The resources company will invest close to $1 billion in its local arm, Illawarra Coal, to open a new mining area as the West Cliff mine reaches the end of its reserves.

The $833 million boost is the biggest capital investment the company has made in its subsidiary, Illawarra Coal president Colin Bloomfield said.

Union and community leaders welcomed the news as a vote of confidence in the region's mining sector, and said the benefits would flow through the local economy.

BHP Billiton said the underground expansion secured employment for its 500 West Cliff workers and would generate more than 300 jobs during construction, which has already begun.

The new area - Appin Area 9 - is adjacent to the company's existing Appin operations and is set to open in 2016, the year reserves will expire at West Cliff.

It will produce an estimated 3.5 million tonnes of metallurgical coal each year, allowing Illawarra Coal to sustain its annual capacity of 9 million tonnes.

The mining area will have little impact on Illawarra Coal's visible footprint, with workers able to access the mine from the existing Appin and West Cliff operations.

Illawarra Regional Information Service executive director Simon Pomfret hoped yesterday's news would boost flagging business and consumer confidence.

Maintaining high coal volumes could also be critical to the planned expansion of the Port Kembla Coal Terminal, he said.

Illawarra Coal manages the key export terminal on behalf of a consortium of miners.

The announcement was also significant because of the multiplier effects of coal jobs, which each supported about three indirect positions, Mr Pomfret said.

"[Mining] is one of our traditional industries and it just shows how important those traditional industries still are to the region."

Illawarra Coal operates three mines and two coal preparation plants, including one at West Cliff.

Mr Bloomfield said coal would still be processed at West Cliff, and that money would "start to flow immediately" to contractors.

"Illawarra Coal accounts for about 2400 local jobs directly.

"About 1400 of those are employed by Illawarra Coal and about 1000 through our contract partners," he said.

BHP Billiton said it approved the investment following the NSW and federal governments' approval of the Bulli Seam Operations Project.

Wollongong Lord Mayor Gordon Bradbery said the funding could "soak up a lot of the jobs that have been displaced from other areas".

Coking coal from Illawarra Coal's mines is used in steelmaking overseas and domestically, including at BlueScope Steel.