SYDNEY/WELLINGTON: Australian shares settled higher on Thursday as a rally in iron ore prices and a report that China will allow some long held-up coal shipments from Australia lifted heavyweight mining stocks. The mining index soared 4.6% to its highest in more than eight years, with disappointing output forecasts from Brazilian miner Vale SA adding fuel to an iron ore price rally driven mainly by robust demand in top steel producer China and partly by supply concerns.

Rio Tinto, the world's biggest iron ore miner, surged up to 7.2% to its highest since May 2008 and was the biggest boost to the benchmark, while Fortescue Metals Group jumped 13.9% to a record high. The S&P/ASX 200 index closed 0.4% higher at 6,615.3, extending gains into a third session.

BHP Group Ltd, the world's biggest listed miner with exposure to both iron ore and coal, jumped more than 5% to its highest in over 10 months. Elsewhere, Australia-listed pot stocks found support in the United Nations removing cannabis from the most tightly controlled category of narcotic drugs.

Financial services firm Macquarie Group added 0.2% after announcing the acquisition of US-based investment management firm Waddell & Reed Financial Inc for $1.7 billion.

Across the Tasman Sea, New Zealand's benchmark S&P/NZX 50 index fell for a third straight session, closing 0.6% lower at 12,648.9.

"It's really about the iron ore price today," said Henry Jennings, a senior analyst and portfolio manager at Marcustoday Financial Newsletter.