Deadline critical: missed by Essar

Mesabi Metallics was meant to begin construction on a highend iron ore processing plant in Nashwauk by Dec. 31, 2018. However, a review by the Department of Natural Resources (DNR) discovered that work had not been achieved, according to Barbara Naramore, the DNR's assistant commissioner.

Essar Steel Minnesota’s half-built mining site near Nashwauk, Minn. (Bob King. 2015)

Mesabi was trying to resu rrect the prior Essar Steel M innesota site, and they

face penalties worth m illions after m issing the imp ortant state deadline. ”U nder the conditions of the state m ineral leases, failu re to m eet this

deadline resu lts in a dou bling of imp orts and rents du e to this state," Naramore said. "We have informed Mesabi Metallics of the schedule under which these increased payments are expected.”

The rents will double to $120,000 each quarter. From the end of 2019, rents and full-year royalties will now be a total of $12 million. Mesabi admits the work on the value-added centre wasn’t completed by the deadline, according to spokesman Darin Broton. The company hopes to talk about the obligations with the DNR in more detail in the coming weeks, and reveal what design and engineering work has been completed on the value-added high-grade ore centre. This plant is expected to be constructed adjacent to a half-built taconite pelletizing plant which Mesabi hopes to complete.

The deadline is the most recent drama in a 12-year saga to build brand new iron ore mining and processing centers in Nashwauk. Under Essar Steel Minnesota, milestones were missed by the project. The state demanded economic development loans be repaid. Essar Steel Minnesota, already $1 billion in debt, filed for bankruptcy.

Under the direction of the Chippewa Capital Partners team, Mesabi Metallics bought Essar Steel Minnesota assets from bankruptcy in 2017. The nation granted mining licenses to Mesabi after they promised to put $650 million into the project. Broton says the former deadlines were made with a different management group and before Mesabi faced lawsuits along with other issues that have come into play. Control of Mesabi changed in Aug. 2018 from Tom Clarke to Nubai Global Investments (former partners in Chippeway Capital).

Mesabi also stated in September that Mercuria, a Swiss energy and commodity company, was going to buy majority control of the company. The deal would also give Essar Global, the Nashwauk mine’s former owner, a stake in the business.

In addition, Mesabi is addressing court challenges regarding the mineral rights to its Nashwauk land from Cleveland-Cliffs, another mining company using properties on the Iron Range.

Broton stated Mesabi has filed a new building schedule to the DNR but still expects to finish the whole $2.6 billion project by the end of 2019. Naramore said it was to be seen exactly what Essar's renewed involvement can mean for resolving remaining bankruptcy issues, or for any changes in leases or permits. She said that although the DNR has been in discussions with Mesabi, it's not had any contact with Essar Global or even Mercuria.