Steel and mining group Arrium expects iron ore prices to remain at solid levels this year as it returned to profit thanks to record mining earnings.

Statutory net profit for the first half to December 31 was $220 million, up from a net loss of $448 million for the same period last year.

The company said it was on track to achieve iron ore sales of around 12 million tonnes as strong economic growth in China underpinned demand for the steel making commodity.

“In mining, we expect average iron ore prices to remain at solid levels over the balance of this financial year, particularly given the outlook for a sustained lower Australian dollar,” the company said.

Still, shares in Arrium fell 3.5 cents, or two per cent, to $1.745.

The share price fall came despite total revenue rising seven per cent to $3.64 billion as the company continues to reduce debt.

High levels of gold and copper production have underpinned demand for mining consumables, despite recent volatility in commodity prices.

In Arrium’s steel business, the company expects the ongoing weakness in domestic and international steel markets to continue in the second half.

However it noted that this could improve due to increased project construction in NSW and Western Australia.

Chief executive Andrew Roberts said the $220 million profit result was primarily due to the mining business, “reflecting benefits from the expansion to double iron ore sales to a rate of 12 million tonnes per annum in June last year”.

“Our strong first half results reflect the benefits of our growth strategy for the mining and mining consumables businesses, with both of these businesses being substantial contributors to the company’s earnings for the half,” Mr Roberts said in a statement on Tuesday.

Arrium, which was spun out of BHP as the steelmaker OneSteel in 2000, now makes more money out of iron ore mining and mining consumables – products used for minerals processing – after diversifying to reduce its exposure to steelmaking.

The company recently completed major growth projects and acquisitions of mining consumables and iron ore assets.

Arrium also said its Whyalla Port was performing well and the steel business was cash flow positive despite weakness in domestic demand.

The company announced an unfranked interim dividend of six cents per share, up from two cents last year.