The Silvergrass mine is due to be commissioned during the final quarter and the $338 million brownfield development is set to produce 10m tonnes of low-sulphurous ore a year.

Rio Tinto chief executive Jean-Sébastien Jacques said Silvergrass was a "great example of our value-over-volume approach," as the mine would provide low-cost, high-grade material to maintain the quality of the miner's brandname Pilbara Blend.

Silvergrass is located adjacent to Rio's Nammuldi mine and ore would be moved to the Namuldi plant by a 9-km conveyer system currently under construction.

The initial phase, with a five million tonne per annum capacity, began production in the fourth quarter of 2015. Final capacity could be in excess of 20m tonnes per year, but most of Silvergrass output would replace depleting resources elsewhere.

Rio is also moving ahead with its $2.2 billion Koodaideri iron ore project in Western Australia, 110km west-north-west of Newman. The project would begin construction in 2019 and enter production two years later.

Rio Tinto said it shipped its five billionth tonne of iron ore last year after 50 years of operations in the Pilbara and has invested some $20 billion in Western Australia over the past decade.

Last month, the Melbourne-based giant cut back guidance for iron ore output in 2017 by up to 10m tonnes to around 330m tonnes. Iron ore accounts for just less than half Rio's earnings.

The Northern China import price of iron ore was holding steady in the mid-$7os a tonne range this week, up more than 40% from lows struck mid-June.