The following news story would indicate Rio believes their shares are undervalued-hence their intended
Rio Tinto’s 2010 Profit Triples on Iron Ore Price Gains
By Jesse Riseborough and Rebecca Keenan - Feb 9, 2011 10:11 PM PT
Rio Tinto Group, the world’s third- largest mining company, said second-half profit more than tripled as a global economic recovery boosted prices for iron ore and copper.
Net income rose to $8.5 billion in the six months ended Dec. 31 from $2.4 billion a year earlier, the London-based company said today in a statement. That compares with the $8.6 billion average estimate of 12 analysts Bloomberg surveyed. The company also announced a $5 billion share buyback by the end of next year as full-year earnings also tripled to $14.3 billion.
Chief Executive Officer Tom Albanese plans $13 billion of spending on expansion and new mines this year to boost output as commodity prices rise. Rio is being urged to increase returns on funds as global economic recovery adds to its cash pile, fueling a reversal in fortunes after the 2007 acquisition of Alcan Inc. that led to a crippling $40 billion of debt.
“GDP growth in emerging markets and supply constraints mean the general market and pricing outlook for commodities remain positive, albeit with elevated risk,” Albanese said today in the statement. Rio Tinto is reinvigorated, running strongly and benefiting from favorable markets
Rio declared a final dividend of 63 cents a share
