Rio Tinto Group, the second-largest miner, offered to repurchase as much as $3 billion of debt, its second buyback in about two months, as rebounding raw-material prices ease pressure on the sector.
The company will make buying back $2.9 billion of notes due in 2018 a priority, according to a statement. Rio will then consider offers from holders of about $5.2 billion of bonds maturing in 2020 to 2022, the company said, Bloomberg reported.
Rio repurchased $1.5 billion of notes in an April tender as miners seek to cut borrowings and pare financing costs following a collapse in commodity prices last year. The industry’s financial squeeze has lessened in 2016 because of a price pickup, slower investment in new projects and as they’ve raised cash by selling operations.
“It indicates that miners are confident that their asset sale programs can be executed, and that the commodity price rally and subsequent improvement in cash-flow can be sustained,” said Anthony Ip, a credit sector specialist at Citigroup Inc. in Sydney.
Commodities this week entered a bull market, ending a five-year rout, on gains in prices of raw materials from zinc to soybeans. The Bloomberg Commodity Index, which tracks returns from 22 raw materials, closed on Monday 21% above its low on Jan. 20, meeting the common definition of a bull market. The gauge closed Tuesday up 0.2% at 88.29, though that’s still down almost 50% from a 2011 peak.
Since 2013, Rio has sold about $4.7 billion of assets and in February announced plans to cut its dividend and scrapped a pledge to keep boosting payouts to help bolster its balance sheet. It’s also frozen salaries and cut travel costs amid efforts to win savings.
