MINING MARKETS & INVESTMENT NEWS — Low prices drive producers to buy back shares

With weak copper and gold prices sending shares of producers to their lowest levels in years, some companies are diving into the bargain-basement equity market to buy back their own shares.

As the Dow Jones industrial average tumbled in recent weeks, dragging commodity prices with it, at least three mining companies — Ashanti Goldfields (ASL-N), Cyprus Amax Minerals (CYM-N) and Freeport-McMoRan Copper & Gold (FCX-N) — took advantage of the opportunity to repurchase as much as 10% of their outstanding shares.

Gold’s recent slide back to 18-year lows prompted Ashanti, West Africa’s largest gold producer, to announce a stock repurchase program. In early summer, the company said it planned to buy up to 5.5 million shares (or 5% of the issued shares) on the open market. By the end of August, the company had bought nearly 3 million shares, ranging in price from US$3.50 to $7.50 per share, on the London and New York stock exchanges. The shares will be held in treasury, though the repurchase program may be put on hold in light of Ashanti’s newly announced plan to acquire all the shares of Samax Gold (SMX-T).

Cyprus announced a program to buy back up to 10 million shares (representing 11% of outstanding stock) in August. The company will buy the shares on the open market, using funds from the proceeds of the sale of certain assets. Cyprus currently has 91.8 million shares outstanding.

“In this market environment, our shareholders are not reaping the rewards of our operational improvements and cost reduction programs,” says Cyprus Chairman Milton Ward. Indeed, while cash production costs in its copper division have been lowered by 20%, and cut by 15% in its coal division, the company’s share price has fallen to an 11-year low of US$9.19.

Shares of Freeport hit an all-time low when its class A and B shares dropped below US$11.50. The company intends to buy as many as 20 million class A and B shares combined, representing 11.5% of all outstanding shares.