Just days after walking away from a US$116 billion plan to combine its iron ore assets in Australia's northwestern Pilbara region with those of BHP Billiton Ltd. (BHP), Rio Tinto Ltd. (RTP) Wednesday announced plans to spend US$3.1 billion on expanding its iron ore capacity in the region.

Rio said its plans would boost its production in the region, which accounts for around a third of global iron ore trade, to 283 million tons a year by 2013, from a current rate of around 200 million tons a year. Further growth would raise production to 333 million tons by mid-2015, it said.

The Pilbara has boomed in recent years as China's voracious demand for iron ore to feed its construction-driven economy has put a premium on ore from the region, the country's nearest overseas source of high-quality ore. China imports around 50 million tons of iron ore every month.

Tuesday, Platts benchmark iron ore averaged US$151.50 a metric ton in Chinese port costs, having nearly doubled over the past year.

"This is the largest mining project ever undertaken in Australia and highlights the quality of our growth options," said Sam Walsh, Rio's iron ore and Australia chief executive.

The speed of the move illustrates the degree to which Rio has been determined to pursue all avenues for expanding production alongside the BHP joint venture, which was abandoned by mutual agreement on Monday after regulators in Germany and the European Union raised conditions to passing the deal which the miners considered unacceptable.

The joint venture would have cut costs on infrastructure, planning and product blending for the miners, but steelmakers feared it would concentrate too much pricing power in the hands of the two miners.

Together, BHP and Rio account for just under a third of the seaborne trade in iron ore, with Brazil's Vale S.A. (VALE) accounting for another third. There are a swag of emerging iron ore miners in the Pilbara region, most noticeably Fortescue Metals Group Ltd. (FMG.AU), which hopes to hit 55 million tons a year of production by mid-2011.

Neil Goodwill, a resources analyst at Goldman Sachs in Melbourne, said that companies' rush to build production could be set against an iron ore price expected to cut in half again by 2015 as new projects come onstream globally in response to current demand.

"Obviously they're looking to expand production but it will come off at some stage," he said.

The ramp-up of spending had long been foreshadowed. In its half-year results in July, Rio announced plans to commit around US$13 billion to new capital spending by the end of 2011, the bulk of that dedicated to iron ore and with a focus on the Pilbara.

The company said the investment would pay for new port and rail infrastructure around Cape Lambert, one of two ports owned by Rio in the western Pilbara. "The single best creator of value for Rio Tinto shareholders is to move more Rio Tinto tons through an expanded Cape Lambert. Today we have committed further funds to doing just that."

Heavy, low-value bulk commodities such as iron ore and coal are highly dependent on the infrastructure needed to get them to port, with freight a major part of overall costs.

Rio said that the spending would pay for a two-berth wharf at Cape Lambert port, a new stockyard, six new heavy train units and other equipment.

Further spending is expected to be approved over the next year to fund expansions to Rio's regional mines and warehousing facilities, the company said, with studies centered on the Brockman 4, Western Turner Syncline, and Nammuldi mines in the western Pilbara.

Rio's Pilbara operations have had US$6 billion of fresh investment committed to them since July, of which Rio Tinto accounts for US$3.9 billion while its minority partners Sumitomo Corp., Mitsui & Co., and Nippon Steel Corp. make up the balance.

-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@dowjones.com