* Share price falls as results miss forecasts, costs rise
* CEO says will meet activist investor Elliott Advisors
* Says dual-listed structure always under review (Updates with CEO comments, share price)
MELBOURNE/LONDON Feb 20 (Reuters) - Global miner BHP , seeking to fend off activist investor Elliott Advisors, handed an extra $800 million to shareholders but its share price slid on Tuesday after costs rose and interim results fell short of forecasts.
All the major miners have recovered strongly as commodity prices have rebounded from the 2015-16 crash.
However, inflation is creeping up as commodity price rallies can inspire demands for higher wages and service companies seek increased fees.
BHP must also contend with Elliott, which has a stake of around 5 percent in its London arm, and has made a series of demands that it says will increase shareholder returns.
BHP Chief Executive Andrew Mackenzie said the company expected to boost free cash flow to around $7 billion in the second half of its financial year, up from $5 billion in the first half if prices for its commodities stay at current levels.
"These are very strong foundations and position us well for the remainder of the 2018 financial year," he told a media call.
Underlying profit for the half year ended Dec. 31 rose 25 percent to $4.05 billion from $3.24 billion a year ago, but was below market forecasts of about $4.3 billion, compiled by Thomson Reuters I/B/E/S.
BHP's share price fell more than 4 percent by 1345 GMT, while the broader index eased 1.4 percent.
BHP has a lot to live up to. Its closest rival Rio Tinto last week doled out a record dividend as it announced full-year results.
BHP's interim dividend of $0.55 per share, equivalent to a 72 percent payout ratio, was well up on $0.40 a share a year ago.
"The dividend is better than we expected, so that was certainly a positive surprise," said Andy Forster, senior investment officer at Argo Investments, a top 20 shareholder in BHP's Australian shares.
"But definitely we see cost pressures starting to emerge in the business. Some of them are one-off in nature (but) more generally across the industry cost pressures are starting to re-emerge."
At BHP, costs rose for coal, petroleum and copper operations, which BHP said was largely based on one-off events, including maintenance at the Olympic dam copper mine and supply snags at Australian coal mines.
Asked about Escondida in Chile, the world's largest copper mine, which last year was disrupted by a strike lasting more than 40 days, Mackenzie said he did not wish to pre-empt discussions with unions, but was seeking to control costs.
"Ultimately we want to be able to drive unit costs down and the best way to do that is by making labor more efficient," he told a London news conference.
SHALE SALE ON TRACK
BHP said the sale of its onshore U.S. shale assets, which it has on its books at $14 billion, was on track with initial bids expected in the June quarter.
"We have people who are interested in the whole lot and people who are interested in just parts of it ... We have strong interest at both ends of the spectrum," Mackenzie said.
Speaking in London, he said various options were under consideration, including a spin-off or an IPO, but his "strong preference" was for a sale, adding that mirrored the preference of shareholders.
Mackenzie, who plans to meet Elliott and other investors this week, said the miner was also open to changing its structure, with listings in both Britain and Australia, but the costs and risks of collapsing the dual listing outweigh potential benefits for now.
Denying he had shifted his stance, he said the company was always evaluating the structure, but said it had value in providing "tax cover," so losses could off-set profits and it did not limit BHP's ability to act.
"Per se the company would be simpler if it's unified, but it's not game-changing," he said. "If the stars are aligned and there is some value upside, well take the simplification premium."
BHP cut net debt by 23 percent to $15.4 billion during the period and said it was on track to reach its $10 billion to $15 billion target before year-end.
(Additional reporting by Sonali Paul in Melbourne, Barbara Lewis in London and Rushil Dutta in Bengaluru; editing by Richard Pullin and Keith Weir)