The $US5.1 billion underlying profit and the better-than-expected shareholder returns cut a stark contrast to the mood one year ago when Rio was forced to axe its dividend policy after reporting a net loss of $US866 million.
Rio Tinto PLC (LON:RIO) yesterday was the subject of a new research report issued by JP Morgan in which it was reiterated as "Overweight" by analysts at the firm.
The figures were also boosted by $1.3 billion worth of asset sales in Rio's coal and aluminium business.
Rio Tinto chief executive J-S Jacques said, "We enter 2017 in good shape".
The UK oil and gas index fell 1.3 percent, making it the biggest sectoral decliner, after oil prices extended Tuesday's falls following a massive increase in USA fuel inventories and a slump in Chinese demand.
Revenue was down to USD33.80 billion in 2016 from USD34.80 billion, but margins improved due to cash cost improvements, which helped offset weaker pricing in some divisions.
According to Rio Tinto, the off-loading of Bunder is in the interest of streamlining the company's asset portfolio.
Rio stock is up 9 per cent this year and reached an nearly four-year high in late January. Rio Tinto has also announced that it will start a$500 million share buy-back programme of Rio Tinto shares.
Rio said the total payout represented 70 per cent of its 2016 underlying earnings. This was aided by $1.6 billion of pre-tax sustainable operating cash cost improvements. "Our value over volume approach, coupled with a robust balance sheet and world-class assets, places us in a strong position to deliver superior shareholder returns through the cycle", Jacques said. "We have adapted by cutting our controllable cash costs by $7 billion from 2014 a full year earlier than planned".
As part of the US$3.6 billion return to shareholders, Rio declared a full-year dividend of 170 U.S. cents per share and a share buyback of US$500 million this year. Its iron ore mines are located in Australia and Canada.
Capital expenditure will be $5 billion this year before rising to $5.5 billion for the following two years.
Looking ahead, the company said its production guidance is unchanged from the fourth quarter operations review.