Tata Steel has signed an agreement-in-principle with the Government of Quebec to develop iron ore deposits in the Canadian province.

The company is likely to invest up to $400m in the Canadian province within the next two years to help the steelmaker reduce its raw material costs.

Despite depressed prices for iron ore, the company wants to speed-up an iron ore mine project, known as DSO, at Schefferville in northern Quebec, where it has already invested more than $1bn.

Signing of the agreement between the Government of Quebec and TS Global Minerals Holdings, a subsidiary of Tata Steel, was announced by the Quebec Premier Philippe Couillard and innovation and exports minister of economy Jacques Daoust.

“The DSO Project is contributing to the revival of the town of Schefferville, with significant investments in the community infrastructure.”

Tata Steel (India & South East Asia) managing director T V Narendra signed the deal on behalf of the firm at the World Economic Forum in Davos, Switzerland.

Both parties will work to develop the transit for iron ore, a key raw material used in making steel, from Arnaud Junction to the multi-user dock of the Port of Sept-Iles.

The investment will create 300 jobs in the region.

Jacques Daoust said: “Further to creating considerable economic benefits for Quebec, the DSO Project is contributing to the revival of the town of Schefferville, with among others, significant investments in the community infrastructure.

“The mining company is also a partner in the construction of the multi-user dock of the Port of Sept-Iles and a strong ally in maintaining industrial activities in the North Shore region.”

The DSO project involves mining, crushing, washing, screening and shipping the sinter fines and pellet fines to Tata Steel’s European steel making facilities.

Tata Steel Group executive director (F&C) Koushik Chatterjee said: “We are pleased to explore opportunities to collaborate with the government of Quebec in this challenging time for the mining industry.

“Tata Steel continues to contribute to the communities in Schefferville region and also enjoys a positive relationship with the government and other stakeholders in Quebec.”

The DSO site of Tata Steel produces 2t to 3t of ore per year. With the execution of the project, production could reach up to six million tonnes per annum.