Fortescue Metals Group Limited (ASX: FMG) today announced the share buy-back of up to $500 million.
This on-market share buy-back will start after the release of Company’s Quarterly report due on 25 October 2018 and is expected to remain in place for a 12-month period.
The iron ore miner Fortescue Metals Group told that the buy-back does not require shareholder’s approval as it within the guidelines of Corporation law. However, the number and timing of shares bought back will be driven by the share price of Fortescue and the prevailing market conditions.
Macquarie Bank is acting as a broker to the company. The bank is expected to be seen on purchasing the maximum of $500 million shares of FMG on behalf of the Fortescue Metals Group Limited.
Why Fortescue Metals plans for $500 million shares buy-back?
The reason for the buy-back has been clearly stated as on-going capital management.
Fortescue’s Chief Executive Officer Elizabeth Gaines told that the $500 million share buy-back program is underpinned by the company’s current focus on capital extension. Earlier the group has been targeting on debt reduction program but on the back of rapid de-gearing of the company’s balance sheet, the focus is now shifted to capital management strategy.
Source of Funds for the Buy-Back
The management informed that Buy-back will be funded from operating cash flows driven by the robust operating performance of the group and its ongoing investments. The strategy is said to be well in line with the company’s vision to inject maximum funds in core iron business of the company while pursing growth and delivering decent returns to FMG’s shareholders.
However, Fortescue’s plans to purchase their own shares will take the final shape after the release of company’s quarterly report for the 3 months ended 30 September 2018. In the previous June quarter, company posted record iron ore shipment of 46.5 million tonnes (mt). Whereas, the cost for cash production (C1) was reported to US$12.17 per wet metric ton (wmt)
For FY 19, FMG targets total shipments to be between 165-173mt. The cash production costs (C1) to achieve this target has been anticipated to be between US$12-13/wmt while total expenditure is expected to reach US$1.2 billion.
It has been noticed that since the company’s last Annual General Meeting, number of role changes have been undertaken in the Board. In November 2017, Mr. Mark Barnaba joined Ms. Sharon Warburton as co-Deputy Chair of the Board which was followed by Mr. Nev Power resignation from the role of Chief Executive Officer on 19 February 2018. Resultantly, the new CEO Ms Elizabeth Gaines took the helm of Fortescue Metals Group, stepping from her previous role of Chief Financial Officer.
Well, the next Annual General Meeting of the company is due to be held on 15 November 2018. The stock of Fortescue Metals Group Limited has risen by 1.362% to $3.720 on 11 October 2018 (12:55 PM AEST). But in the last one-year FMG’s share price has fallen by 27.33%. The stock is currently trading at a PE of 9.620 x with market capitalization of $11.43 billion.
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