UPDATE 2-Anglo American ups dividend, launches $1 bln share buyback

* Share price rises nearly 2%

* Company investigating after fatalities

* Expects Minas Rio permit by year end (Adds analyst comment, quotes from CEO)

By Barbara Lewis and Yadarisa Shabong

LONDON, July 25 (Reuters) - Anglo American raised it dividend payout by 27% and announced a $1 billion share buyback as it posted its best first-half results since 2011, driven by higher iron ore prices and the ramping up of operations at Minas-Rio in Brazil.

But CEO Mark Cutifani said fatal accidents detracted from the strong results. The company is investigating the death of 10 employees travelling from work in Chile in late June and early July, as well as three workplace fatalities in the first half.

"Our determination to reach and sustain zero harm is our most pressing challenge," Cutifani said. "The safety of our people ‒ at work or travelling to and from home ‒ is paramount."

Anglo American reported underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $5.45 billion in the six months ended June 30, beating the $5.16 billion expected by a company-compiled consensus of 12 analysts.

Anglo's share price rose 1.7% by 0855 GMT.

In response to the commodity market crash of 2015-2016, Anglo American said it would narrow its business to copper, platinum group metal and diamonds.

It halted an asset sell-off as the market recovered, so it benefited from this year's outpeformance of iron ore that followed cyclone disruption of output Australia and reduced production in Brazil after a Vale dam burst in January that killed at least 240 people.

Iron ore futures fell this week after Vale received approval to resume some operations, but Cutifani said Minas-Rio's high grade ore would remain in demand.

Anglo needs one more permit to increase capacity at its Minas-Rio iron ore mine in Brazil, which Cutifani told reporters on Thursday he expected to secure by the end of this year.

Following the ramping up of operations so far at Minas-Rio, Anglo American increased annual output guidance on Thursday to between 19 million tonnes and 21 million tonnes from 18 million tonnes to 20 million tonnes previously.

Analysts said the results were strong and the buyback, which begins immediately, was a positive surprise.

"It remains our top pick amongst the global diversifieds for its operational performance and copper optionality," BMO Capital Markets said in a note.

Anglo America says it is on track to deliver first copper product at Quellaveco in Peru in 2022, ramping up in 2023, and Cutifani said the company was also exploring further in that region, as well as in Brazil.

Also on Thursday, the company announced the board had approved a six-year mine-life extension at Aquila coking coal operations in Queensland, Australia, at a cost of $226 million. (Reporting by Yadarisa Shabong in Bengaluru; Editing by Patrick Graham and Edmund Blair)