Mega miner Glencore Xstrata (LON:GLEN) and junior partner Zanaga Iron Ore Company (LON:ZIOC) have decided to move forward with the assessment of their vast iron ore mining project in the Republic of Congo, which may cost as much as $3 billion.

The companies said Friday the Zanaga iron ore project will be now developed in two phases, which will allow them to cut initial expected capital investment by about two-thirds.

As part of the new development, Zanaga entered a supplemental agreement with the resource giant to modify the existing joint venture agreement, which gives Glencore a 50% stake plus one share in the project, while Zanaga holds the rest.

The partners have also agreed to jointly explore funding options with a view to attracting third party debt and equity financing for potential project implementation. The revised plan was welcome by investors, which send the junior stock up more than 20% at one point in morning trade.

The news comes only two days after the Swiss-based giant decided to put its massive $6 billion Wandoan thermal coal project in Australia on hold, mainly due to depressed coal market prices approaching three-year lows.

In the first phase of the project the parties will develop the mine, which is estimated to be capable of producing up to 14 million metric tons of iron ore a year, including 1 to 2 million tons of ore that can be taken directly out of the ground and shipped to customers.

During the second stage, the firms will complete a feasibility study to be ready in the summer of 2014. An investment decision from Glencore would come only after that, said the companies in a presentation to analysts and investors.

Zanaga is a world-class deposit with proven reserves of 2.5 billion tonnes at 34% iron.