The dual-listed Anglo-Australian company said the investment, in new port and rail infrastructure, would take production capacity to 283 million tonnes a year in 2013, up from 220 million tonnes currently.
Iron ore and Australia chief executive Sam Walsh said Rio planned to expand capacity to 333 tonnes a year by 2015, a rise of more than 50 per cent. The company has tipped a lengthy resources boom fed by rampant Asian demand.
"This is the largest mining project ever undertaken in Australia and highlights the quality of our growth options," Walsh said in a statement.
On Monday, Rio and BHP, the world's biggest miner, scrapped plans to merge their Australian iron ore operations after resistance from regulators and leading customers, including China, on anti-competition grounds.
Since July, Rio has announced six billion US dollars of new investment in Australia's desolate Pilbara region, a major source of iron ore for Asian steel mills which are in overdrive to feed the continent's mass industrialisation.
The $116 billion iron ore joint venture with BHP, which abandoned a hostile takeover of Rio only two years ago, would have encompassed one-third of global production and saved about $10 billion in shared costs.