Rio Tinto will expand two of its mines in Western Australia, as the state government signs off on a deal to keep them digging for more than a decade.

Expansion of the two Rio Tinto-owned mines in Pilbara will be jointly worth around $880 million.

The company says it will now pour $680 million into an expansion of its West Angelas joint venture project.

WA Government approvals also mean Rio will spend $200 million to establish additional pits at the Western Turner Syncline.

It means the Pilbara projects can keep digging for an extra 13 years, Rio says, pushing the combined total output of the two up to 11 million tonnes of iron ore per annum.

The WA Government expects more than 500 jobs will be created in the upcoming construction period.

The approval came in a rough week for iron prices, which have fallen about 20 per cent since the start of the year to a level below $US105 a tonne.

This has been largely blamed on moves in China, where reports say a trade deficit exposed an oversupply of iron, leading Chinese authorities to tighten credit for underperforming steel mills and buy less ore.

Chris Richardson from Deloitte Access Economics told the ABC that iron has been caught in the movements of the broader markets.

“Economics says you can only have a boom in two out of three in demand and supply and price,” he said.

“As China and others boomed, then demand for commodities shot up, prices shot up as well, because supply is really slow to get to market, you've got to dig new mines and get all the approvals and the rest of it.

“Now demand is a little slower, supply is roaring into those markets.

“The long-term outcome was always going to be a booming commodity demand, a booming commodity supply and rather more sensible pricing.”