Rio's 53% share of the investment is $820 million, which forms part of its $2.7 billion existing replacement capital guidance of around $2.7 billion from 2018 to 2020.
Of the funds, $967 million will be invested to develop the Mesa B, C and H deposits at Robe Valley, and $579 million to develop Deposits C and D at West Angelas.
The investments enable Rio Tinto to sustain production of the Pilbara Blend, and the Robe Valley lump and fines products.
Construction of the projects are expected to start next year, subject to approvals, creating 1200 jobs.
First production is expected from 2021 onwards.
Once operational, both projects will feature the latest technology with 34 existing haul trucks to be retrofitted with Autonomous Haulage System (AHS) technology, delivering safety and productivity gains to the business.
"The development at West Angelas will help sustain production of the Pilbara Blend, the industry's benchmark premium iron ore product, while the additional Robe Valley deposits will enable us to continue to provide a highly valued product to our long-term customers across Asia," Rio Tinto Iron Ore chief executive Chris Salisbury said.
"The approval of these two projects highlights the strong pipeline of development options within our portfolio as we remain focused on our value-over-volume strategy."
It comes after Rio approved an investment of $146 million in August for early works at the Koodaideri project.
Capital costs have previously been estimated at around $2.2 billion, but a feasibility study is still being finalised.
Rio is aiming to make a final investment decision on the project by the end of the year ahead of construction next year and first ore in 2021.
Shares in Rio dropped by 0.4% to A$78.44 on the ASX this morning.