Rio Tinto trying to use franking credits

Many analysts have predicted that Rio will return value to its owners via a buyback of shares, and with the price difference between the London and Australian shares reducing in recent times, buybacks look likely to be part of the solution. ”Off-market buybacks are obviously a proven mechanism for utilising franking credits, but it’s one of a mix of things we will be looking at over the next several months as we come into that conversation with the board,” Mr Lynch said.

Rio Tinto may struggle to include franking credits in the “materially increased” package of shareholder returns it plans to roll out next year, with the miner’s dual-listed structure complicating efforts to equally reward shareholders in Australian and London.

Australian investors have shown a strong desire for franking credits in recent times, as demonstrated last week when shareholders in Woodside voted down their company’s plan to use $US900 million worth of franking credits to buy back 9. 5 per cent of its own stock from Shell.

The prospect of Rio conducting a special round of shareholder returns in February strengthened this week, when the miner revealed a stronger-than-expected interim profit on higher production, lower spending on capital projects, cuts to operating costs and a lower impost from Australia‘s mining tax.

Mr Lynch and Rio chief executive Sam Walsh said the board would finalise shareholder returns at the full-year results in February, but analysts at CLSA and CIMB said the timing could be delayed if iron ore prices weakened. 2 Malaysia Airlines to be privatised after plane …

Read more here: SMH

    

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