Rio Tinto tipped to announce share buyback

Speculation is mounting that mining heavyweight Rio Tinto is
planning on announcing a $5 billion share buyback.

According to the Australian Financial Review, analysts are
tipping Rio to announce the buyback scheme next month when the company releases
its full-year results.

The buyback is said to be part of a five-year strategy to
increase underlying dividends by 10 per cent.

In an investor briefing last month, Rio’s CEO Sam Walsh said the company was committed to generating strong free cash flow and increasing cash returns to shareholders.

“They’ve talked it up so
much,” a mining analyst for Credit Suisse said.

“Iron ore looks like it’s
stabilising and unless the price completely falls out of bed, I think they’ve
made enough noise that they probably want to ­commit to something come
February.”

Glyn Lawock, a UBS mining analyst predicts Rio will announce
a buyback between $US2 billion and
$US3 billion so that it can stay within its debt-gearing range of 20 to 30
per cent.

Is it thought any buyback scheme will help shut down
investor interest about a possible merger with Glencore which made a play for the company in July.

Rio’s board unanimously rejected the approach.

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