Rio Tinto (RIO) - Get Report posted stronger-than-expected full-year earnings on Wednesday and boosted its annual divided as the world's second-largest miner took full advantage of rising commodity prices.

Full-year net profit came in at $5.1 billion, the company said, up from a loss of $866 million in 2015 and ahead of analysts' forecasts of $4.87 billion. The group will pay a full-year dividend of $1.7 per share, down from 2015's $2.15 payout but firmly ahead of the higher end of market forecasts and will also buyback $500 million worth of shares.

Rio shares rose 2.4% in early London trading to change hands at 3,515 pence each in London, extending their three month gain past 23% and outpacing the 20% advance for the FTSE 350 Miners Index.

"Today's results show we have kept our commitment to maximise cash and productivity from our world-class assets, delivering $3.6 billion in shareholder returns while maintaining a robust balance sheet," said CEO Jean Sebastien Jacques. "At the same time, we strengthened the portfolio and advanced our high-value growth projects as we look to the future.

"We enter 2017 in good shape. Our team will deliver $5 billion of extra free cash flow over the next five years from our productivity programme," Jacques added. "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."

Iron ore prices have more than doubled since the end of 2015, rising from around $36.60 per ton at the end of December 2015 to just under $80 per tone by the end of the following year. Rio Tinto shipped 327.6 million tons last year, a figure that hit the mid-point of its earlier guidance. The company sees shipments in the range of 330 million to 340 million for 2017.