Aquila Resources has received the green light from the West Australian government to develop Anketell Port as part of its $6 billion iron ore project.
The federal government will now consider whether to also approve the project.
The coal producer has been moving into iron ore and developed proposals for two key mines in WA's Pilbara region.
Integral to the project is the proposed port development at Anketell.
"The approval provides for the staged expansion of the multi-user, deepwater port to a nominal iron ore export capacity of 350 million tonnes per annum, subject to other non-environmental approvals," Aquila chairman Tony Poli said in a statement on Friday.
The planned development of the port is crucial to Aquila securing the majority of the $3 billion in funding it needs for its iron ore project.
Mr Poli said the companies had signed binding agreements to settle all legal proceedings and disputes relating to Belvedere for $20 million, paving the way for Vale to exercise its option to buy Aquila's stake for $150 million.
The pair have been locked in a legal battle since 2010 about the valuation used for Aquila's interest in Belvedere.
Aquila's shares were steady at $3.12 at 1303 AEDT.