Fortescue Metals Group could spend $2.6bn on extending its Western Australia-based Cloudbreak mine.
Citigroup analyst Clarke Wilkins told news service Bloomberg the iron ore producer is currently upgrading the mine to achieve an annual capacity of 55 million tons.
Wilkins said if the extension is approved, it will help increase the mine's annual production capacity to 95 million metric tons.
Citigroup said Fortescue may opt for a combination of cash, operating cash flow, operating leases and delaying royalty payments to Leucadia National to finance the project.
Last month Fortescue CEO Andrew Forrest said the company will finance most of the project on its own after failing to reach a consensus on terms for a $6bn funding offer from China.
Wilkins said Fortescue may further extend its capacity to reach 155 million tons per annum through the development of the $3.3bn Solomon project.