The Quebec government is committing up to $20-million towards a feasibility study on the construction of a railway line connecting the iron ore deposits in northern Quebec's Labrador Trough region with the Port of Sept-Iles.
Funding for the study, to be conducted with private partners, was included in this week's provincial budget.
The Liberal government says developing the mining potential of the region is a "cornerstone" of its relaunched Northern Quebec economic development plan.
The study will estimate costs and determine the best railway option, including increasing capacity on existing lines and the building a new one.
Ore producer Champion Iron Ltd. welcomed Quebec's move, saying political support will stimulate further investment in the region and create new jobs.
Chairman Michael O'Keeffe said Friday that the decision – coming amid uncertainty about the outlook for iron ore because of low global prices – will be seen as a "defining point" in the history of Quebec's mining industry.
Canadian National Railway put its own feasibility study on ice more than a year ago due to delays in mining projects because of low iron ore prices.
The country's largest railway had been working with several mining companies and the Caisse de dépôt pension fund on a study into a transportation line and terminal handling facility, which analysts had estimated could cost $5-billion.