UPDATE 1-BHP Billiton shares slip on profit guidance talk

(Adds details, background)

LONDON, Jan 30 (Reuters) - BHP Billiton (BLT.L)(BHP.AX), the world's biggest mining group, extended losses on Friday on market talk that it was guiding its earnings forecasts lower ahead of results next week, traders said.

The company declined to comment.

Its shares in London had fallen 4.4 percent to 1,220 pence by 1050 GMT, lagging a 1.7 percent fall in the UK mining index .FTNMX1770.

BHP shares have lost 44 percent since the sector touched a record peak in May last year as commodities prices boomed, but it has outperformed the UK mining index by 70 percent, largely due to its strong balance sheet in comparison with debt-heavy rivals such as Rio Tinto (RIO.AX)(RIO.L) and Xstrata (XTA.L).

The company is set to report its first-half results for the six months to end December on Wednesday.

Analysts expect a steady decline in profits in the mining sector this year, reflecting a collapse in the prices of metals as demand falls during the global economic downturn.

Citibank said in a note this week it expected BHP to post earnings of 69.8 cents per share, including exceptional items, such as a write-off announced last week. This is down from 106.8 cents in the same period a year earlier.

Before exceptional items, Citibank forecast a result of 111.7 cents per share.

"The major driver of the earnings result is expected to come from iron ore and coking coal, which are expected to account for around 65 percent of the earnings result," the note said.

While metals traded on exchanges such as copper and nickel have tumbled due to the downturn, iron ore and coal are sold on annual contracts, and high prices negotiated last year are still in effect until April.

Last week, BHP released its production report and said it planned to cut 6,000 jobs and close its giant Ravensthorpe nickel mine in Australia, writing off $1.6 billion. [ID:nSYD409818]

For the second quarter, BHP's production of iron ore rose 5 percent over the same quarter a year earlier, while oil output rose 30 percent. Output of aluminium fell 8 percent and copper 11 percent. (Reporting by Eric Onstad and Simon Falush, editing by Will Waterman)