Glencore (GLEN.L) Fulfills Its Promise of Returns By Announcing A $1 Billion Buyback Plan

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By Lisa Bradley on August 21, 2014 Company, Intl News

The mining giant, Glencore (GLEN.L), fulfilled its promise that it made earlier with the shareholders that it would return cash to them once its profits rise; the company announced a buyback plan for its shares.

Mining companies promised their investors that they would deliver returns to shareholders after the giants were criticized on using the money for risky projects without delivering a single penny to the stockholders for years.

The competitor company, BHP Billiton Ltd (NYSE:BHP), recently held its stockholders meeting; however, the company failed to announced any returns. Moreover, Rio Tinto (RIO.L) announced on August 19, 2014 that it would embark upon the task of share buyback once it posted its annual results in the coming February.

The expectations of shareholders of Glencore (GLEN.L) that the company will fulfill its promise of returns, either through a special dividend or a buyback program, strengthened when the company sold its Las Bambas copper project to a Chinese company for a total of $6.5 billion deal.

Glencore (GLEN.L) is one of the biggest mining giants in the production sector of nickel and zinc. The company also became the biggest producer of zinc in the world when it acquired one of its competitor companies, Xstrata, last year.

Although the company had to incur huge expenses for its New Caledonia Koniambo project, the sale of its Las Bambas unit improved the numbers of the balance sheet and allowed the company to speed up the buyback plan.

Ivan Glasenberg, the chief executive of the company, said that the company had promised its investors that it would return extra money to them when the sale of its Las Bambas unit completed, and the company is glad that it fulfilled that promise. The CEO further said that the company’s focus is to generate huge profits and deliver the cash to its investors.

Marc Elliott, an analyst at Investec, said that although the $1 billion buyback that the company announced is around 50 percent of the estimated reward, but at least the company kept its promise. He praised the prudence of the company by saying that the company had taken a very logical step. Not only will the buyback plan that the company announced last for a longer period than expected but it will also keep the balance sheets neat.

Glencore (GLEN.L), after announcing an 8 percent increase in the first half profits of the company, said that it will carry out its buyback plan by March next year. The company also said that all the shares purchased through this plan will be kept as treasury shares.

Coming to the stock prices of the company, Glencore (GLEN.L), on the last trade day, August 20, 2014, started its stocks at a price of £359.90 and closed at a price of £360.20. The company has a market capitalization of £47.26 billion. As far as the 52 week high and 52 week low of the company is concerned, the figures are reported to be around £295.80 and £379.45 respectively.