China set its resource-hungry eyes on another Canadian industry yesterday, as state-owned firm Xinxing Pipes Group Co. agreed to invest up to $1-billion into an iron ore mining project in Nunavut.

Xinxing announced that its subsidiary, Xinxing Ductile Iron Pipes, has formed a joint venture with Toronto-based Advanced Explorations Inc. to develop a proposed magnetite mine in Roche Bay, Nunavut. Iron ore is the main ingredient for steel.

The investment comes as China is ramping up its iron ore imports globally in a bid to keep up with the country's domestic steel industry. And that is good news for Canadian iron ore companies, which could see new investment after long losing out to gold, diamond and other mining operations in accessing capital.

"I think there's plenty of room for the industry to grow substantially here," said Bart Melek, an economist for the Bank of Montreal. "Some of the companies -- especially in isolated parts of the country like Baffin Island -- have massive capital expense requirements, and Chinese capital or [capital from] anywhere else for that matter is welcome. These companies need lots and lots of infrastructure to make their mines work."

Under the deal, Xinxing Ductile Iron Pipes -- one of the world's largest manufacturers of cast iron pipes -- will inject $20-million into the Roche Bay project to complete the mine's feasibility study.

Xinxing Ductile Iron Pipes will invest a further $30-million when the study is completed. If all checks out, Xinxing could fund up to $1-billion for the mine's capital requirements.

Xinxing, along with its affiliate China Huaxin International, will also acquire 19% of Advanced Explorations' stock at a price of 25¢ per share, valued at approximately $5.3-million as part of the deal. In return, Advanced Explorations has agreed to provide Xinxing Ductile Iron Pipes with half of Roche Bay's iron ore output.

"These are very exciting times in iron ore as indicated by M&A activities in the region," said John Gingerich, chief executive of Advanced Explorations. "The global demand for iron ore has brought international focus to the world's emerging opportunities."

Much of that global demand is being stoked by China. Even a government campaign to cut steel production has not managed to reduce forecasts for Chinese production of the metal. Analysts expect steel output to hit between 620 million and 630 million tonnes this year, up almost 10% from 2009.

And while Australia, Brazil and India remain the largest iron ore suppliers to China, the country appears to be diversifying its suppliers.

"China is running out of good, high-quality iron ore," Mr. Melek said. "They are being forced to increasingly import a lot of the metal for materials because they have high costs and inefficient mines that simply are not enough."

Increasingly, China's imports are coming from countries like South Africa, Ukraine and Canada. Iron ore imports from the three countries more than doubled in 2009 from a year earlier, according to the General Administration of Customs in China.

Last year, China's imports of iron ore from Canada stood at 8.65 million tonnes, up 130% from 2008. Canada is the world's eighth-largest producer of iron ore, but many proposed mines--like Advanced Explorations' Roche Bay project -- lie in northern regions that require vast capital to develop.

Investment from China will likely continue to provide the biggest opportunity for iron ore mining companies in Canada.

"China will need to continue to import mass amounts of iron ore, and it's probably wise for them to diversify somewhat away from Brazil and Australia, which is just wise policy," Mr. Melek said. "A geopolitically stable company like Canada makes sense."