Diversified miner South32 is launching a $US500 million ($A655 million) on-market share buyback as the BHP Billiton spinoff continues to benefit from the recovery in commodity prices.

The company, which in February reported a $US620 million first-half profit, on Monday said the yearlong buyback will return the equivalent of 4.5 per cent of its market capitalisation based on Friday’s closing share price.

“Our net cash balance continues to build giving us the financial strength and flexibility to invest in our existing operations, pursue opportunities where we can create value and return excess capital to shareholders,” chief executive Graham Kerr said in a statement.

South32, the world’s largest producer of manganese ore which was spun out of mining giant BHP in 2015, said “all alternatives will continue to be assessed to ensure this capital is returned in an efficient manner”.

RBC Capital Markets’ mining analysts Paul Hissey and Connor O’Brien said this suggested South32 could pursue other means if the buyback ceases to provide value.

“This announcement, whilst positive, is not entirely unexpected, given South32’s balance sheet position as well as the supportive commodity price environment of FY17 so far,” the RBC analysts said in a note.

South32’s share price more than doubled to about $A3 between March and December last year, but has since fallen back slightly.