BHP might move first, but Rio Tinto’s buyback likely bigger

Financial Post | Business

Both BHP Billiton and Rio Tinto Group should begin returning excess capital to shareholders during the next year, but BHP will likely move first, says Fraser Jamieson, an analyst at J.P. Morgan Cazenove in London

He thinks BHP could make an announcement during its fiscal 2014 results in August, but he thinks Rio Tinto offers a more compelling capital returns story even though it might wait to make a similar announcement until it reports in February 2015.

Mr. Jamieson estimates the miner could support a US$4.75-billion share buyback program in fiscal 2015, while keeping net debt near its US$15-billion target. That would produce EPS accretion somewhere between 3.8% and 4.1%.

The analyst further noted BHP could support share repurchases of around US$3-billion, implying 1.3% to 1.4% in earnings accretion.

“Both management teams have emphasized they are in listening mode around the preferred mechanism for any returns,” Mr. Jamieson told clients, noting…

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