Iron ore mining giant Fortescue Metals Group Ltd (ASX: FMG) announced on Monday a new bank facility of up to $2.06 billion which the company said it would utilise to finance the expansion of its mining operations.

The company said that the lined up bank facility would be allocated for refinancing notes that Fortescue has issued in 2006 while the remaining would be used to fund existing and future expansion activities of FMG.

Fortescue chief executive Andrew Forrest called the new facility, which will mature in October 2015 with an initial interest rate of 7.5 percent, as a major step forward for the company.

In revealing the lining up of the new bank facility, Mr Forrest stressed that "while coming at some cost, even though largely mitigated by the strengthening Australian dollar, Fortescue has now secured the pathway to realise our goal of becoming the world's best iron ore producer."

He noted too that since the facility, with notes secured in August 2006, is unsecured and carries no restrictions, Fortescue should be able to exercise expansion freedom in all areas, adding that in a month's time the whole redemption process for the original notes would be secured.

Fortescue said that following the completion of feasibility studies, it would proceed with the development of its Solomon Hub and further deposit explorations that would go beyond the company's Chichester mines.

Mr Forrest said that the anticipated profits from Fortescue's expansions could possibly lead to dividend yields though he maintained that company cash flow could be first used into expanding infrastructure, mines and building market share offshore.

As of 1015 AEDT on Monday, Fortescue Metals shares were trading up by 5.7 percent to $6.15.