TOKYO (Reuters) -Japan's Nippon Steel ( NISTF ) said on Tuesday it had bought a 30% stake in Canada's Kami iron ore project, forming a joint venture with Australia's Champion Iron ( CIAFF ) and Sojitz ( SZHFF ) to secure high-grade ore supplies for direct reduced iron.

Japan's top steelmaker paid C$42 million ($30.2 million) of the total C$150 million consideration through its unit NS Canadian Resources, with the remaining C$108 million to be paid pending an additional investment decision based on a feasibility study.

The deal follows a December agreement under which Nippon Steel ( NISTF ) and trading house Sojitz ( SZHFF ) agreed to buy a 49% interest in the project from Champion Iron ( CIAFF ) for C$245 million.

Under a new joint venture, Kami Iron Mine Partnership, the companies will advance a feasibility study for the project in Newfoundland and Labrador, which is under consideration for development.

The project's iron ore is a high-grade, scarce resource suitable for producing direct reduced iron, Nippon Steel ( NISTF ) said.

Direct reduced iron, along with high-quality scrap, is needed for the production of high-grade steel from large electric arc furnaces, which Nippon Steel ( NISTF ) aims to build to reduce carbon emissions.

The Japanese steelmaker, which has recently acquired U.S. Steel, has been expanding stakes in coking coal and iron ore mines to ensure a stable supply of essential raw materials.

($1 = 1.3908 Canadian dollars)