Fortescue will resume work to expand the Kings deposit at its Solomon iron ore mining hub next month after a rebound in commodity prices.
Fortescue deferred work at the Pilbara mine in September, blaming volatile market conditions which caused iron ore prices to drop.
Chief executive Nev Power said Fortescue 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 recent improvement in iron ore prices and market outlook, along with a number of measures undertaken by Fortescue, including the sale of non-core assets, a reduction in operating costs and the restructuring of existing bank facilities, underpinned the decision to complete Kings in the new year," he said.
The market responded favourably to the news. In early trade, Fortescue shares were up 11.5 cents, or 2.6 per cent, at $4.465.
Fortescue had flagged earlier in December that it would restart work at Kings, in the Pilbara, 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.
At the time, Fortescue also reduced its production target to 115mtpa from 155mtpa.
However the resumption of work at Kings should allow it to meet its original target.
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.
Iron ore prices have also rebounded from lows in 2012 of about $US86 a tonne and are expected to rise to about $US140 a tonne in early 2013.
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