Share repurchases in the South African mining sector

Abstract

The purpose of this study was to obtain an overview of the share repurchase activities of companies listed in the mining sector of the JSE, and to determine the extent to which detail information of these share repurchases are available on public data sources such as SENS (Securities Exchange News Service - the office of the JSE that distributes all relevant company information electronically). The study focused on a period of 11 years, from July 1999 until the 2010 financial year-end. The annual reports of a sample of companies were analysed to determine the number of shares, as well as the monetary value of the shares that were repurchased. The SENS announcements were then scrutinised to determine the number of share repurchases recorded in the annual reports that were announced to shareholders. From a total of 55 share repurchase transactions, only 23 transactions were announced on SENS. The repurchase transactions were then further analysed in terms of the method used (general or specific repurchase), the repurchasing entity (company, subsidiary or share trust) and the subsequent sale of treasury shares from the subsidiary to the holding company. It was concluded that the majority of share repurchases are announced. However, if only companies with primary listings on the JSE are
considered, 60% of share repurchases are not announced. The use of the general and specific methods are more or less equal for companies with primary listings on the JSE, but for companies with secondary listings on the JSE, 98% of
repurchases are general. Of the specific share repurchases of companies with primary listings about 46% are not announced, but of the general share repurchases about 77% are not announced. Since share repurchases made by
companies with secondary listings on the JSE were significant in terms of numbers and value, it changed the total statistics substantially from what it would be if only companies with primary listing on the JSE were considered. Even though about 85% of total share repurchases are announced, studies on share repurchases cannot rely on SENS announcements only, since this would exclude a significant portion of the repurchase activities of companies with
primary listings on the JSE (60%), and therefore lead to unreliable results.