Rio Tinto has signalled that it is unlikely to participate in a major consolidation of the global metals industry after unveiling a $3bn (£1.6bn) share buy-back that augments the $4bn cash return it announced earlier this year.
Mining companies are in rude health because of record metal prices that have soared on fears of a shortage of supply. That has significantly boosted cash flows, enabling companies such as Anglo-Swiss miner Xstrata and BHP Billiton, the world's largest miner, to use excess cash to snap up rival companies.
The Anglo-Australian miner Rio Tinto reported a 75 per cent rise in interim profits in August and promised to return surplus cash to shareholders if it did not find a big acquisition. Last week, it purchased a near 10 per cent stake in Ivanhoe Mines for $1.5bn. The deal exposes the company to the world's largest undeveloped copper resource,in Mongolia's Gobi Desert.
Simon Toyne, a Numis Securities analyst, said Rio Tinto might make further strategic project acquisitions like the Ivanhoe deal but that a bid for an existing large producing company is not expected. As a result, he said, further cash returns are likely. "We believe significant cash returns by the end of 2007 are possible, especially if current commodity prices continue," he said.
A company spokesman declined to comment on the potential for further returns. "That is something for the future," he said.
Rio Tinto is still to buy back $600m of shares to complete its previous $4bn cash return. Shareholders received a special dividend totalling $1.5bn in February and the company has repurchased $1.9bn worth of shares over the past nine months. It aims to complete the new $3bn share buy-back by the end of 2007.Reuse content