Rio Tinto to carry out buyback

Rio Tinto has announced a $500 million share buyback as part of its wider $2 billion capital return program.

The miner is attempting to gain a greater control of its own business, and comes as little surprise to market analysts who predicted the company would carry out such a move.

The buyback is believed to be part of a five year strategy to increase Rio Tinto's underlying share dividends  by around ten per cent.

Under the scheme Rio will target a purchaseof US$500 million of shares, and reserves the right to increase or decrease the size of the move later on.

Speaking on the decision, Rio outlined it as an important feature of the group's capital return program.

"It is an efficient way to return capital as it allows the purchase of shares at a discount of at least eight per cent to prevailing market prices and is expected to be funded out of the group's resources," Rio Tinto said in a company statement.

Rio Tinto is now inviting shareholders to tender their shares at discounts of between eight and 14 per cent to the market.

The tender process will run from 2 March to 2 April.

The wider US$2 billion capital return program  will allow the miner to stay within its debt gearing range of 20 to 30 per cent, and reaffirms Rio Tinto's stance against the much vaunted merger with fellow mining major Glencore.

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