TOKYO (Reuters) -Japan's Nippon Steel 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 and Sojitz 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 and trading house Sojitz agreed to buy a 49% interest in the project from Champion Iron 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 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 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)

(Reporting by Yuka Obayashi. Editing by Mark Potter)

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