The investment will be used to replace the Los Colorados concentrator with a new 152,000t per-day plant and allow access to higher grade ore located underneath the existing facilities.
The project will cost $3.8bn and Rio Tinto will contribute $1.2bn in funding.
BHP Billiton Base Metals president, Peter Beaven, said: “We expect the completion of the current Escondida Ore Access and Laguna Seca debottlenecking projects, and a strong recovery in ore grades, to support a substantial recovery in Escondida copper production to over 1.3Mtpa in the 2015 financial year.
Construction will begin in February 2012 with commissioning anticipated the first half of the 2015.
BHP Billiton also approved the $721m oxide leach area project (OLAP) which will create a new leaching pad and mineral handling system that will include several overland conveyers.
The new pad will maintain oxide leaching capacity at current levels following the exhaustion of the existing heap leach in 2014. The project is expected to be commissioned in 2014.
BHP Billiton also announced a 17% rise in the mineral resources and a 25% increase in the ore reserves at Escondida following brown field exploration and accelerated in-fill development drilling programmes.
BHP Billiton operates the Escondida mine and holds a 57.5% stake while Rio Tinto owns 30%, Jeco Corporation with 10% and JECO 2 with 2.5%.
Image: Escondida copper mine is located 3,100m above sea level. Photo: Courtesy of BHP Billiton.