In early trade the Rio Tinto Limited (ASX: RIO) share price has had a bright start and climbed notably higher.
At the time of writing the miner's shares are up over 1.5% to $66.52.
Why are its shares higher?
This morning the mining giant announced to the market that it would commit an additional US$2.5 billion to its ongoing share buyback programme following the sale of its Coal & Allied business to Yancoal Australia Ltd (ASX: YAL).
According to the release, management will undertake an off-market buyback tender that targets A$700 million of Rio shares at an 8% to 14% discount to the market price, with the remaining balance being allocated to the company's existing on-market purchases.
This latest capital return brings the total amount of Rio share buybacks announced in 2017 to US$4 billion.
This capital return increases to US$8.2 billion when you include the dividends it has paid out this year.
Should you invest?
Whilst I think it is great to see money returning to shareholders through dividends and buybacks, I don't believe that Rio is getting bang for its buck at the current share price.
With both iron ore and copper prices tipped to have peaked, I would class Rio as being about fair value right now, whereas I like to see buybacks take place on undervalued shares.
In light of this, I wouldn't be in a rush to invest in Rio and would suggest investors focus on opportunities elsewhere.
