The company - the world's largest producer of kaolin, a soft clay used in paper and ceramics - said yesterday that it was considering "a significant repurchase of shares". It is understood that ECC could buy back up to 20 per cent of its shares - a move that would cost about pounds 100m at yesterday's closing price. The bulk of the buyback is set to take place after April 1999 to take advantage of tax changes, according to sources close to the company.
Lawrence Urquhart, chairman, said the board decided to return cash to shareholders after being "disappointed by the company's share price performance".
ECC made a large loss in 1996 after a radical overhaul of its key businesses. It returned to the black last year, but the turnaround failed to trigger a recovery in the share price.
Shares in ECC have fallen by almost a half since their 12-month peak of 290.5p in October, amid a general downgrade of the extraction sector and concerns over weaker mineral prices.
They rebounded 18.5p to 163.5p yesterday, buoyed by news of the share buyback and the release of interim results in line with City analysts' expectations.
ECC reported a 5 per cent increase in pre-tax profit to pounds 43.5m on turnover up slightly to pounds 417.2m. Sales in its core paper minerals division jumped 8 per cent in the first half, but prices remained subdued, ECC said.
The company also announced the acquisition of Minco, a US ceramics business, for $28m (pounds 17.5m).
Patrick Drayton, finance director, said the purchase was part of ECC's strategy of growing through bolt-on acquisitions. He said the company could spend up to pounds 35m by the end of the year on similar acquisitions.