UPDATE 1-Rio Tinto austerity drive fuels surprise dividend hike

* H2 profit jumps 45 pct to $5.99 bln, beating forecasts

* Annual dividend up 15 pct to $1.92, tops consensus

* Exceeds forecasts on capex, net debt cuts

* Shares hit 11-month high ahead of result

By Sonali Paul

MELBOURNE, Feb 13 (Reuters) - Global miner Rio Tinto

RIO.AX RIO.L surprised investors with a 15 percent dividend hike after reporting a huge jump in second-half profit on Thursday, which could put it in position to fund a big capital return sooner than expected.

Rio's result will set the pace for other mega miners, who have shelved projects, axed costs, sold assets and cut debt over the past 18 months to satisfy shareholders wanting bigger spoils from the mining boom.

"The dividend was way above consensus," said Fat Prophets mining analyst David Lennox. "It's all about iron ore, cost cutting at the company and general improvements in operations."

Rio Tinto met or exceeded all the targets set out by Walsh for 2013, cutting capital spending by 26 percent to $12.9 bln, cutting costs by $2.3 billion and paring net debt to $18.1 billion, down 18 percent from June.

That helped boost cash flows by 22 percent to $20.1 billion for the full year.

"The 15 percent increase in our dividend reflects our confidence in the business and its attractive prospects," Chief Executive Sam Walsh, who took the reins a year ago, said in a statement.

Analysts had expected an annual dividend of $1.81 compared with the $1.92 that Rio declared.

The company has said it will be in a position to consider a share buyback or other capital return to shareholders when its net debt is around $15 billion.

Underlying earnings for the six months to Dec. 31 rose 45 percent to $5.99 billion from $4.12 billion a year earlier, based on Reuters calculations off the full-year result, and compared with analysts' forecasts of around $5.49 billion.

For the full year, Rio posted a net profit of $3.665 billion, but that was marred by impairments on assets acquired from Turquoise Hill Resources TRQ.TO , aluminium and its Gove alumina refinery, which it is shutting down.

That result was up from a $3 billion loss in 2012 due to $14 billion in writedowns on its Alcan aluminium business and its Mozambique coal assets, which led to the sacking of then CEO Tom Albanese.

Analysts and investors have said the latest round of results from the big miners could help drive a turnaround in their shares, which have underperformed the broader markets over the past year as investors shunned miners on fears of cooling growth in China and an expected slump in iron ore prices.

Other big miners including BHP Billiton BHP.AX BLT.L , Anglo American AAL.L , Brazil's Vale SA VALE5.SA and Glencore Xstrata GLEN.L are due to report in coming weeks.

Rio's Australian shares have fallen 3.7 percent over the past year, underperforming a 6 percent rise in the broader market .AXJO , but the stock touched an 11-month high on Thursday ahead of the result.

The biggest risk for Rio Tinto is that new iron ore supply from its mines and those of rivals BHP Billiton and Fortescue Metals Group in Australia's Pilbara will drive down iron ore prices this year.

Iron ore made up nearly 90 percent of Rio's earnings in 2013, while the rest largely came from copper.

(Additional reporting by James Regan in Sydney; Editing by Richard Pullin)

((Sonali.Paul@thomsonreuters.com)(+61 3 9286 1419)(Reuters Messaging: sonali.paul.thomsonreuters.com@reuters.net))

Keywords: RIOTINTO EARNINGS/