Rio Tinto not planning major acquisitions, boosts capital management program

Mining giant Rio Tinto Ltd. (RTP) is signaling it won't chase major acquisitions by announcing it will funnel another US$3 billion into its capital management scheme, analysts said.

Rio Tinto said Friday it plans to boosts its capital management scheme for 2006 and 2007 to US$7 billion from US$4 billion.

Finance director Guy Elliott said favorable market conditions meant the miner's assets were generating record cash flows.

"This allows us to make substantial investments in the growth of the business and to return cash to shareholders," he said in a statement.

There has been strong speculation that a cashed up Rio Tinto could go looking for a big takeover target with aluminium companies Alcoa Inc. and Alcan Inc. cited as possible targets.

But Daiwa Securities analyst Mark Pervan said the move to boost the capital management program signals Rio Tinto isn't planning any major corporate deals.

"With the recent move into Ivanhoe and this capital management move they are channeling cash away from a large acquisition," he said. "It appears that they don't see any imminent attractive deal on the horizon."

Rio Tinto said under its current US$4 billion capital management program, US$1.5 billion has been returned to shareholders as a special dividend with a further US$1.9 billion spent buying back London-listed shares, leaving a balance of US$600 million.