BHP reported a 35 percent slide in second-half profit and its first fall in annual profit in three years in the face of falling commodity prices as China's economic growth cools, wrapping up a torrid earnings season for the world's biggest miners.

"It's pleasing to see that there's some capital discipline from the company, so they are not ploughing ahead irrespective of current difficult economic conditions," said Tim Schroeders, a portfolio manager at Pengana Capital in Melbourne.

Big miners have all been battered by weaker prices for iron ore, copper, coal, nickel and aluminum as economic growth in big-buyer China slows this year to what is expected to be its weakest pace in more than a decade.

Expanding Olympic Dam, the world's fourth-largest known copper deposit and largest uranium source, was one of three mega projects that were due to go to the BHP board for final approval by December 2012 in an $80 billion pipeline of projects that BHP had flagged were likely to be slowed.

Now, the Anglo-Australian giant said no major new projects would be approved before June 2013.

BHP CEO Marius Kloppers said the company needed to take a fresh look at the Olympic Dam expansion. He cited high project costs, partly due to a strong Australian dollar, and volatile commodity prices, which BHP sees persisting short term.

"What has changed is the capital cost of construction, what has changed is that post-Fukushima there is a different and still developing outlook on things like uranium, gold prices have changed," he told reporters.

"There have been a number of (changes) here, but the most important one is capital costs have gone up, which is an industry wide phenomenon."

Investors, who have been pressing the major miners to return capital to shareholders rather than splash out on major projects amid global uncertainty were relieved BHP had decided to hold back on the project to quadruple copper output from Olympic Dam.

"Cancelling Olympic Dam was probably a good announcement, as the market was looking for something of that nature, or hoping for something like that. So it's a sensible move on their part," said Hayden Bairstow, a Sydney-based analyst at CLSA.

BHP's second-half attributable profit before exceptional items fell to $7.16 billion from $10.98 billion a year earlier, as calculated by Reuters from the full-year results. That was slightly ahead of analysts' forecasts around $6.96 billion.

Full-year profit to the end of June fell to $17.1 billion from $21.7 billion a year earlier.

BHP has also been hurt by lower natural gas prices and industrial action at its coking coal mines, with its bottom line marred by $2.5 billion in writedowns on its shale gas and nickel assets and charges on projects, including Olympic Dam.

In BHP's biggest business of iron ore, softening demand growth from China has been particularly painful. The world's biggest iron ore miner, Brazil's Vale (VALE5.SA), last month reported its worst quarterly earnings in two years.

BHP said $22 billion worth of capital spending in the year ahead on projects already approved would go ahead. The expansions underway would boost BHP's production volumes substantially by the end of 2015, including a 50 percent increase in coking coal output, Kloppers said.

The Olympic Dam plan would have involved digging a massive open pit over several years capable of producing 750,000 tonnes of copper and 19,000 tonnes of uranium a year, but the economics no longer made sense following a 25 percent slump in copper prices over the past 18 months.

The company said as a result of the plan to review the project, it would not be ready to approve any expansion before a December 15, 2012 deadline it had agreed with the South Australia state government.

The decision not to approve other major projects this year left open the question on when BHP would go ahead with its two other mega projects -- the Outer Harbour in Australia and the Jansen potash project in Canada.

Klopper told reporters the company would focus on squeezing as much as it could out of the existing inner harbour iron ore port at Port Hedland before pushing on with a new outer harbour, and remained committed to getting into potash in the long run.

"I don't think BHP has been given a mandate from investors and shareholders to go out and write blank cheques. I think they're very mindful of that and they're bunkering down and responding to the feedback they've been getting," said Peter Esho, chief markets analyst at broker City Index in Sydney.

BHP expects Chinese steel demand growth to slow to a much more modest pace than over the past 10 years, and Kloppers was bearish about a near-term recovery in iron ore prices, languishing at their lowest since December 2009.

"We probably don't see really dramatic price movement in iron ore to the upside," he told reporters.

BHP raised its final dividend by 2 cents to 57 cents, but that was below analysts' forecasts of around 58 cents, which was seen as another sign of caution on the outlook.

BHP revealed earlier this month it would book a $2.8 billion write-down on the U.S. shale business it had bought last year and $450 million on its Australian nickel division, which led Kloppers and petroleum head Mike Yeager to forgo their bonuses this year.

BHP's shares slipped 0.3 percent to close at A$33.16 after the announcement, roughly in line with the broader market's .AXJO decline.

Its London-listed shares (BLT.L) fell 1.4 percent in early trading in a wider market .FTSE that was down 0.8 percent.

(Additional reporting by James Regan in SYDNEY and Clara Ferreira-Marques in LONDON; Editing by Neil Fullick)

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