Fortescue has responded to rising iron ore prices and its improved financial situation by resuming the development of the Kings deposit at its Solomon mine.
The Western Australian miner put the development of the Kings deposit on hold in September as iron ore prices slumped below $U90 a tonne.
However, the last three months have seen the biggest rally in the key steel making ingredient since 2010, with the benchmark Chinese spot price back up to $US135 a tonne.
The 56 per cent rally in iron ore prices has analysts raising earnings forecasts for iron ore producers in 2013, with some now expecting the spot price to climb back as high as $US170 a tonne.
A Bloomberg survey of analysts is forecasting a 6.9 per cent rise in iron ore shipments to China next year to 778 million tonnes.
Fortescue's decision to restart the Kings project should add 40 million tonnes per annum to its output, lifting the company's total production to 155 million tonnes per annum by the end of next year.
The company's chief executive Nev Power says the turnaround in iron ore prices and the pace of completing its current expansion projects were the main factors in the decision to restart the Kings development.
"We've made outstanding progress with the expansion of our Chichester operations and the development of the low cost Firetail mine," Mr Power said in a statement.
"We can now turn our attention to Kings, which will deliver Fortescue an additional 40 million tonnes per annum of low cost production by December 2013." Fortescue says the development of Kings will resume in 2013, and accelerate as the completion of the Firetail expansion in late March frees up additional construction workers.
However, Fortescue's chief executive Nev Power says most of the several hundred workers who lost their jobs in September will not be re-hired.
With construction workers mainly sourced from the nearby Firetail deposit.
"The majority of those won't come back into the operation.
That's because we changed the nature of how we were managing the business," he said.
"We finished a major expansion phase at the business and we're transitioning now from a construction phase into an operational phase." Resources analyst Gavin Wendt says the move will restore confidence in FMG after questions about its very survival.
"It's extremely important because there has been, over the last six months, a very real question mark over the viability of Fortescue Metals," he said.
"It's a tremendous sign of confidence as far as the market is concerned and, also, shareholders will be pleased."