BHP Billiton , the world's biggest miner, plans to pour $80 billion into expansions over the next five years rather than chase ambitious takeovers.
The announcement came as it nearly doubled first-half profits to a record due to booming demand for iron ore and copper.
The Anglo-Australian company , flush with cash, also said it would more than double its share buyback to $10 billion, to be completed this year.
Spurred by strong demand from China and India, BHP and its main competitors Rio Tinto and Xstrata plan to spend more than $110 billion on expansion projects over the next five years. In 2011, the companies will target more iron ore and coal capacity in Western Australia and more copper capacity in Mongolia, Chile and Peru.
BHP Chief Executive Marius Kloppers, speaking after the miner announced net profit for the July-December period of $10.7 billion, said the firm's acquisition sights were on very large assets. But because there were not many available, the preference was to spend on expansions, he said.
Deals were getting too hard to pull off, Kloppers added, referring to three big deals BHP had to ditch over the past three years, including its $39 billion bid for top global fertiliser maker Potash Corp last year.
'In addition, where we currently stand in the commodity price cycle probably has increased price expectations for those assets,' Kloppers told analysts.
BHP forecast a strong outlook for commodities markets due to tight supplies, but like Rio Tinto last week, it warned that prices could be volatile.
Kloppers said industry analysts had long overestimated supplies and he predicted that over the next one to two years supplies would remain tight, with few new large expansions or projects coming on line.
He also confirmed he had harboured concerns about Chinese and competitor espionage of his business.
The $10 billion buyback follows Rio Tinto's plan to return $5 billion to shareholders over the next two years, which some investors considered too little. BHP is already in the midst of conducting a $4.2 billion buyback of its UK shares.
Investors had high hopes for a big share buyback as the miner is nearly debt free, its cashflow is booming and its failure to complete major takeovers limits its expansion options.
BHP's attributable profit before exceptional items soared to $10.7 billion for July-December from $5.7 billion a year ago, beating an average forecast of $10.3 billion. First-half earnings from iron ore nearly tripled, while earnings from base metals, including copper, jumped 45%.
BHP's $80 billion expansion plan over the next five years includes expanding its Olympic Dam copper and uranium mine in Australia, with a decision expected in 2012 and the Jansen potash project in Canada.
