The Fortescue Metals Group Limited (ASX: FMG) share price is edging lower on Monday despite the release of a positive announcement.
The iron ore producer’s shares are down 0.2% to $16.92 at the time of writing.
What did Fortescue announce?
This morning the mining giant revealed that it intends to continue buying back shares for the foreseeable future.
According to the release, Fortescue has further extended its on-market buy-back as part of its ongoing capital management programme.
The buy-back period will now continue for an unlimited duration, with the maximum number of shares that may be bought-back to be determined periodically by the company’s 10/12 limit.
The 10/12 limit is defined in section 257B(4) of the Corporations Act 2001 and limits the company to buying back no more than 10% of its voting shares within the span of any 12 month period.
Though, that doesn’t necessarily mean that the company will buyback 10% of its shares each year.
Management advised: “The number of shares purchased and timing of any buy-back will depend on Fortescue’s share price and market conditions at the time. Fortescue reserves the right to vary, suspend or terminate the buy-back at any time.”
Bankers at Macquarie Group Ltd (ASX: MQG) have been tasked with the job of buying shares on Fortescue’s behalf.
What’s next for Fortescue?
Fortescue has just completed its first quarter and will be providing the market with an update on its performance towards the end of the month.
According to a note out of Goldman Sachs from last week, it expects the company to report iron ore shipments of 42.5Mt.
While this will be a 10% decline on its fourth quarter shipments, it will be a 1% increase on the prior corresponding period.
One metric the broker expects to grow quarter on quarter is the price it commands for its iron ore. Goldman estimates that Fortescue will report an average realised price of US$102 a tonne. This is 87% of the 62 fines benchmark iron ore price and up 27% from US$81 a tonne in the fourth quarter.
Goldman Sachs has a neutral rating and $16.80 price target on the company’s shares.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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