MELBOURNE --Australia's Alumina Ltd. Monday made good on its promise to consider capital management, announcing a A$250 million off-market share buyback.
The miner flagged a possible return of funds to shareholders at the time of its full year results last month, with higher aluminum prices boosting cash on hand.
Alumina said Monday the board has considered a number of options for capital management and decided an off-market buyback offers the best value.
"The buyback is expected to improve the efficiency of Alumina's capital structure and result in improvements to earnings per share and return on equity," chief executive John Marlay said.
The Melbourne-based company said the buyback, together with the 20% increase in final dividend, are based on strong earnings and cashflow and a continuing positive outlook for the alumina and aluminum markets.
The buyback will be carried out via a tender process with eligible shareholders being invited to sell their shares to Alumina at discounts from 8% to 14% to the market price.
The buyback allows Alumina to utilize some of its franking credits and the company said the tax office has accepted that the buyback price will comprise a capital component of 36 cents a share, with the remainder to be deemed a fully franked dividend for taxation purposes.
Alumina said this will mean that, for some shareholders, selling into the buyback will offer better value than selling their shares on market.
The cut off date for franking credit entitlement is March 8 and the tender period opens April 2.
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