UPDATE 2-Australia iron ore miners steel for cyclone

* Cyclone veers away from Port Hedland

* Expected to hit land late Wednesday

* Flood warnings for inland iron ore mines

PERTH, Feb 27 (Reuters) - A powerful cyclone that has brought half the world's seaborne-traded iron ore to a halt has veered away from Australia's Port Hedland shipping hub, possibly averting a direct hit, and should make landfall some 100 kms (60 miles) away late on Wednesday.

Cyclone Rusty, with destructive winds up to 200 kph (125 mph), is still expected to flood inland iron ore mine operations and rail links.

Residents in the Pilbara iron belt have been told to prepare for a prolonged battering given the storm's slow advance, suggesting it could be several days or more before iron ore mining and shipping operations return to normal.

Based on satellite tracking by meteorologists, Port Hedland was likely to escape a direct hit, but remained on the highest alert. Cyclones are erractic and can quickly change direction.

Australia's three main iron ore ports, Port Hedland, Dampier and Cape Lambert, were closed on Monday. Offshore oil and gas fields have also been shut down.

Severe weather warnings extend as far as 500 kms (310 miles) inland to the mining camps and towns of Tom Price, Mt Newman and Nullagine, operated by Rio Tinto , BHP Billiton and Fortescue Metals Group.

The Pilbara, a sparsely populated and inhospitable outback part of Australia, is the world's largest source of iron ore.

Rusty early on Wednesday strengthened to a category four storm -- on a scale of one-to five.

"This is a large tropical cyclone and its slow movement is likely to result in an extended period of destructive winds near the track, with rainfall that is heavier than that associated with a typical system," the weather office said.

At 0600 GMT, the cyclone was headed directly for the mining and cattle ranching town of Pardoo, north of Port Hedland. Atlas Iron which operates a mine in Pardoo yielding around 2.5 million tonnes of ore a year, has evacuated the site. Calls to local residents and businesses went unanswered.

Areas hardest hit by the storm could receive up to 600 millimetres, or 2 feet, of rain in 24 hours, according to the Bureau of Meteorology.

Such extensive flooding threatens to submerge hundreds of kilometers (miles) of rail lines owned by the miners and used to transport ore to the ports.

"Extreme weather preparations continue across our mining operations in anticipation of the cyclone moving further inland," BHP said in a statement emailed to Reuters. "Additional operations will be suspended if necessary."

Australian & New Zealand Bank estimates iron ore shipments with a total value of A$500 million ($510.58 million) have so far been sidelined due to port closures.

Australia's biggest iron ore miner Rio Tinto plans shipments of 260 million tonnes of ore through Dampier and Cape Lambert this year.

BHP, Fortescue and Atlas are forecast to ship more than 275 million tonnes of iron ore this year, or 750,000 tonnes per day, through Port Hedland.

Spot iron ore prices have steadied at $151.90 after falling to one-month lows, supported by a disruption in supply from Australia.

"If this cyclone closes the ports for three to four days, you could lose up to 3-5 million tones of iron ore of supply, so it's a tight market," Antony Priddy, senior manager with Fortescue Metals Group Ltd, told Reuters at a conference in Beijing.

Rusty is the fourth cyclone to form during Australia's 2012-13 "cyclone season" which runs November to end April. There are typically 11 cyclones per season off Australia northwest and northeast coasts.

Rusty on Wednesday was around 200 kms (125 miles) wide, with the eye of the storm 65km (40 miles) in diameter, and moving slowly towards the coast.

"This is a very long, drawn-out slow nightmare," Port Hedland town councillor Bill Dziombak told the Australian Associated Press.

Port Hedland is the largest town in the Pilbara, population 14,000, with the northwest outback on its doorstep.

Residents have been warned to expect dangerously high storm tides and high waves along the coast. Those in low lying coastal areas had been evacuated, with local media reporting a run on emergency supplies such as water, batteries and flashlights.

Outback aboriginal communities were evacuated and schools closed.

The Department of Fire and Emergency Services advised people to remain in the strongest part of their house.

"There'll be buildings that may be damaged, there may be loose tin, flying objects. Power may be down and there may be airborne hazards from asbestos or septics," said spokesman Phil Cribb.

A weaker category one system which passed the Pilbara in January forced the shutdown of all three iron ore export terminals, contributing to a nine percent drop in exports for the month and a 5.2 percent rise in spot prices.