The company plans to invest Can$16.43 million over five years.
H. C. Stark has operated the Sarnia plant since 1997, The company started the modernisation in 2008 but work was suspending during the global recession and decline in the hardmetal market in the US.
The loan will create 10 new jobs and retain 29 existing positions. The new facility will process high grade metal powder used for cutting tools in the oil, gas and mining sectors.
The government grant is part of a programme called Advanced Manufacturing Investment Strategy (AMIS), which provides repayable loans to innovative industries.