SYDNEY, Feb 2 (Reuters) - BHP Billiton, the world's biggest miner, on Thursday earmarked a further $779 million to expand its Australian iron ore business by constructing a new outer harbor port and shipping facilities on the Indian Ocean.
The work will enable BHP Billiton, which trails rival Rio Tinto in iron ore production in Australia, to boost annual shipments from Port Hedland in northwest Australia by 100 million tonnes, the company said.
The project, which BHP Billiton said it expects to review for final approval in the fourth quarter of 2012, also carries an option to expand by a further 100 million tonnes per year.
"The development of the outer harbour is pivotal for our longer term growth objectives and this initial funding is rapidly turning those plans into a reality," BHP Billiton iron ore division president Ian Ashby said in a statement.
BHP Billiton's partners in the project, Itochu Minerals and Energy of Australia, Mitsui-Itochu Iron and Mitsui Iron Ore Corp, have also committed funds to the project, taking the total cost to $917 million, according to BHP Billiton.
BHP Billiton has forecast record iron ore production this year after quarterly output jumped by a fifth, shrugging off predictions that growth in top buyer China will slow this year.
A modern-day industrial revolution underway in China is behind the optimism. More than 100 million rural Chinese are projected to settle in towns and cities in the next decade, requiring unprecedented amounts of steel made from iron ore for housing and infrastructure.
"China will still be pushing mining companies such as BHP to deliver enormous quantities of raw materials and at a solid rate of increase into 2012," said Fat Prophets mining analyst David Lennox.
Trade data from China showed that the country's global iron ore imports in 2011 reached 687 million tonnes, an increase of 11 percent over 2010.
Australia provides approximately 43 percent of China's iron ore imports with BHP, Rio Tinto and the smaller Fortescue Metals Group the main suppliers.
BHP Billiton and others mine ore from giant pits resembling excavation sites found in the 500,000-square-km, or 190,000-square-mile, Pilbara district, the single largest source of iron ore in the world.
While the price of iron ore has eased from last year's $170 per tonne-plus levels, it is unlikely to fall below $140 a tonne, according to Lennox.
Industry consultancy Umetal said Pilbara fines with 61.5 percent iron content were being offered at $141-$143 per tonne cost and freight as of Wednesday.
China's own supplies of iron ore are of lower quality than that from Australia and also insufficient to keep up with domestic demand.
Only Brazil's Vale and Rio Tinto mine more iron ore each year, but BHP Billiton's production growth is running at about 10 times the rate of Rio Tinto.
In December alone, Port Hedland shipped more than 16 million tonnes of ore to China.