Rio Tinto has announced plans to buy back an additional $2.5bn of its shares, returning all of the proceeds from the sale of its Australian coal business to investors.
In a statement released after the market closed, the Anglo-Australian miner said it would repurchase $560m shares in Sydney and the rest in London in coming months.
The move, which was approved at board meeting in Singapore this week, takes to $4bn the share buybacks announced by Rio this year and makes good on a promise by its chief executive Jean-Sébastien Jacques to deliver “superior cash returns” to its peers, which include Anglo American, BHP Billiton and Glencore.
Mining companies are trying to atone for years of profligate spending and deal making by ramping up returns — either through dividends or buybacks — and focusing on improving productivity.
After a last-minute bid battle, Rio sold Coal & Allied in June to Yancoal, a state-backed Chinese mining company for a total of $2.69bn, including future royalty payments. Yancoal subsequently sold a 49 per cent stake in the business to Glencore, the losing bidder.
Rio, the world’s second-biggest producer of steel-making ingredient iron ore, is widely acknowledged to have one of the strongest balance sheets in the sector. Its profits have sharply risen this year on the back of rising commodity prices.
In August, the company announced the biggest interim dividend in its history and added $1bn to its share buyback programme, which at the time stood at $500m.
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