Analysts support Glencore's defense as miner restores trust with buy-back system

JOHANNESBURG (miningweekly.com) – Mining badysts have set out to defend the diversified mining and marketing industry Glencore, which has quickly restored the company's confidence by announcing a buy-back program share of $ 1 billion

"Trust Redemption Signal Managers", Barclays Capital equity research badysts Ian Rossouw Amos Fletcher and Kennedy Nyangoni state in a note that declares the repurchase "a welcome development".

"We consider the announcement today as positive for the shares," say research badysts on the shares of Goldman Sachs Eugene King and Abhinandan Agarwal . "There are a number of reasons why this should be," Credit Suisse said earlier this week that the move by the US Department of Justice was "a simple request for documents, rather that an announcement of an official investigation. "

Faced with the DOJ's request and a court in the Democratic Republic of Congo suspending a court hearing, the price of Glencore shares dropped the most in two years.

Now, led by CEO Ivan Glasenberg the company has responded with firmness, with the first $ 350 million of the buyback program that begins today.

The redemption, which began on Thursday, represents 1.6% of the market capitalization, which p recent rice movements are extreme, "say badysts

Glencore said it has reached an agreement with Citigroup Global Markets Limited for m ener the buy-back program, which would be implemented in two stages.

The first step would reach $ 350 million immediately and end no later than August 7, a day before the announcement of the company's half-yearly results. Citi, under irrevocable instructions, would trade.

As part of the second part of the buyback program, Citi may make commercial decisions in accordance with the company's guidelines.

In February, Glencore shot with an outstanding set of 2017 results that coincided with a jump in its stock price in Johannesburg, reaffirming South Africa as an even more positive investment destination. , and rumination of a "recharge" dividend later in the year.

Switzerland, which last week declared Glencore as the diversified mining and marketing company and its first choice, reiterated its outperformance rating of the company, which described as having a strong balance sheet and a cash flow generation all as strong.

there is the possibility of a small upgrade of the buyback program to the next results on August 8, "Credit Suisse badysts Samuel Catalano Conor Rowley Michael Shiaker ] and Alexandr Ryumin forecast.

"We believe that Glencore has a significantly higher growth profile than its peers and also has much higher cash returns than other majors." Some investors fear that this liquidity will never be returned to shareholders and instead be redirected to perpetual growth and mergers and acquisitions (M & A). Today's announcement shows in itself that this is not true but brings pro forma net debt closer to the company's $ 16 billion self-declared top net debt, which should reduce the likelihood of a major M & A activity over the next six months. Earlier this month, the service Bloomberg reported that Glencore had the ambition to expand in South Africa, where it is reaping profits from rising prices for thermal coal, chromium and ferro-chrome. Credit Suisse badysts expect Glencore to post a compound annual growth rate of 7% in volume over the next three years.

"Our badysis suggests that Glencore has the highest rate of organic growth, volume and earnings growth, and greater proportional cash flow capacity in the event that it chooses to trim balance sheets to add organic growth. or not phase, "they say.