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Nicholas Grove is a Morningstar journalist.

Mining giant Rio Tinto (RIO) on Thursday announced an 11 per cent rise in full-year underlying earnings to a record US$15.5 billion.

But the figure was short of both Morningstar and consensus estimates for a figure in the US$16.4 billion to $16.7 billion range, following a year chairman Jan du Plessis said was characterised by "increasingly unpredictable markets".

"As with BHP's report for the first half of 2012, escalation in operating costs was higher than expected. Rio's result likewise fell short of the mark," said Morningstar global head of basic materials Mark Taylor.

"CEO Tom Albanese pointed to industry-wide high cost inflation in a number of hotspots. Strengthening Australian and Canadian currencies, escalating raw material prices and lower grades were complemented by adverse weather conditions to squeeze margins," he said.

"Key divisional under-performers were aluminium and copper, partially offset by better-than-expected numbers from the iron ore and energy divisions."

The miner also took a US$8.9-billion charge against its aluminium businesses, which largely related to the company's acquisition of Alcan.

Including the charge, the company's net earnings were down 59 per cent on the year to US$5.8 billion.

The charge also prompted CEO Albanese to forego his annual bonus.

In a note, Bell Potter's Charlie Aitken said he had suspected the group would write down the carrying value of its Alcan acquisition, which he said now makes an "all-but-irrelevant" contribution to group earnings.

"If you want to throw good money after bad, buy an aluminium smelter ... Rio's debt-financed bid for Alcan must make the top 10 list of all-time worst pieces of M&A," he said in an email prior to the release of the company's earnings.

"Yet, thankfully for Rio, they are still the biggest in Australian iron ore production."

In a statement, Rio said its iron ore division's underlying earnings of US$12,853 million in 2011 were 26 per cent higher than 2010.

This reflected higher prices and increased volumes, partly offset by adverse currency movements and higher costs driven by inflation, input prices, royalties and operational readiness, the company said.

Earlier this week, Rio announced it would spend a further US$2.9 billion on expanding its Pilbara iron ore operations in Western Australia.

While CEO Albanese acknowledged the company's results were primarily driven by its iron ore operations and higher prices, he said: "Not all of our divisions are enjoying the same tailwinds."