By James Regan
SYDNEY, June 9 (Reuters) - BHP Billiton BHP.AX BLT.L is studying an option to develop a massive new iron ore deposit in Australia to replace lost tonnes as operations age and reserves decline, according to the company and documents filed with environmental regulators.
The deposit is called South Flank and lies 10 km (6.2 miles) south of BHP's existing Mining Area C operation and would create an expanse 26 km long and 2 km wide.
"We are currently studying a number of options to sustain our supply chain capacity for the future, and the South Flank deposit is one option under consideration," a BHP spokeswoman said.
She said it was too early to place a cost on any new iron ore mine, which would be designed to help replace almost a third of BHP's current production, coming from its Yandi mine.
"At the current rate of production, the resource supporting Yandi's 80-million-tonnes-per-year operation will need to be sustained from other ore sources at some stage over the next five to ten years," she said.
BHP is the second-biggest iron ore producer in Australia behind Rio Tinto RIO.AX RIO.L , with each company using its own rail lines and port facilities to ship hundreds of millions of tonnes of ore a year, mostly to China.
Rio Tinto is expected to decide this year to whether to develop its own Silvergrass iron ore deposit in Australia, which analysts estimate could cost $1 billion. ore was largely absent from a growth strategy outlined by BHP Chief Executive Andrew Mackenzie last month that focused on ways to increase the company's footprint in copper and petroleum, despite iron ore being its greatest source of revenue.
BHP has invested heavily in iron ore, more than doubling its output since 2010.
The company has submitted an environmental document to Western Australia state's Environmental Protection Authority to determine the level of assessment required.
The document is designed to help the authority decide on how much scrutiny to apply to the project, with BHP recommending a full public environmental review be conducted.
Any plans remained preliminary and don't change BHP's production guidance of 260 million tonnes this year and 290 million tonnes over time, according to the spokeswoman. (Editing by Ed Davies)