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MELBOURNE (Reuters) – BHP Billiton, the world's biggest miner, plans to rain $80 1000000000 into expansions over the incoming fivesome eld kinda than chase ambitious takeovers, after nearly raise first-half profits to a achievement on palmy obligation for shackle ore and copper.

The Anglo-Australian company, dowse with cash, also said it would more than threefold its deal buyback to $10 billion, to be rank this year.

"The biggest surprise is the dedication to pay $80 1000000000 over the incoming fivesome years," said saint Bruce, portfolio trainer at Perpetual Investments, digit of BHP's top 10 inhabitant shareholders.

"We conceive this demonstrates the challenges that the industry is having satisfying rising demand, patch replacing declining production from mature operations," he said.

Spurred by brawny obligation from China and India, BHP and its main competitors metropolis Tinto and Xstrata organisation to pay more than $110 1000000000 on treatment projects over the incoming fivesome years. In 2011, the companies module direct more shackle ore and coal power in Western state and more conductor power in Mongolia, Chile and Peru.

BHP Chief Executive Marius Kloppers, speech after the jack declared gain acquire for the July-December period of $10.7 billion, said the firm's acquisition sights were on rattling super assets. But because there were not whatever available, the alternative was to pay on expansions, he said.

Deals were effort likewise hornlike to pull off, Kloppers added, referring to threesome big deals BHP had to hollow over the past threesome years, including its $39 1000000000 effort for top orbicular fertilizer maker Potash Corp terminal year.

"In addition, where we currently defence in the artefact toll cycle belike has increased toll expectations for those assets," Kloppers told analysts.

"Hence, our pore and whatever of my peers with another companies ... is to emphasize that as digit looks at a acquire versus build equation, the clear opportunity for us is to move to invest money in our organic portfolio."

While Kloppers played downbound the prospects of any near term acquisitions, investors doubted deals were soured BHP's agenda.

"They're on the backburner only to the extent that at the instance with today's inflated artefact prices they would belike have difficulty uncovering anything which would create continuance for them. I'm trusty they'd be looking," said saint Chilton, an analyst at Constellation Capital Management.

BHP forecast a brawny looking for commodities markets due to dripless supplies, but same metropolis Tinto terminal week, it warned that prices could be volatile.

Kloppers said industry analysts had long overestimated supplies and he predicted that over the incoming digit to digit eld supplies would rest tight, with few new super expansions or projects reaching on line.

He also addicted he had harbored concerns most Asiatic and competitor espionage of his business, citing it as a conceive behindhand his near for mart pricing of key commodities.

The Sydney Morning Herald newspaper, citing smooth cables obtained from Wikileaks, said Kloppers once offered to change intelligence with pedagogue on China after informing a U.S. functionary most the extent of Asiatic surveillance of his firm.

It said Kloppers confessed his concerns to the Australia-based diplomatist in 2009, at a instance when he was actuation Asiatic customers to switch from closed-door period toll negotiations to more market-based pricing.

"One of the reasons we have pushed so hornlike for market-clearing prices is so that these sorts of things are not a concern," Kloppers told reporters when asked to confirm if he was concerned most espionage from China and defence rivals.

BIG BUYBACK

The $10 1000000000 buyback follows metropolis Tinto's organisation to convey $5 1000000000 to shareholders over the incoming digit years, which whatever investors thoughtful likewise little.

BHP is already in the midst of conducting a $4.2 1000000000 buyback of its UK shares.

Investors had broad hopes for a big deal buyback as the jack is nearly debt free, its cashflow is palmy and its failure to rank major takeovers bounds its treatment options.

In the digit weeks directive up to the result, BHP's shares rallied 9 proportionality to a 33-month broad on expectations of a buyback. Its shares slipped 1.6 proportionality to A$46.59 in a insipid broader market, part as its dividend increase was disappointing to retail investors.

BHP stepped up its interim dividend by 10 proportionality to 46 cents a share, below broker forecasts of around 49 cents.

"We would have liked to wager more dividend, because we conceive that is of continuance to people who are continuing shareholders in the business," said doc Barker, managing director of inhabitant Foundation Investment Co, digit of BHP's top fivesome shareholders in Australia.

BHP's imputable acquire before surpassing items soared to $10.7 1000000000 for July-December from $5.7 1000000000 a assemblage ago, fighting an cipher forecast of $10.3 1000000000 from 14 analysts.

First-half earnings from shackle ore nearly tripled, patch earnings from humble metals, including copper, jumped 45 percent.

BHP's $80 1000000000 treatment organisation over the incoming fivesome eld includes expanding its Olympic Dam conductor and metal mine in Australia, with a selection expected in 2012 and the Jansen hydroxide project in Canada.

Petroleum earnings, which ordered BHP unconnected from its defence peers, rose 23 percent.

BHP said sharp outlay increases revilement its earnings by $521 million.

Kloppers said patch materials outlay increases were equilibrize by toll increases on BHP's key products, fag shortages were starting to bite, particularly in field jobs in Western state where zillions of dollars of shackle ore and oil and gas projects are competing for manpower.

(Editing by Balazs Koranyi, Anshuman Daga and histrion Yates)

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