Fortescue Metals Group has approved the $US2.6 billion ($3.7 billion) second stage development of its Iron Bridge magnetite joint venture project in the Pilbara.

The delayed decision by Fortescue subsidiary FMG Magnetite and Taiwan’s Formosa Steel follows the $US500 million investment in stage one construction of a full-sized grinding plant at the project, 145km south of Port Hedland, which was built to test processing of the 5.45 billion tonne magnetite resource, the biggest in Australia.

Stage two works are expected to create 3000 construction jobs and 900 full-time positions once operations start in the first half of 2022.

Fortescue chief executive Elizabeth Gaines said the resource supported a long mine life of more than 20 years, with premium iron content of 67 per cent.

“The project is well progressed and ready for detailed design and execution with the majority of key approvals already in place,” she said.

“The innovative design, including the use of a dry crushing and grinding circuit, will deliver an industry-leading energy efficient operation with globally competitive capital intensity and operating costs.

“In developing the Iron Bridge project, Fortescue has demonstrated and refined each step of the ore processing system and conducted full-scale trials. Our focus has been to create the most energy and cost-efficient ore processing facility, tailored to the specific ore we will mine.

“We are now ready to build this plant and develop this mine, and are confident that our early work will support rapid progress to full production.”

Ms Gaines said when combined with Fortescue’s $1.8 billion Eliwana mine, ore from Iron Bridge would mean the miner could deliver the majority of its products at greater than 60 per cent iron.

Standing member of Formosa’s executive management committee, Wilfred Wang, said the development came at a time when steel mills were looking to increase productivity.

“The high quality product will be able to be used for both sintering and pelletising and, for Formosa, will increase the options for raw material supply available to its steel mill in Vietnam,” Mr Wang said.

Stage two works will include building an airstrip and expanding the accommodation village, construction of a 195km water pipeline, a 135km concentrate pipeline to FMG’s Hert Elliot port facility and a return process water pipeline and extra port-handling facilities.

The project is owned by FMG Iron Bridge (69 per cent) and Formosa (31 per cent), with Fortescue holding an 88 per cent stake in FMG IB and its subsidiary FMG Magnetite. A subsidiary of Baosteel holds 12 per cent in FMG IB.

Andrew Forrest’s Fortescue will manage and operate Iron Bridge, which is expected to produce 22 million wet metric tonnes a year once fully operational.

Five binding off-take agreements have already been secured for 5.3mtpa.

FMG Iron Bridge is expected to spend $US100 million on the project this financial year, ramping up to $US850 million and $US630 million in FY21 and FY22, respectively.

Fortescue shares were up 31¢, or 4.2 per cent, to $7.74 at 8.15am.