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Minnesota DNR terminates Mesabi Metallics leases

The company had missed several last-chance requirements earlier this month.

FILE: Mesabi Metallics
A crane sits next to the partly constructed Mesabi Metallics pelletizing building. (2018 file / News Tribune)
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DULUTH — The Minnesota Department of Natural Resources has terminated the leases for Mesabi Metallics, the beleaguered iron ore mine and half-built processing plant near Nashwauk, Minn.

The DNR started the 20-day process to terminate the company's leases earlier this month after the company failed to meet a last-chance requirement set by the state after years of missed lease requirements and deadlines. Namely, it only made half of the required $200 million available by May 1, blaming the COVID-19 crisis in India, where its funder Essar is based. Last week, the DNR added to the list of unfulfilled requirements when it deemed one of Mesabi Metallics' lenders as not credible .

The state agency announced the lease termination in a news release Thursday, May 27, and said it will follow up with the company on any equipment that needs to be removed from the site.

The future of the mine and plant site are not yet known. Minnesota's two other iron ore mining companies — U.S. Steel and Cleveland-Cliffs — have both expressed interest in the site. The DNR has not made any decisions on future leasing of the state minerals area, according to the news release.

On Wednesday, Ravi Ruia, co-founder of Essar Global Fund Ltd., took out a full-page advertisement in the Minneapolis Star Tribune urging Minnesotans to support the project.

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"Despite the progress we made, we regret there were some setbacks due to circumstances we could not control, which is not unusual for a project of this scale. But in spite of these setbacks, we are still here to make sure this project will move forward this summer as planned. We are going to get this done," Ruia wrote.

Since 2007, iterations of Mesabi Metallics — the former Essar Steel Minnesota project that has had multiple owners, managers and names — has floundered through construction stoppages, bankruptcies, missed deadlines, late payments and other legal battles. In the works for more than a decade, the project sits about half-finished. While Essar walked away from the bankrupt project in 2015, leaving behind $1 billion in debt, the Mumbai, India-based company reentered the picture after settling some $260 million of debt.

Mesabi Metallics.jpg

Cliffs, which owns a patchwork of land at the Nashwauk site, has long urged the DNR to award it the leases and permits instead so it could build a hot-briquetted iron plant at the Nashwauk site; and has even threatened to close Hibbing Taconite when it runs out of ore in 2025 if it cannot get the Nashwauk leases and supply the Hibtac plant with Nashwauk ore.

This month, after the DNR announced its intentions to pull Mesabi Metallics' leases, U.S. Steel also expressed interest in the site. The company said ore from the site could help feed its Keetac pellet plant and said it was interested in building a direct-reduced iron facility on the site to supply electric arc furnaces.

The DNR has said leases can not be transferred to other companies.

Jimmy Lovrien covers energy, mining and the 8th Congressional District for the Duluth News Tribune. He can be reached at jlovrien@duluthnews.com or 218-723-5332.
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