Anglo American will invest $51m ($49.3m) to develop the Earaheedy iron ore project near Wiluna in Australia and earn a 75% stake in the project.
Anglo will drill at least 7,500m in the next 18 months on the project, which is currently being developed by Cazaly Resources and Vector Resources.
The company will secure a 51% interest in the project if it pays an additional A$21m ($20.3m) to the Cazaly-Vector joint venture over the next four years.
Once Anglo completes a bankable feasibility study and pays A$5m ($4.8m), it will raise its stake to 75%.
Cazaly managing director Clive Jones stated that the Earaheedy is a major iron ore province and requires the expertise of a major player to develop it.