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FMG share price: $500 million share buy-back program extended

FMG has today announced plans to extend its on-market share buy-back program – valued at some A$500 million. This comes just one day after FMG’s CEO spoke at a key mining industry event in Melbourne.

FMG share buy-back in focus Source: Bloomberg

Fortescue Metals Group (ASX: FMG) today announced that it intended to extend its on-market share buy-back program.

Bouncing back from a handful of moderately negative trading sessions, the FMG share price was up today by around 4.49%, as of 16:10 AEST.

The other main-stay iron ore giants – Rio Tinto (ASX: RIO) and BHP (ASX: BHP) also joined in on the gains – seeing their share prices rise 2.45% and 2.08%, respectively.

The buy-back program in focus

FMG (ASX: FMG) noted that the buy-back program will be extended up until 10 October 2020, with the company re-establishing that ‘the total amount of the buy-back program [sits] at A$500 million.'

Speaking on this matter, FMG’s Company Secretary, Cameron Wilson, commented that:

‘The buy-back program remains an important part of the successful execution of Fortescue's capital management strategy.'

Indeed, as we covered not too long ago, FMG’s management have proven themselves particularly savvy of late, capitalising on the current low-rate environment, and recently ‘announcing the successful refinancing and repayment of [their] US$1.4 billion 2022 Syndicated Term Loan Facility (Term Loan).’

In saying all this, the buy-back program mentioned above does have some qualifications. For example, it was pointed out that:

'The number of shares purchased and timing of the buy-back will depend on Fortescue's share price and market conditions. Fortescue reserves the right to vary, suspend or terminate the buy-back at any time.'

FMG share price: is this a positive?

Overall, share buy-backs are generally seen as a positive for shareholders.

Ultimately, by reducing the shares floated on the open market through a buy-back program, investors effectively gain more ownership of the company. This is often particularly positive for institutional holders who may hold chunky positions in companies.

On this front – and according to MSN Finance – the largest institutional holders of FMG’s shares are: Capital Research Global Investors at (8.09%), Capital World Investors at (3.06%) and The Vanguard Group at (2.64%).

Other metrics, such as earnings per share (EPS) may also get a boost thanks to a share buy-back program.

Year-to-date, the FMG share price has now risen a sizable 103%.

Final thoughts

Fortescue's (ASX: FMG) extended buy-back plans come just one day after the company’s esteemed CEO – Elizabeth Gaines – spoke at the Melbourne Mining Club industry event.

Drawing on a Reuters report, Elizabeth Gaines made the following stand-out comment:

‘Those who think that growth is going to slow, or that China won’t continue to look to develop broader markets for supply would be at risk of underestimating some important factors.’

As with all things it would seem of late: China is key.

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