A Russian company is considering building a large iron ore manufacturing facility in Sydney, an investment that's potentially worth millions and would create hundreds of jobs.

The plant in Sydney would turn iron ore into metallic pellets that would then be shipped elsewhere to be used for producing steel.

It's been more than 10 years since the area's steel mill closed.

International Iron Beneficiation Group Ltd is looking at using part of the old steel plant site for the new facility. IIBG is a subsidiary of the Russian OAO Serverstal, a steel and steel-related mining company.

The province will spend $400,000 to study how feasible the plant would be, it will also do a power rate study. Enterprise Cape Breton Corporation will chip in another $300,000 for those studies. IIBG is responsible for the remaining cost which could exceed $2 million.

It's believed the plant could create 500 to 700 jobs.

But the location is not a sure thing. Sept Iles, Quebec is also in the running for the plant.

"I think it goes without saying that if the project moved forward it would be a significant one for Nova Scotia, Cape Breton in particular," said John Lynn, CEO of Enterprise Cape Breton Corporation.

Frank Corbett, the province's deputy premier, said it's early in the process, but he also believes the plant could be good for Cape Breton.

"The big issue here would be somewhere between 500 and 700 full time jobs, in a manufacturing sector that a large component would be export, and we have an area that we think they can utilize. What we'll show them is areas they could ship out of, and one of the attractions obviously was the dredging of the harbour," said Corbett.

IIBG said it will use an innovative process to create the metallic pellets.

Marie Walsh, chief administrative officer of the Cape Breton Regional Municipality, was part of a conference call with company officials and was encouraged by their assurances on the environment.

"People are concerned about that because of our history, but I think with the new technology I think they do have a focus on that," she said.

No one from IIBG was available for comment. Government officials said any decision on whether the plant will be built in Sydney won't come until 2014.