The engineering and construction firm has secured investment of up to £420,000 from Highlands and Islands Enterprise (HIE) for the project.
The company has expanded its manufacturing sites, adding 4.7 acres by purchasing neighbouring land which was previously owned by Moray Council.
The development will include the refurbishment of the existing buildings at the former sawmill site at Waterford and a new automated fabrication facility will be installed.
The firm is already a significant employer in the Forres area, currently employs around 80 staff at the existing Greshop Industrial sites including seven apprentices.
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Owner Alan James said: "HIE has been fully involved in the development of these plans and supported us in this project with a grant for our investment in the first and second phases.
"We had previously rented the buildings and ground from Moray Council and we were delighted that they agreed to sell the site to enable our future development plans.
"This investment will make us more efficient and it will provide the company with the ability to increase its throughput but at a lower production cost. The new equipment will mean that our skilled fabricators will be available to concentrate on the more technical projects and no longer have to spend time measuring or marking beams or drilling them as the new machine will be able to do all this automatically from the details downloaded directly from our drawing office. With the skilled workforce being available we will be able to seek a greater number complex projects."
Steve Richards, business development account manager with HIE, said: "Moray is renowned for innovation and manufacturing across many sectors and AJ Engineering is a key part of this. This is a fantastic project and a great example of a dynamic Scottish manufacturing firm pursuing its growth ambitions through innovation and automation.
"It's also brilliant news for Forres and the wider local economy, particularly in relation to the expectations of new opportunities for young people through apprenticeships.
"We are very pleased to be able to provide support and very much look forward to seeing the new facility take shape."
