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* BHP to return $5.2 bln in off-market Australian buyback
* After buyback BHP to return $5.2 bln in special dividend
* Shares jump as much as 6.2 pct in heavy volume(Adds investor comments, updates shares)
By Sonali Paul
Nov 1 (Reuters) - Top global miner BHP onThursday said it would buy back shares and pay a specialdividend to return $10.4 billion to shareholders, sticking to apromise to hand back all of the proceeds from the sale of itsU.S. shale business.
Investors cheered the massive return and the split between a$5.2 billion off-market buyback and a $5.2 billion specialdividend, sending BHP's Australian shares up as much as 6.2percent.
BHP had promised to return all of the net proceeds from the$10.8 billion sale of its U.S. shale business to shareholderswhen the deal was announced in July. British oil major BP Plcbought most of the U.S. business in a deal completed thisweek.
"It's good that 100 percent is going back to shareholders,"said Stephen Butel, an analyst with Platypus Asset Management,which owns shares in BHP.
Miners have been handing money back to shareholdersfollowing a recovery from the commodity bust of 2015-16, underpressure from investors not to waste growing piles of cash onbuying up assets that may never deliver returns.
"Giving $10 billion back shows you they probably don't seeopportunities to deploy a huge amount of capital internally atthe moment," Butel said.
"The whole industry's probably learned from the previousboom and would be quite hesitant to go out and do a largeacquisition."
Bidding into the off-market buyback will open on Nov. 19 andclose on Dec 14. Investors are allowed to tender in shares at upto a 14 percent discount to the market price.
Once the off-market buyback is completed, BHP will decidethe per share amount for its special dividend.
"Returning this $10.4 billion will bring the total cashreturned to shareholders to $21 billion over the last twoyears," BHP Chief Executive Officer Andrew Mackenzie said.
Australian institutional investors were pleasantly surprisedthe buyback was for BHP's Australia-listed shares rather thanits UK-listed shares, said Paul Xiradis, Chief Executive ofAusbil Dexia, which owns BHP stock.
The investors had thought the buyback would apply to theUK-listed shares, Xiradis said, as they typically trade at adiscount because the UK shares do not have access to Australiandividend tax credits.
As a result, investors piled into BHP's Australian shares onThursday to get access to the dividend tax credits that comewith an off-market buyback, driving trade in the stock to itsbiggest volume in 2-1/2 years.
"The after-tax return can actually be quite substantive,"Xiradis said.
BHP's big return to investors comes as world No.2 miner RioTinto is returning to shareholders $3.2 billionreaped from the sale of its Australian coal assets on top of a$4 billion share buyback.
"We like both (BHP and Rio). We do have both and part of thereason is that they are generating a lot of cash," Xiradis said,adding that the companies were continuing to invest inreplenishing reserves of their key products.
"So they're managing their business quite effectively forvalue rather than for volume."(Additional reporting by Nikhil Kurian Nainan in BENGALURU;Editing by Stephen Coates and Tom Hogue)
