Rio Tinto, Hancock to develop $2.5b iron ore project

Under the continued joint venture, the two companies will contribute half of the project's costs, consistent with Hope Downs 1, a four-pit Pilbara mine established in 2007 that will process ore from the new mine.

The joint venture was established in 2006, but Rio and Hancock's shared history goes back to the 1960s.

Approval of Hope Downs 2 was a key milestone for Rio Tinto, chief executive Simon Trott said.

"These projects are part of our strategy to continue investing in Australian iron ore and to sustain Pilbara production for decades to come, supporting jobs, local businesses and the state and national economies," he said.

"The Pilbara has been critical to global steel supply for more than 60 years, and we are committed to ensuring it remains so well into the future."

The project will include non-process infrastructure precincts, railway crossings and haul roads, and the realigning of a 6km section of the Great Northern Highway.

First ore from Hope Downs 2 is expected to be produced in 2027.

Rio Tinto expects more than 950 jobs will be created during construction and the project will help sustain roughly 1000 full-time equivalent roles at Greater Hope Downs.

While weaker ore demand and steel production from China has pushed iron ore prices to nine-month lows of $US94.65 a tonne, investors reacted positively to the new project's progress, with Rio shares up 1.8 per cent to $103.67 on Tuesday afternoon.

The world's biggest iron ore miner said it expected to spend more than $13 billion on new mines, plants and equipment over the next three years, and it was on track to achieve and sustain mid-term system capacity of between 345 and 360 million tonnes per annum from its Pilbara activities.

A pre-feasibility study was also underway on the Rhodes Ridge project, which Rio called the region's best undeveloped iron ore deposit.

Hancock Prospecting has been contacted for comment.