Montreal-based Champion Iron will acquire a pellet plant in Sept-Iles, Quebec, with the aim of producing direct reduction grade pellets.

Champion Iron also entered into a Memorandum of Understanding with an unnamed "major international steelmaker" to complete a feasibility study to evaluate the re-commissioning of the pellet plant and manufacture direct reduction grade pellets.

The Pointe Noire ore pelletising facility is located adjacent to the port facilities that Champion Iron currently uses. The plant, commissioned in 1965 and put on care and maintenance in 2013, will cost C$2.5 million.

The plant will need "significant investments" before it can be put back into operation, Champion Iron said. It will need structural work, rehabilitation, and enhancing of existing equipment to attain desired productivity while minimising environmental impact.

"The proposed acquisition of the pellet plant represents a strategic opportunity for our company to further deploy its vision to contribute to the green steelmaking supply chain," chief executive David Cataford said.

The feasibility study is expected to be completed by 2023, Champion Iron said. Champion Iron will aim to use only green energy sources, including electricity, natural gas, biofuels, or renewable energy, to power the plant.

Champion Iron operates the Lake Bloom iron ore mine in northern Quebec. The provincial government approved the mine's expansion in March to double production to 15 million tonnes per annum.