month.
Glencore completed the $29 billion takeover of Xstrata in May last year to add coal, copper, zinc and nickel mines to its trading empire. The transaction is expected to generate cost savings of as much as $2.4 billion this year, Glencore said in March.
Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director of Glencore.
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