The decision to start the project comes amid continuing talks between Rusal, whose net debt stood at $10.3 billion at the end of March, and its creditors over debt restructuring.
Dian-Dian is the world's largest bauxite deposit with reserves of 564 million tonnes, the company said.
The first stage of the Dian-Dian project involves the construction and putting into operation by 2016 of a bauxite mine with an annual capacity of three million tonnes with the potential for a further increase of up to six million tonnes, Rusal said.
The total investment for the first stage of the project will be more than $220 million, with a significant part of this budget reserved for infrastructure development in Guinea, specifically railway and port development. To transport bauxite from the mine, a new 25km road will be built, Rusal said.
With the capital spending of $73 million per year over three years, Rusal will be able to finance it internally and will be able to increase its bauxite self-sufficiency to 93% from 74% in 2013, Morgan Stanley said.