Rio launches $2.5bn share buyback

PERTH (miningweekly.com) – Diversified major Rio Tinto will spend an additional $2.5-billion on its ongoing share buy-back programme, funded by the recent sale of its Coal & Allied subsidiary to ASX-listed Yancoal.

The capital return programme will be executed through a combination of an off-market buy-back tender, targeting A$700-million of Rio’s shares, with the balance of around $1.9-billion of additional funds allocated to the company’s existing on-market purchase of Rio shares.

“Returning the $2.5-billion proceeds from our Coal & Allied divestment shows our continued commitment to delivering superior value and returning cash to our shareholders,” CEO Jean-Sebastian Jacques said.

“This year we have announced cash returns to shareholders of $8.2-billion, comprising $4.2-billion of dividends and $4-billion of share buy-backs. Shareholder returns of this scale are made possible by maintaining the strongest balance sheet in the sector and a disciplined capital allocation process,” he added.

Yancoal earlier this year settled its $2.69-billion acquisition of Coal & Allied’s Hunter Valley operations, in New South Wales, paying Rio $2.45-billion in cash and a further $240-million of unconditional guaranteed royalties.

Meanwhile, Rio’s exploration arm has struck a deal with ASX-listed TNG to acquire its Melville Island exploration licence application, in the Northern Territory for A$80 000 and a 2% net smelter return royalty.

Rio in 2012 entered into a farm-in agreement over the Melville Island exploration licence, with the aim of earning an 80% share in the project area. However, TNG pointed out on Friday that the licence had not progressed from the application phase, meaning Rio had not earned any equity in the project as of yet.

TNG MD Paul Burton told shareholders that the Melville Island exploration licence application was considered to be noncore for the junior company, with the divestment of the asset consistent with the company’s focus on progressing the financing and development of its Mt Peake vanadium/titanium/iron project.

“Over the past 12 months, we have demonstrated a clear intent to rationalise our portfolio consistent with our focus as an emerging international strategic metals producer,” he said.

“A key step in this process was the successful demerger and initial public offering of our Northern Territory base metal exploration assets through Todd River Resources, and this transaction with Rio Tinto Exploration marks another step towards consolidating our minerals portfolio while retaining some exposure to the future development potential of this asset.”

The exploration licence application covers some 1 387 km² of tenement in the north-western part of Melville Island, and is prospective for bauxite and heavy minerals.