Mesabi Metallics to try building upon Essar bones

Construction at Essar Steel near Nashwauk, Minnesota, as seen May 2015. (Aaron J. Brown)

Mesabi Metallics issued a plan last week to bring the former Essar Steel Minnesota iron ore project in Nashwauk, Minnesota, out of bankruptcy and back into construction.

A judge must now consider whether the newly reorganized company has sufficiently proven its case to keep the state mineral leases along the western Mesabi Iron Range.

“Creditors will receive vastly improved recoveries, the company will be able to complete the project, and the employees and community in which the project is based will greatly benefit,” the company wrote in an 85-page disclosure filing. The Hibbing Daily Tribune and other media outlets reported the news last week.

Mesabi Metallics aims to build a $1.9 billion taconite plant on the site of the old Butler Tac plant that closed in 1985. Mesabi Metallics, like its India-based Essar predecessors, also touts an option to produce value added iron ore products in the future.

The bankruptcy court must now determine if Mesabi Metallics’ plan is the best way for creditors to recover their losses, or if new ownership should be sought.

Last summer, Cliffs Natural Resources announced it would make a bid for the project, promising to open the value-added iron ore plant that was originally promised by Essar. But if Mesabi Metallics falls short for some reason, other bidders could get into the game.

Nevertheless, Mesabi Metallics remains the company of record and, despite doubts last summer (including my own), will be the favorite in this process. New management has given the company a new chance to complete a project that broke ground more than a decade ago.

If successful, you can count on market realignment across the Mesabi to account for the increased production capacity.

Comments

  1. independant says:

    I disagree with your assertion that iron production from Minnesota has to be viewed as a zero sum game. Just last fall the Empire mine in Michigan shut down after depleting its productive reserves. This takes 4 million tons of iron ore pellets off the table for the great lakes region. Now factor in reduced production costs at the Mesabi Metallics site and perhaps a DRI product is viable and now your market opens up to include electric arc furnace customers like Nucor and Steel Dynamics. As a side note lets be real about Cliffs, they are in no position to do anything with that site and the state and local governments along with our local contractors and venders would suffer as the site would site stagnant for years.

    • ^ ^ An independent thought is worth a thousand words. Totally agree. Cliffs debt leaves them in a position to speak loud and carry a small stick. Production efficiencies and deep pockets are the two most crucial items to ride the waves of market fluctuations for anyone coming into this game. Old, run-down plants with old management styles and legacy labor bargaining approaches (ie. merit based what?) will leave you first in line for ‘lights-out.’

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