Glencore announces US$1 billion share buyback days after probe

Logo of Glencore Plc. (Reuters pic)

LONDON: Glencore Plc will buy back as much as US$1 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 buyback program will start Thursday and last through year-end, the Swiss miner and trader said in a statement. 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.

The probe wiped about US$5 billion off Glencore’s market value Tuesday, marking the latest twist in a tumultuous year for the company. It 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.

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 buyback program to improve investor confidence, adding that the 8.1% share slump on Tuesday was probably overdone. The stock is down 18% this year, while other mining majors such as BHP Billiton Ltd., Rio Tinto Group and Anglo American Plc have gained.

Other mining giants have also announced share purchases to reward investors after higher commodity prices brought in bigger profits. Rio Tinto in February promised an additional US$1 billion stock buyback.

The first part of Glencore’s buyback will total up to 350 million pounds (US$463 million) and end by Aug 7, and any ordinary shares purchased will be held in treasury, it said. Citigroup Inc. will conduct the program.