Mining giant BHP on Friday approved a new US$2.9 billion mine in resource-rich northwestern Australia as the country's top iron ore producers race to meet Chinese demand for higher-quality metals.
China - the planet's largest commodities consumer - has been seeking cleaner, higher-grade raw materials such as iron ore as it cracks down on pollution and inefficiency in the steel-making industry.
The new South Flank project in the central Pilbara will increase BHP's average iron grade from 61 percent to 62 percent and eventually replace production from its Yandi mine, which is reaching the end of its life.
"The project... will enhance the average quality of BHP's Western Australia Iron Ore production and will allow us to benefit from price premiums for higher-quality lump and fines products," BHP's Australia minerals president Mike Henry said in a statement.
South Flank will start producing iron ore from 2021, with the mine expected to last for more than 25 years, the Anglo-Australian firm said.
Overall the South Flank project will involve US$3.4 billion in investments, with smaller partners providing the rest of the money, BHP said.
The announcement comes just weeks after rival Fortescue, one of the world's big four iron ore exporters, said it would develop the Eliwana mine and rail project in the Pilbara for US$1.275 billion.
The mine would allow Fortescue, which usually produces lower-grade iron ore, to "underpin the introduction of a (higher-grade) 60 percent product in the second-half of financial year 2019", the Perth-based miner said.
Rio Tinto is also tipped to update its investors next week on its approval schedule for its more than US$2 billion Koodaideri iron ore project in the Pilbara, the Australian Financial Review reported.