(Adds quote, details) Australia's Fortescue Metals Group Ltd...

(Adds quote, details)

Australia's Fortescue Metals Group Ltd (FMG) on Wednesday reported a 383 percent rise in interim net profit to $1.2 billion, surpassing the $319 million in the year-earlier period on the back of a surprise surge in iron ore prices, but still fell short of market expectations.

Analysts had forecast profit for the six months to Dec. 31 of about $1.5 billion, according to Thomson Reuters data.

"Our successful operational performance combined with positive market conditions produced strong cash flows facilitating further debt repayments of $1.7 billion," Managing Director Nev Power said in a statement.

Fortescue declared a dividend of A$0.20 ($0.1535) per share. Fortescue, Australia's third-biggest producer, is aiming to ship up to 170 million tonnes of ore in fiscal 2017, mostly to China.

A push to hammer down costs has left Fortescue on par with larger rivals Vale SA , Rio Tinto Ltd (RIO) and BHP Billiton Ltd (BHP) , which combined control more than 70 percent of global sea trade in iron ore.

Iron ore was one of the best-performing commodities in 2016, defying analyst forecasts for a correction on the back of plentiful supply and an expected slip in demand from China, the world's biggest buyer.

Iron ore and steel markets grew at a modest rate during 2016, industry figures show, with China importing a record 1.02 billion tonnes of ore, and steel production rising by 1.2 percent versus 2015.

($1 = 1.3033 Australian dollars)