The mining boom is well and truly over with Rio Tinto shares opening lower on the Australian stock market after the mining giant announced a full year net loss and scrapped its generous dividend policy.

The company’s shares closed 3.4 per cent lower in London trading overnight, after initially falling as much as nine per cent.

Rio reported an annual loss of $US866 million ($A1.22 billion), as a collapse in commodity prices weighed down earnings.

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Underlying earnings halved to $4.54 billion in 2015 from $9.31 billion a year earlier, hit by weaker iron ore, copper and aluminium prices.

Chief executive Sam Walsh said 2016 is shaping as an even tougher year, amid continuing volatility and uncertainty on global markets.

The company said capital expenditure will be reduced by a further $US3 billion than already planned over the next two years, and will end its current progressive dividend policy in favour of a more flexible approach to reflect the company’s performance.

Rio will pay dividends of $US2.15 per share for 2015, and said it intends for 2016 full year dividends to fall to no less than $US1.10, effectively slashing returns for shareholders.

Earlier this month, ratings agency Standard & Poor’s placed Rio’s credit rating on negative watch, saying it expects a material drop in the company’s results as metal prices come under further pressure.