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Fortescue profit doubles on iron ore surge

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Fortescue Metals Group has delivered its highest ever annual profit and dividend as it took advantage of soaring prices to ship record volumes of iron ore to China.

The world's fourth-largest iron ore miner said 2020/21 net profit more than doubled from a year earlier to $US10.3 billion ($A14.1 billion) after iron ore production exceeded annual guidance and prices surged in the second half of the year.

Revenue for the 12 months to June 30 jumped 74 per cent to $US22.3 billion.

By 1530 AEST, Fortescue shares had jumped 6.3 per cent to $21.25 each.

"Our integrated operations and marketing strategy continue to deliver significant benefits during FY21, allowing us to adapt and rapidly respond to market conditions," chief executive Elizabeth Gaines told reporters on a conference call.

Iron ore prices surged to record levels in May on the back of rising demand for the steelmaking ingredient in China following a government stimulus to offset the impact of the pandemic.

Supply disruptions from Brazil also helped keep prices above $US200 a tonne for months. Prices have since eased but the commodity is still trading at $US159 a tonne in the spot market.

Like its larger mining peers, Fortescue used the opportunity to shower rewards for shareholders in a bumper year.

The company more than doubled final dividend to a fully franked $2.11 a share, equating to a payout worth $6.5 billion.

Chairman and founder Andrew Forrest, who owns about a third of the company, will be the biggest beneficiary of the bonanza. The final payout brought its total dividend to a fully franked $3.58 a share.

The company said the escalating prices were largely reflected in the 72 per cent increase in the average price it earned for its ore, at $135 per tonne.

The miner has forecast for iron ore shipments in the range of 180-185 million tonnes for the 2021/22 year, close to the 182.2 million tonnes it shipped last year.

However, it expects the cash cost incurred at each processing stage to rise to between $US15.00-$US15.50/wet metric tonne of ore - a hefty rise from $US13.93/tonne.

Meanwhile, Fortescue announced it would achieve carbon neutrality by 2030, ten years earlier than its previous target.

The company has set up Fortescue Future Industries to invest in a global green hydrogen and renewable energy portfolio as part of its decarbonisation strategy. On Monday, it said it would invest up to $US600 million in the venture.

Mr Forrest said he wants the company to ship 15 million tonnes of green hydrogen by 2030, with a goal of making it the world's most traded seaborne commodity.

Ratings agency Moody's called Fortescue's record results "credit positive" and said the miner had good capacity to absorb increased shareholder payout.

"We consider the company can fund potentially higher capital spending as it progresses its Iron Bridge project, and possible investment opportunities in renewable energy and green hydrogen projects," Moody's analyst David Xu said.

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