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Rio Tinto plc (RIO) shares led the mining sector higher in London Monday after unveiling a plan to shrink its balance sheet through a buyback of its own bonds.

The miner will spend up to $2.5 billion buying back its own notes, focusing on those that fall due over the course of 2019 and 2020, the company said in a statement.

There are around $1.7 billion of notes due for redemption in 2019 and 2020, which will be bought back, while the commodities powerhouse will spend the remaining $780 million buying back bonds that fall due over a longer time frame.

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Rio Tinto stock rose more than 1.5% in response to the announcement, amid modest gains for the broader sector, to change hands at 3,214 pence, the highest since April 11.

The world's third largest miner by revenue, Rio Tinto reported net debt of $9.6 billion on its balance sheet for the year ending Dec 31 2016, down from more than $13.78 billion at the end of 2015.

The Anglo-Australian firm has led the way in the restructuring and deleveraging undergone by miners in recent years, pledging to shareholders that it will reign in its balance sheet and balance shareholder returns with future expansion plans.

"We expect the stock to re-rate over the next 12 months when Rio steps up returns to shareholders, and as volatility in commodities/mining stocks moderates," said Miles Allsop, an analyst at UBS, in a note to clients on Monday.

Allsop has a buy rating and a price target of 3,750 pence assigned to Rio Tinto stock, which implies upside of around 15% from current levels.