Passing lanes will be built and ageing structures will be replaced over the next two years under the agreement.

The works, outlined in the Mount Isa System Rail Infrastructure Master Plan, will bring the line's capacity up from 4.8 million tonnes to 7.5 million tonnes each year.

Transport Minister Rachel Nolan, who was in Mount Isa yesterday, said the upgrade would improve the rail's efficiency and increase capacity to handle future demand.

"This rail upgrade has been one of the highest priorities for this region and will be a confidence boost to mining companies," she said.

Member for Mount Isa Betty Kiernan said the upgrade was welcoming news right before Christmas.

"This is great news and gives a degree of certainty to the region. It's a huge confidence boost," she said.

"There is much more potential in the area and it is essential that the rail line keeps up with this demand. These upgrades will ensure this happens."

Mount Isa to Townsville Economic Zone chair David Glasson said the upgrade was tremendous news.

"If they're committing the money that was outlined in the master plan then that's a good start for the region," he said.

"It's a good sign the government's willing to spend the money on what is needed."

Xstrata Copper general manager Mark Roberts has also welcomed the upgrade.

"The Mount Isa to Townsville rail line is strategically important to our business and we welcome the State Government's commitment to improve the reliability and increase the capacity of the line," he said.

Proposed rail improvements:

• Replac ement of the current telecommunications system with a new optical fibre link.
• New holding roads at Cloncurry and Hughenden, which will increase the capacity of the line. The replacement of wooden sleepers with stronger more reliable concrete sleepers.
• A new passing loop at Kimburra.