Fortescue Metals Group has joined its bigger rivals in announcing a 12-month on-market share buyback of up to $500 million of its stock.

The Andrew Forrest-controlled miner announced this morning the buyback would begin after its first quarter report on October 25.

It heralds a new era of maturity for the once heavily indebted miner and is almost certain to be welcomed by shareholders.

Chief Executive Elizabeth Gaines said the share buyback program was a natural extension of the company’s capital allocation focus which had clearly shifted from debt reduction following the rapid de-gearing of the balance sheet and the successful execution of its capital management strategy.

“With our continued strong operating performance and new investments under way, the purchase of our own shares, funded out of operating cash flows, maintains our disciplined balance sheet management,” she said.

“This is consistent with our clear business strategy of investing in our core iron ore business while pursuing growth and development and delivering returns to our shareholders.”

Fortescue said the number and timing of shares purchased would depend on Fortescue’s share price and market conditions, with all shares purchased to be cancelled.

The buyback suggests the company believes its shares are trading at a discount and that it is not planning any major corporate investments or activity other than what has already been announced.

Shares in Fortescue have been on the slide in recent times, owing to the big discounts it is enduring for its low-grade, fines iron ore product in its main market, China.

In response the company has announced the development of a 60 per cent product which is expected to come online later this year. It has also been trying to diversify its markets across other south and south-east Asian countries where the discount for its ore is not so great.

The company’s announcement of a buyback follows similar moves by the likes of rivals Rio Tinto and BHP, which have been cheered by their shareholders.

Image: Elizabeth Gaines, Kalgoorlie Miner.