Australian construction major CIMIC Group (ASX. CIM) has announced their decision to buy back 10 per cent of its stock over the next year as the shares are said to be at an attractive position now. This decision was made despite the group’s share price crashing more than 20 per cent in the last six weeks. The CIMIC is majorly owned by Hochtief, which is further controlled by Spanish builder Actividades de Construccion y Servicios SA.

The company's board met on Dec. 9 and said the buyback signifies the company’s belief that the current share price is “attractive.” The stock was down 21 per cent from its peak of $27.91 in November and is now at $22.14.

Funding

“The initiative is reflective of CIMIC’s strong balance sheet position, solid cash flow generation, and disciplined approach to capital management,” said CIMIC, formerly known as Leighton Holdings, in a press release.

The board also clarified that the buyback will be within the "10/12 limit" permitted by the Corporations Act and does not require any shareholder approval.

At the stock’s current price, 10 per cent of shares will be worth nearly $750 million. The CIMIC will finance the buyback from own reserves and capital facilities though the decision on timing and volume of shares to be purchased will depend on the market conditions.

The CIMIC recently won many construction projects, including its selection as the preferred contractor for Sydney’s AU$5 billion new M5 Motorway. The company said it is on track for 2015 profit of between AU$450 million and AU$520 million, reports Business Insider.

Glencore contract

Meanwhile, CIMIC’s mining arm Thiess won a AU$760 million contract to operate Glencore's Mt Owen coal mine in Hunter Valley at New South Wales of Australia. That extends the company's 20-year-old initial contract to construct infrastructure at the mining site, reports Mining Technology.

"This contract enables Thiess to further build on two decades of continuous association with the Mt Owen operations, and the mine owner Glencore,” CIMIC executive chairman and CEO Marcelino Fernández Verdes said.

He said the award recognised Thiess' ability to provide certainty of operations whilst seeking out innovative ways to drive efficiency.

In the earlier part of the contract, Thiess delivered design and construction services for the coal handling preparation plant at the mine, which included site office, workshop, fuel facilities, water supply, roads and wash bays. After completing construction, the company also assumed responsibility for mining operations.

Thiess managing director Michael Wright added that the ongoing work at this complex mine is a testament of the relationship between Thiess and Glencore. Mt Owen deposit comprises multiple seams of coal with thicknesses ranging from 0.4m-4m.

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