(Recasts with higher dividend, adds quotes, shares)
LONDON, March 22 (Reuters) - Iron ore pellet producer Ferrexpo plans to double its dividend in 2017 and raise spending on its mines on expectation for improved prices for its products, the company's financial officer said on Wednesday.
The Swiss-based firm resumed its dividend after a halt in 2015, paying out 6.6 cents for 2016 following a 20 percent rise in last year's earnings, driven by a surge in commodity prices and lower costs. It is now targeting a payout of 13.2 cents per share in 2017 to levels last seen in 2014.
"We plan to return, if we can dependent on the market which is looking reasonable at this point in time, to 13.2 cents per share for this whole year," Chief Financial Officer Chris Mawe told Reuters.
Iron ore prices and pellet premiums jumped in the second half of 2016 after falling to multi-year lows in the first half. Pellet premiums, which are typically fixed at the beginning of the year, have seen a good start to the year and therefore have less risk for the rest of 2017, Mawe said.
"What a difference a year makes, with the surprise return to dividends highlighting such," Investec analysts said in a note.
"Ferrexpo is a highly leveraged iron ore play and has benefited accordingly from the higher-than-expected iron ore price and associated premiums for high-quality product."
Shares in the world's third largest exporter of iron ore pellets, which rose five-fold last year, slipped 0.5 percent against a 2 percent drop in the mining sector.
After slowing down capital spending in 2016 due to low iron ore prices, Ferrexpo expects to increase investment this year by around $25 million on a project that will add 1.5 million tonnes of concentrate.
Ferrexpo said on Wednesday 2016 earnings before interest, tax, depreciation and amortisation (EBITDA) reached $375 million from $313 million in 2015 thanks to higher revenue and a 13 percent drop in costs.
Production of iron ore pellets in 2016 reached 10.5 million tonnes from 10.4 million a year prior while sales inched up 3 percent. (Reporting by Zandi Shabalala; editing by David Clarke and Louise Heavens)