Glencore launches $1bn share buyback programme

Glencore announced the start of a share buyback programme of up to $1bn on Thursday, to run until 31 December, to get investors back on side after US authorities launched an investigation into its business in Africa.

With Citigroup conducting the repurchase programme in two stages, the FTSE 100 company said the first part of the programme of up to £350m, was starting on Thursday and ending no later than close of dealings on 7 August.

“This part of the programme will be conducted by Citi under irrevocable instructions to make trading decisions independently of the company,” the Glencore board said in its statement.

After that date, under the second part of the programme, trading decisions would be undertaken by Citi in accordance with the directions of the company.

Shares in Glencore, having almost hit a year's low earlier in the week after a subpoena from the US Department of Justice over a potential money laundering inquiry, rose 2.7% on Thursday's news to 328p.

On Wednesday's close and using spot prices, broker Canaccord said the buyback is equivalent to an increase in 2018 estimated shareholder returns of around 1.6%, from 6.0% to 7.6%, which compares favourably to BHP & RIO’s dividend yield of around 6.6%.

"Balance sheet implications aren’t onerous, in our opinion," analysts said, also expecting potential upside to incremental returns going forward, given their forecast for spot 2018 free cash flow at roughly 15%, management's previous statements that they could return FCF in the absence of “other deployment opportunities” and pro-forma year end net debt close to $3.5bn post buyback compared to management's targetted $10-16bn net debt range.