By Robb M. Stewart 
 

MELBOURNE--BHP Billiton Ltd. (BHP) Wednesday reported its first drop in annual profit for three years and said it won't approve any new projects until at least mid-2013, in the biggest sign yet that the global mining boom has run its course.

BHP announced plans to dramatically scale back a planned expansion of its Olympic Dam copper and uranium mine and defer development of a Queensland coal deposit as it moves to conserve cash in the wake of a slump in commodity prices, triggered largely by weakening Chinese demand.

Just a year ago, BHP was talking up the prospects of investing US$80 billion to ensure it was able to capitalize on Asia's demand for materials such as coal for firing power stations and iron ore used in steel frames during construction of high-rise buildings. The company was also spending more than US$12 billion on acquisitions to gain exposure to the U.S. shale gas boom.

The rapid change in strategy is heaping pressure on BHP Chief Executive Marius Kloppers as investors seek better returns from the world's largest mining company by output, whose share price is languishing near three-year lows, even if the stock of mining peers like Rio Tinto PLC (RIO) is also sharply down.

Melbourne-based BHP said its net profit for the year to June 30 fell 35% to US$15.42 billion, including charges taken on Olympic Dam in South Australia and previously announced writedowns of U.S. shale gas assets and Australian nickel projects.

But the world's largest mining company by output and market value said it expects the global economy to stabilize in the first half of 2013 and then improve, which would provide support for commodity demand and pricing. Growth in fixed-asset investment in China will shore up demand for iron ore, one of the biggest drivers of BHP's earnings, the company said in a statement.

Big diversified mining companies have been tightening their focus on cutting costs and reconsidering investment plans to shore up weaker cash flow, although they remain positive about the longer-term outlook for demand. Rivals such as Xstrata PLC (XTA.LN) and Anglo American PLC (AAL.LN) have trimmed their near-term capital expenditure plans.

BHP has 20 projects underway costing a combined US$22.8 billion, and it said its capital is largely committed for the next financial year. That means decisions on whether to build $10 billion-plus projects such as building an Outer Harbour at Port Hedland in Western Australia to facilitate more exports of iron ore, and the Jansen potash project in Canada, are on ice for at least ten more months.

In a separate statement, BHP said it was examining options to replace previous plans for an underground mine at Olympic Dam in South Australia. The decision is significant as the expansion was estimated by analysts to cost up to US$30 billion, and the acquisition of Olympic Dam in 2005 was seen as a key factor in Mr. Kloppers being elevated to the chief executive's role.

BHP said it is now focused on cutting costs and wants to simply its portfolio of assets further.

The company said its revenue in the year to June 30 edged up 0.7% to US$72.23 billion from US$71.74 billion. Stripping out one-time items, profit for the year was down 21% at US$17.12 billion, slightly ahead of the consensus of analyst forecasts that had been progressively reduced in recent months.

Mr. Kloppers, who has been at the helm for almost five years, and the head of the petroleum division earlier this month said they would forego bonuses this year after BHP announced writedowns totaling US$3.29 billion combined on its shale gas and nickel assets.

BHP said that average prices for many of its products knocked about US$2 billion from its underlying earnings, while higher costs reduced earnings by a further US$2.7 billion.

Write to Robb M. Stewart at robb.stewart@wsj.com

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