SYDNEY (Feb 21): Mining giant BHP Billiton rewarded shareholders with a bigger than expected dividend on Tuesday, signalling its growing confidence amid a resurgence in commodity prices.

The world's biggest miner reported a near eight-fold rise in underlying first-half net profit to US$3.24 billion from US$412 million a year earlier, just missing market forecasts for US$3.4 billion. It declared a first-half dividend of 40 US cents, up from 16 US cents a year ago.

"This is a strong result that follows several years of a considered and deliberate approach to improve productivity and redesign our portfolio and operating model," Chief Executive Andrew Mackenzie said in a statement.

The result follows an unexpected surge in commodity prices in 2016 on the back of renewed demand from China that delivered windfall profits for miners, with iron ore climbing more than 80%, and coal as much as 300%.

BHP said the board had boosted the interim dividend by 10 US cents from the minimum required under its 50% dividend payout policy, beating a consensus of 34 US cents per share.

"Clearly they're reasonably confident on where iron ore prices are at the moment. The balance sheet gearing has come back down," said Argo Investments senior investment officer Andy Forster.

BHP said it reduced its net debt to US$20.1 billion, from US$26.1 billion at June 30, 2016.

"With several of our commodity exposures currently trading above our long-term forecasts and with considerable economic and political uncertainty ahead, our bias for lowering debt remains," the miner said in notes accompanying its results.

BHP rival Rio Tinto also surprised shareholders earlier this month with a bigger-than-expected dividend and a US$500 million share buyback.

Revenue from iron ore mining, BHP's biggest division, was boosted by a 28% rise in its ore selling price over the period, while copper was up 14% and oil 7%, the company said.

However, the iron ore market was likely to come under pressure in the short term from moderating Chinese steel demand growth, high port inventories and incremental low cost supply, BHP warned.