The state is participating in the project, which will further develop Kobe Steel's newiron-making technology, which converts iron ore into a nearly pure iron in nugget form. Iron nuggets would be used as an alternative or supplement to pig iron in the steel-making process.

The project's second phase includes development and operation of a pilot demonstration plant. Cliffs will invest $4.5 million in cash, materials, other property and manpower through this phase, with additional financing coming from the state andthe other members of the project.

The demonstration plant will be built at Cliffs' Northshore Mine facility here. The25,000-tons-a-year plant, which is planned to be operational early next year, is designed to test and develop the process for commercial application and collect data on the environmental aspects of the process. This is a key step to the commercializationof the process, Cliffs officials say.