Top global mining companies are set to report large, but modestly weaker, half-year profits and indicate they are keeping their billions in cash to chase deals and develop massive projects instead of handing it to shareholders.

The July-December financial results for BHP Billiton , Rio Tinto , Anglo American and Xstrata , which will be released over the next two weeks, will reflect a decline from record highs for prices of iron ore, copper and coal, and soft aluminium and nickel markets.

Swiss-based Xstrata , being courted by its main shareholder, commodities trader Glencore to create an $80 billion mining giant, will steal the limelight, kicking off results on Tuesday.

That will provide the first opportunity for investors and analysts to query the potential deal, which may involve only a small premium.

There's potential for a win-win situation here. The amount of synergies that would be released is significant, said John Robinson, chairman of Australia-listed Global Mining Investments , which has A$209 million in assets and owns shares in both Glencore and Xstrata.

A deal would set a record for the mining industry in a year shaping up to be tough as growth slows in China, the world's biggest commodities consumer, Europe tackles its debt crisis and U.S. growth stutters.

In that environment, investors expect miners to be more conservative than last year and retain more cash.

My guess is that caution will probably be the order of the day. I wouldn't expect any major capital return initiatives, Robinson said.

SHARE BUYBACKS

BHP returned $10 billion to shareholders in 2011 through a share buyback and at the same time spent $20 billion on shale gas takeovers in the United States and mapped out $80 billion in spending on iron ore, coal, copper, potash and shale gas projects through 2015.

Rio Tinto is about to complete a $7 billion buyback while having flagged in November that it would consider further returns to shareholders.

However, it may hold back from returning more cash while it waits to pounce on Ivanhoe Mines for its massive Oyu Tolgoi copper and gold project in Mongolia and other smaller deals and fund $14 billion worth of projects for 2012.

They are more likely to not do anything at this point in time, unless they get a whole lot more clarity on the (economic)outlook than they have at the moment, said analyst Tim Dudley at Collins Stewart in London.

Anglo American is sitting on a windfall from the $5.4 billion sale of a stake in its Chilean assets, but is likely to preserve its cash until the outcome of its spat with Codelco over stakes in copper-rich assets in Chile is clearer.

Analysts said the companies are likely to be flexible on their growth projects if the global economy turns down sharply in 2012, just as they battened down the hatches in 2009 at the height of the global financial crisis.

I'm less worried than I was three months ago, said Tim Schroeders, a portfolio manager at Pengana Capital, which owns shares in BHP and Rio Tinto.

But it's still going to prove a challenging environment in terms of sub-par growth, the ability to raise capital and the outlook for commodity prices, he said.

XSTRATA

Xstrata is expected to report a 3 percent fall in net profit to $2.8 billion for the second half of 2011, according to Thomson Reuters I/B/E/S, with its earnings not as exposed to volatile iron ore prices as its peers.

It is unlikely to return cash to shareholders with the merger talks pending and given it has targeted spending $20 billion on projects over the next three years, with the bulk going into copper mines.

Analysts and investors will be watching for news of progress on its Koniambo ferronickel project in New Caledonia, due to be in a commissioning phase later this year and where estimated costs rose to $4.6 billion.

The risk is not to earnings estimates (we think Koniambo will contribute just 3 percent to 2013 EBITDA) but instead to management credibility, HSBC analysts said. Koniambo is seen as a test of Xstrata's ability to deliver large greenfield projects and its devolved management structure.

BHP BILLITON

BHP Billiton , the world's biggest miner, is forecast to report attributable profit of $10 billion for the December half, down about 7 percent from a year earlier, hit by lower iron ore and copper prices, when it reports on February 8.

The company is going ahead with major expansion projects, including plans to spend $4.5 billion on developing shale gas in the United States following its takeover of Petrohawk and acquisition of Chesapeake assets for $17 billion in 2011.

The move into shale gas has raised alarm among some investors as U.S. natural gas prices have tumbled under a glut of shale gas production. BHP argues it is looking at a much longer time horizon for payback on its acquisitions.

As an investor in BHP you'd have to be concerned about the significant amount of capital that has been invested in that new business, said Ben Lyons, who helps manage A$500 million at ATI Asset Management.

RIO TINTO

World no.3 miner Rio Tinto , reporting on February 9, is tipped to show a 9 percent fall in second-half underlying earnings to $7.5 billion before one-offs.

It is considered the most likely to be able to go ahead with another buyback or a big dividend increase, after completing its $7 billion share buyback, as it flagged in November that it was looking carefully at how to reward investors.

However, analysts are expecting its results to be marred by hefty writedowns mostly from its aluminium business, stemming from its top-of-the-market $38 billion takeover of Alcan in 2007, plus a writedown on its diamonds arm.

UBS and Goldman Sachs estimate second-half writedowns could be around $5 billion.

Rio Tinto is set to ditch an estimated $8 billion worth of aluminium assets, but has yet to outline whether it will seek trade buyers or float the assets as it frees up more capital for its thriving iron ore arm. Analysts say the aluminium business will post a second-half loss.

ANGLO-AMERICAN

Anglo American, reporting on February 17, is expected to post a 5 percent fall in operating profit to $5.17 billion for the second half, according to Reuters calculations.

One of Anglo's units, Anglo Platinum , has already warned 2011 profit likely fell about a third, due to a black empowerment deal and also a high number of safety stoppages and higher costs for labour and electricity.

The second-half for diamond producer De Beers, which will be majority owned by Anglo once a deal to buy out the Oppenheimer family completes this year, is likely to have been marred by volatile markets and a decision to rein in output as a result.

De Beers reports on February 11.

Other than the complex legal battle with Codelco, Anglo's $5.75 billion Minas Rio iron ore project will be in focus, with the market scanning for evidence of fresh delays or cost overruns, following a 15 percent increase flagged in December.

(Editing by Muralikumar Anantharaman)