Rio Tinto's $1bn buyback programme fails to excite investors

 
Oliver Gill
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"The Rio cash machine is rolling," said Hargreaves Lansdown equity analyst Nicholas Hyett (Source: Getty)

Rio Tinto rewarded investors this morning, launching a $1bn (£720m) share buyback programme.

Annual earnings at the Anglo-Australian mining giant rose 69 per cent to $8.6bn, narrowly below analyst expectations of $8.7bn.

But after jumping as stock markets opened, shares retreated and are currently 0.1 per cent up.

"Investors seemed less than impressed by the record dividend on offer," said ETX Capital senior market analyst Neil Wilson.

Cash

Rio Tinto generated $13.9bn of cash from operations, allowing the firm to pay down almost $6bn of its debt pile. Coffers were still sufficiently full to hike full-year dividends from $1.70 to $2.90 per share.

Rio chief executive J-S Jacques said:

The strength of our cash flow is a result of resilient prices during the year coupled with a robust operational performance and a focus on mine to market productivity.

Read more: Rio Tinto hints at more shareholder returns after record iron ore shipments

The share buyback programme will be completed by the end of 2018, Rio said.

"The Rio cash machine is rolling," said Hargreaves Lansdown equity analyst Nicholas Hyett.

Many of Rio’s vast, super low-cost mines were profitable even in the darkest days of the commodity rout. In these happier times, they’re a licence to print money... That cash infusion means the company is back in rude health.

But Richard Knights, an analyst at Shore Capital Markets, warned Rio Tinto was "most exposed" miner to future weakness in the Chinese steel market, which, he said, is set to contract.

Meanwhile, Hyett said: "High-quality assets and far healthier balance sheet mean Rio is well placed to weather even the worst conditions in the long term – but investors shouldn't think it’s escaped the commodity roller-coaster."

Read more: Robots rise at Rio: Driverless truck push “significant” to $5bn savings

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