Confidence of Aquila Resources investors' plummeted on Monday after the mining company announced it has incurred a $1.4 billion cost blowout for its West Pilbara Iron Ore Project.

Developing its flagship iron ore project in Western Australia has now jumped to more than $7.4 billion, up from $6 billion, the Perth-based Aquila said in a statement to the Australian Securities Exchange. With the blowout surge, the mining firm needs to source immediate funds worth at least $3.7 billion.

The additional costs were largely because of the company's compliance with the state government of WA to come up with a master plan for a deepwater port.

At 1520 AEDT shares of Aquila Resources were at 4.5 cents, or 1.7 per cent, lower at $2.63 before finish trade 1.12 per cent lower at $2.65.

Gareth James, Morningstar Resources analyst, said the cost announcement was rather expected based on the elapsed time since the last estimates were done in July 2010.

"This project looks extremely unrealistic from our point of view,'' Mr James said.

"It's going to be a tough one for Aquila to complete.''

Aquila, which also focuses on coal and manganese, owns 50 per cent of The West Pilbara Iron Ore Project, an integrated mine, rail and port development. It said the project has a resource of 1.71 billion tonnes and could churn 30 million tonnes of new iron ore. The company has a $1.1 billion market value and about $500 million in cash as of end June.

The project has an expected life span of more than 15 years. Construction is expected to start in mid-2013.