LONDON (Reuters) - Glencore GLEN.L said it would favour share buybacks over deal-making after it reported a 23 percent rise in first-half core earnings on Wednesday, just below analyst forecasts.

The miner and commodities trader said its earnings for January-June were a record - building on 2017 full-year results it said were the best yet - but it also said higher costs and lower prices for cobalt and other byproducts ate into profits.

CEO Ivan Glasenberg said market conditions were likely to remain volatile.

Many mining stocks have pared gains this year as metals markets weakened in response to trade tensions and uncertainty about Chinese demand .FTNMX1770.

While other producers have warned of cost inflation, Glencore’s share price has come under additional pressure from its exposure to Democratic Republic of Congo (DRC) and a U.S. Department of Justice (DoJ) investigation.

Days after it announced the investigation in July, Glencore said it would buy back shares worth $1 billion.

On Wednesday it said further buybacks could be in the pipeline as the best way to reward shareholders.

“Right now, buybacks may be the best returns we can get,” Glasenberg said on a conference call. “We just don’t see anything out in the market. We look opportunistically at M+A.”

A strong rebound in Glencore’s share price last year from the commodity crash of 2015-16 was based on the company’s exposure to battery minerals and analyst expectations it would expand through deals.

FILE PHOTO: The logo of commodities trader Glencore is pictured in front of the company's headquarters in Baar, Switzerland, November 20, 2012. REUTERS/Arnd Wiegmann/File Photo

Its share price has retreated 17 percent this year. Glasenberg said the stock was undervalued, making buybacks a better option than increasing dividends.

By 1402 GMT, Glencore shares were 0.8 percent lower in London trade at 323.85 pence.

The company’s first-half adjusted EBITDA (earnings before interest tax, depreciation and amortisation) of $8.3 billion missed a consensus forecast of $8.5 billion.

Adjusted earnings before interest and tax (EBIT) from its marketing division of $1.5 billion, up 12 percent, were in line.

Even allowing for geopolitical risk, analysts also say Glencore is undervalued.

“Political risks in DRC and more recently the DoJ subpoena have weighed on sentiment, but the equity story’s attractive fundamentals remain intact in our view,” analysts at BNP Paribas said in a note. It has a target price for Glencore of 480 pence.

Apart from the risks associated with the DoJ investigation, Glencore faces higher costs in Congo because of a mining code, signed into law in June.

Glasenberg said Glencore was reluctantly paying a higher rate royalty of 3.5 percent on gross revenue for copper and cobalt compared with 2 percent on net revenue previously.

He said the industry was negotiating with the government and was also looking into legal options to overturn the new rules.

Already, as Glencore this year ramped up copper operations in Congo, it said copper costs were higher than expected as by-products, such as cobalt CBD0 lost value.

Cobalt’s use as a battery metal drove it to a peak of $98,000 per tonne in April, but it has since dropped to around $55,000 as Chinese production has created a surplus, analysts say.