Citigroup analysts led by Heath Jansen said in a recent report that the buyback would be 6% earnings per share accretive.
Rio Tinto CEO Tom Albanese has managed to drive down the firm’s debt which ballooned after its $38.1 billion acquisition of Alcan Inc. in 2007 and has increased profits on the back of stronger prices for metals, iron ore and coal. In its mid-year report the mining giant reported that first-half income more than tripled to $5.85 billion.
“We expect Rio to move into a net cash position in 2011,” Regal Group International believes CitiGroup’s report said. “This will allow the company to look at growing through M&A or returning cash to shareholders through buybacks.”
The New York-based Citigroup estimates that Rio could have net cash of about $9.4 billion in 2011 which is likely to increase to $23.9 billion in 2012. Rio has projected spending on its mining projects, including the expansion of its iron ore operations in Western Australia, of $9 billion in 2011, fifty percent higher than estimated in 2009.
“Our priority is investing in value adding growth,” Rio Tinto told Regal Group International in a recent statement. “Additionally we target a single A credit rating and are committed to resuming our progressive dividend policy over the longer term.”
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