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(Bloomberg) -- Rio Tinto Group, the world’s second-biggest mining company, plans to spend $2 billion in a share buyback after profit declined 9 percent last year following a slump in the price of iron ore.

Underlying profit dropped to $9.3 billion in the 12 months ended Dec. 31, London-based Rio said Thursday. That compares with the $8.97 billion average estimate of 26 analysts surveyed by Bloomberg. Estimates for the buyback before the release ranged from $1 billion to $2.5 billion according to forecasts from five analysts compiled by Bloomberg.

The decision to buy back shares comes six months after Chief Executive Officer Sam Walsh described the company as a “cash machine” following a cost-cutting program helped improve profit margins. It also follows Rio’s decision to fend off the advances of smaller rival Glencore Plc, which approached it about a possible merger last year.

Rio’s profit was crimped by the 47 percent collapse in the price of iron ore last year as a wave of new supplies from Australia compounded a glut of the steel-making raw material.

To contact the reporter on this story: Jesse Riseborough in London at jriseborough@bloomberg.net To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Ana Monteiro