Glencore said it was nearing the completion of its wide-ranging debt reduction programme as it announced plans to pay a dividend of $1bn in 2017.
Before a meeting with analysts and investors later today, the Swiss-based company said the cash would be paid in equal tranches in the first and second half in the year.
In 2018, a new dividend policy will take effect, comprising a $1bn payment and a quarter of the cash generated by its industrial, or mining arm.
The move to restart dividend payments marks a sharp shift from a year ago when the miner-cum-trader was grappling with a debt crisis and under attack from hedge funds, which saw betting again the company as easiest way to make money from a commodity market crash.
Boosted by a rebound in commodity prices and $4.7bn of assets sales, Glencore’s financial position has improved and the company is set to end the year with net debt of $16.5-$17.5bn, down from $23.6bn in June.
Shares in Glencore have risen 200 per cent to 280p this year, one of the best performances in the FTSE 100.
“Last year we announced a programme of measures to reduce our debt and structurally increase the flexibility and strength of our balance sheet,” said chief executive Ivan Glasenberg in a statement ahead of the company’s annual strategy update. “We have delivered on our commitments and done so in a way that has preserved the long-term earnings capability of the group.”
In Thursday’s statement Glencore said it could generate $6.5bn of free cash flow next year based on forward commodity prices and it had a large amount of mothballed production capacity it could bring back online.
Around a year ago, Glencore suspended 500,000 tonnes of zinc output and took a large chunk of its copper production offline.
Glencore said underlying earnings from its powerful marketing, or trading arm would come in at upper end of recently tightened range of $2.5bn-$2.7bn.