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* Underlying earnings at $8.81 bln vs $8.47 bln forecast
* Miner offers special dividend of $2.43 per share
* Rio Tinto says has little room to add to iron ore output (Adds CEO comments, analyst comments, adds detail)
Feb 27 (Reuters) - Rio Tinto on Wednesday beat expectations when it reported its highest annual underlying earnings since 2014 and announced a bumper dividend after a string of divestments.
Flush from the recent sale of its stake in the Grasberg copper mine in Indonesia and other non-core aluminium and coal assets, Rio will have returned total cash of $13.5 billion to shareholders for the year, after declaring a $4 billion special dividend of $2.43 per share and a final dividend of $1.80.
The special dividend was "far bigger than expected," said analyst Glyn Lawcock of UBS in Sydney.
"I think this continues to deliver on their promise of returning cash to shareholders and not doing anything dumb," he said, a reference to the top-of-the-cycle asset purchases at the peak of the last commodity boom.
"We have once again announced record cash returns to shareholders," Chief Executive Jean-Sébastien Jacques said, pointing to the miner's "value over volume" strategy.
Underlying earnings for the 12 months ended on Dec. 31 rose to $8.81 billion, from $8.63 billion a year earlier, after its copper and minerals divisions beat expectations, offsetting higher aluminium costs.
The figure was significantly higher than a consensus estimate of $8.47 billion compiled by Vuma Financial.
Chief Commercial Officer Simon Trott told reporters on a media call that Rio had little scope to boost its iron ore output after a deadly dam burst cut supply from Brazil's Vale SA .
"The iron ore business is set up for the year. You can't make changes on the fly. But we will continue to look at options on the portfolio for the year," Trott said.
Iron ore prices have surged since last month's deadly collapse of a dam operated by Vale in Brazil forced the world's top iron ore miner to cut production, likely boosting earnings this year for its global rivals.
Rio maintained its iron ore output guidance at 338 million to 350 million tonnes.
Rio's Australia-listed shares have risen 21 percent so far this year, compared with a near 15 percent jump for its larger, but more diversified, peer BHP Group. In London, Rio's shares were up 1.3 percent.
The Vale disaster has considerably raised scrutiny of safety standards throughout the industry, in particular for tailings facilities, casting a shadow over the industry's license to operate. Rio, which has some 100 tailings facilities across 32 sites, registered three fatalities last year.
The miner also separately released a major report into its plans to transition into a low carbon future, and Jacques made a point of underlining its Environmental, Social and Governance (ESG) credentials.
"Today we are the only large mining company with no coal or oil or gas in our portfolio," he said.
While a global move to a low carbon future lent significant risk to its iron ore business, Rio said in its report that it will focus on materials like copper and aluminium that will supply a new energy future.
Rio Tinto also separately confirmed a copper find in Western Australia.
(Reporting by Aditya Soni and Nikhil Kurian Nainan in BENGALURU and Melanie Burton in MELBOURNE; Editing by Richard Pullin and Tom Hogue)