Glencore (GLNCY) , the world's biggest mining company, said Thursday that it would begin returning cash to shareholders next year after better-than-expected results from an asset sale and debt-reduction plan.
Glencore said it was on track to reduce net debt to between $16.5 billion and $17.5 billion by the end of this year, down from $23.5 billion in June and that asset sales and divestments had earned around $6.3 billion, well above the original guidance of $1 billion to $2 billion. The group also said its sees free cash flow of around $6.5 billion in 2017 from Ebitda of $14 billion.
The upgrades will allow the company to return around $1 billion to shareholders next year in the form to two cash payments, the company said. Glencore also said a new distribution policy will take effect from 2018 that will see a fixed payment of $1 billion and a variable payment representing a minimum payout of 25% of industrial free cash flow.
"Last year we announced a programme of measures to reduce our debt and structurally increase the flexibility and strength of our balance sheet," CEO Ivan Glasenberg said in a statement. "We have delivered on our commitments and done so in a way that has preserved the long-term earnings capability of the Group. Glencore can look forward to the future with confidence, based on our scalable and low cost industrial operations and robust marketing business."
Glencore shares rose 3% in early London trading to change hands at 287 pence each, extending the three month advance to more than 60% in the past three months, double the gains of the FTSE 350 mining index.