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FMG shares head for six month high


Fortescue Metals Group (FMG) shares are heading towards a six-month high after breaking through $5 amid global optimism and an increase in the iron ore price.

The Pilbara-focused iron ore miner closed 2.4 per cent higher at $5.04 on Thursday, putting paid to speculation about its profitability in the wake of weak commodities prices in 2012.

It was the first time the stock had closed above $5 since July 4, 2012, when it finished the local trading day at $5.05.

Enthusiasm for debt-laden Fortescue comes a week after it announced work would resume on expanding the Kings deposit at its Solomon iron ore mining hub in January after a rebound in commodity prices.

Fortescue chief executive Nev Power said the company would extract an extra 40 million tonnes per annum (mtpa) of iron ore from Kings, allowing the miner to reach its total production target of 155mtpa by December 2013.

The price of iron ore reached $US144.90 per tonne on Thursday, almost 70 per cent higher than the $US86 prices fell to in September 2012.

In line with the depressed iron ore price at the time, Fortescue's shares reached a low of $2.97 that month.

The stock has gained almost 30 per cent over the past month as the iron ore price moved up above $US130 per tonne.

"Improved iron ore prices have been one of the key drivers in the recent rises in Fortescue's price," CMC Markets chief market strategist Michael McCarthy told AAP.

"We're now clearly back into profitable production territory for Fortescue.

"It adds to that much better picture we've got since they announced their debt financing deal and their plans to look at their investments schedule and perhaps bring back on track planned production they'd put on hold."

Fortescue has spent the past few months selling several non-essential assets, shelving $1.57 billion worth of expansion plans, cutting staff, and restructuring much of its debt.

The company had flagged in December that it would restart work at Kings, in Western Australia's Pilbara region, after selling part of its stake in the the Nullagine joint-venture to partner BC Iron for $190 million.

Its Kings expansion project was put on hold in September as the company battled to reduce costs and its $10 billion debt pile.

IG markets strategist Stan Shamu said interest in the company had gathered over the past four weeks on the back of news it will complete the Kings development project.

"Fortescue Metals Group continues to impress," Mr Shamu said.

It comes as Australian stocks closed at fresh 19-month highs on Thursday, buoyed by the deal over the US fiscal cliff and firmer commodities prices.