* Iron ore miners hit hard by economic slowdown in China
* Fortescue head says environment is "challenging"
* Shares in Fortsecue fall as much as 9.4 pct (Adds share price drop, detail on company loss)
SYDNEY, Aug 24 (Reuters) - Australia's Fortescue Metals Group FMG.AX on Monday said annual profit dropped nearly 90 percent to $316 million, the latest iron ore miner to report sharply lower earnings on weak prices for the steel-making ingredient as China's economy slows.
Chief executive Nev Power said the world's fourth biggest iron ore miner was operating in a "challenging environment" and would look for greater cost efficiencies and operational improvements in the year ahead.
Shares in Fortescue, dependent on sales to Chinese steel mills for revenue, fell as much as 9.4 percent to their lowest since July 28 after the drop in profit was reported. The stock was the biggest percentage loser on the world-wide Dow Jones Titans Basic Resources Index .DJTBAS
At 0036 GMT, Fortescue was 7 percent lower at A$1.78.
Feeling the effect of weak iron ore prices, rival miner Rio Tinto RIO.AX RIO.L saw net profit drop 82 percent in the last half-year ID:nL3N10H2H6
Analysts also expect BHP Billiton (LONDON:BLT) BHP.AX BLT.L> to unveil a 43 percent fall in underlying attributable profit to $7.73 billion in its financial results released on Aug. 25, according to Thomson Reuters I/B/E/S.
Fortescue, sold its ore for an average of only $52 per tonne in the half-year to June 30 versus $82 in the year earlier period.
The benchmark spot price for high-grade ore .IO62-CNI=SI opened in January at $71.20 a tonne and finished on June 30 at $59.30, down 17 percent.
However, Fortescue must sell its ore at a roughly 15 percent discount to the benchmark due to its lower iron content.
Power in July called an end to expansion work at Fortescue's Australian mines, saying more than enough ore was being mined to meet global demand. IDnL3N10304J
At that time, Power criticised larger Australian miners Rio Tinto and BHP for ramping up output despite soft demand and slumping prices, despite his own company lifting shipments 33 percent in fiscal 2015 before calling a halt.
For the full fiscal year, Fortescue's $316 million was a far cry from the $2.7 billion it reported the previous year.
The downturn in mining has had far-reaching implications for the sector.
Mining services group UGL Ltd UGL.AX on Monday posted a A$236.4 million net loss for the year to June 30, compared with a $62.1 million net profit the year before. ID:nL4N10Y0Q9
Boart Longyear BLY.AX , another mining services company, announced its chief executive was stepping down after its half-year net losses worsened to $152.3 million from a $142.8 million loss in the previous corresponding period. ID:nWNBS0194W
Fears of a China-led global economic slowdown drove Wall Street to its steepest one-day drop in nearly four years on Friday.