Money matters

London, Oct. 28 (Reuters): Rio Tinto Plc, the world’s second-biggest miner, has said it will give back to investors $3 billion (£1.6 billion) in cash, adding to a $4-billion programme announced early this year, after a boom in metal prices.

The cash-rich firm’s latest plan will take the form of share buybacks between now and the end of 2007, and analysts said more payouts were likely.

Shares in Rio Tinto, with a market capitalisation around £29 billion, climbed 1.4 per cent to 2,897 pence, after rising as much as 2.2 per cent and outperforming a 0.4 per cent fall in London’s blue chip FTSE 100 index.

“With our balance sheet very strong, we are in a position further to invest heavily in growth and return capital to shareholders,” chief executive Leigh Clifford told an investor seminar.

“Overall, we believe the outlook remains positive with the world GDP growth in excess of 4 per cent. This is likely to be reflected in continuing good demand for most minerals and metals.”

Rio Tinto has felt the full benefits of a boom in world metal prices, particularly for copper, which has leapt to record levels on fears of supply shortages.

“In today’s favourable markets, the group’s high quality assets are generating record cash flows. This allows us to make substantial investments in the growth of the business and to return cash to shareholders,” Rio Tinto finance director Guy Elliott said in a statement.

However, Elliott said the return would still depend on market conditions.

Surplus cash

In August, Rio Tinto said an impressive performance at its copper division lifted half-year underlying net profit beyond expectations to a record $3.75 billion, topping market predictions of $3.4 billion.

The London- and Australia-listed firm said at the time it did not intend to retain surplus cash and would return the money if it failed to make a big acquisition, as its businesses were generating more cash than the company needed.

The market has since been eyeing the possibility of a new payout plan, including a possible higher final dividend.

Rio Tinto rival BHP Billiton, the world’s biggest miner, announced a $3-billion buyback in August after unveiling a $10-billion full-year profit.

Rio Tinto unveiled its $4-billion programme — consisting of a $1.5-billion special dividend and $2.5-billion share buyback — on February 2.