As copper prices rise to a near three-year high, BHP Billiton, the world's biggest mining company, will spend $2.46bn (£1.91bn) on extending the life of its Spence copper mine in northern Chile by 50 years.
BHP chief executive Andrew Mackenzie said the Spence Growth Option (SGO) project will create long-term value for the firm's shareholders and supports the company's strategy to deliver near-term, valuable copper production.
The construction work will create up to 5,000 jobs and first production will begin in 2021.
In the first 10 years of operation, incremental production from SGO will be around 185,000 tonnes per year of payable copper in concentrate.
Mackenzie said: "Execution of the Spence Growth Option will create long-term value for shareholders in one of our preferred commodities. The project significantly extends the life of our Spence operation and unlocks the potential of the large, quality resource."
Copper prices have risen above $6,500 per tonne to the highest level since 2014 as the market tightens.
BHP expects an internal rate of return of 16 per cent and a payback period of 4.5 years from first production.
The miner has been under increasing pressure from hedge fund Elliott to improve shareholder returns. Yesterday the activist investor said it had increased its stake in BHP to five per cent.
BHP will report its full-year results next week.