Record iron ore prices have paved the way for Australia's newest iron ore exporter, Fortescue Metals Group Ltd, to post multi-billion-dollar earnings for the forthcoming financial year.
Chief financial officer Chris Catlow told AAP that the average 85 per cent increase in benchmark iron ore prices achieved by Rio Tinto Ltd this week was expected to boost Fortescue's bottom line considerably.
Mr Catlow said Fortescue expected to achieve earnings before interest tax depreciation and amortisation (EBITDA) of $3.4 billion for the 2008/09 financial year.
He said that under its contract with Baosteel, China's largest steel maker, Fortescue's prices fall in line with the benchmark price set by the iron ore majors.
"The system has been over the past 40 years that after the first price to settle, everybody falls in line.
"But this is the first year it hasn't happened because, of course, Baosteel has agreed to a price ... so Rio has settled and what isn't yet clear is whether BHP Billiton is going to agree to the Rio price.
"Everyone is expecting that they will, but they haven't yet formally done that.
"We're just holding our line as well to see what BHP does."
Since the commencement of iron ore exports last month, the company had pulled in $80 million in revenue, Mr Catlow said.
"After years of shelling it out, we're finally getting some money back in.
"We're selling iron ore at around $A90 per tonne and because it's only costing us around $A20 per tonne, we're making around $A70 for every tonne that we ship.
"For the financial year through to June next year, you should see about $3.4 billion of EBITDA, so it's a very profitable business.
"Much of that cashflow can then be reinvested in any expansion that we may choose to announce at a later date."
Shares in Fortescue closed 12 cents higher at $12.12.
