March 5 -- Alumina Ltd., which owns 40 percent of the world's biggest alumina producer, will spend A$250 million ($195 million) to buy back shares as record earnings give it more cash.
The buyback will be conducted offmarket, and the price will be decided on April 23, the Melbourne-based company said today in a statement to the Australian Stock Exchange.
Alumina last month posted a 62 percent increase in annual profit to a record A$511.1 million as it benefited from higher prices for the material used to make aluminum. BHP Billiton Ltd., the world's largest miner, and rivals Anglo American Plc. and Rio Tinto Group, are spending $16 billion buying back shares after metals prices reached all-time highs.
``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 Officer John Marlay said in the statement.
Shares of Alumina fell 1 cent, or 0.2 percent, to A$6.79 at 10:35 a.m. Sydney time compared with a 1.1 percent fall in benchmark S&P/ASX 200 Index.
The company will buy back shares at between 8 percent and 14 percent below the market value. The Australian Tax Office has agreed that 36 cents of the buyback price would be considered as capital, and the rest as a tax-paid dividend.
Under Australian rules, some investors gain tax credits from selling the stock that would boost the total return to more than market price.
Alumina last month had said it would increase its final dividend by 20 percent and was studying a stock buyback.
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