Operations at the Koodaideri mine will reach a new level of digitization and automation, the company said in a statement, and will lift it's Pilbara Blend iron ore from the current average of 35 percent to around 38 percent.
"Koodaideri is a game-changer for Rio Tinto," company chairman Jean-Sébastien Jacques said.
"It will be the most technologically advanced mine we have ever built and sets a new benchmark for the industry in terms of the adoption of automation and the use of data to enhance safety and productivity."
Plans for a number of innovations have been pointed to, including a 3D digital replica of the processing plant and an automated workshop which will be in addition to autonomous trucks, trains and drills already in use at many of the company's mines.
The investment will include a processing plant as well as 166 km worth of rail line to connect the mine to the existing network.
Subject to government approval construction of the mine will begin in 2019 and is expected to create around 2,000 jobs, with a further 600 ongoing roles after completion.
Approval for the mine reflects an ongoing demand for high grade iron ore from China's steel production industry.