Another salvo in Cliffs, Mesabi Metallics iron ore war

Rock 'em Sock 'em Robots

PHOTO: Bruce Turner, Flickr CC

If this sounds familiar, bear with me.

Cliffs Natural Resources and its outspoken CEO Lourenco Goncalves think very little of the former Essar Steel Minnesota or its reorganized successor, Mesabi Metallics.

Goncalves’ company wants the leases to mine iron at the former Butler Taconite site near Nashwauk on the western Mesabi Iron Range. But Mesabi Metallics has first dibs, and will keep them unless a federal bankruptcy court denies their plan later this month.

This has led to a political and corporate cold war here in Northern Minnesota. Cliffs and its partisans want all talk of Mesabi Metallics shut down. They’re not credible, we’re told. They can’t deliver and will only delay the advance of modern value-added mining on the Mesabi. After all, wasn’t Essar supposed to be a direct-reduced iron plant? As it stands, it would only be another taconite mine and processing plant. The market is full of those.

Goncalves has been openly saying that if he can’t open Cliffs’ first iron briquette plant on the former Essar site, he’ll be shopping other locations, including Canada. Officials like Gov. Mark Dayton and State Sen. Tom Bakk support the Cliffs proposal.

Meanwhile, and somewhat paradoxically, Mesabi Metallics has the support of the city of Nashwauk, several other Iron Range legislators, and the contractors originally bilked by Essar. So far, the bankruptcy court has kept Mesabi Metallics alive by saying that work can restart at the site. That doesn’t mean much work is being done, if any. It just means that the court seems tentatively open to the reorganized company.

For what it’s worth, neither side offers a perfect solution to the problem. (Simply put, there is no perfect solution). Cliffs is the only one talking about a value-added iron plant in Northern Minnesota. This kind of technology is necessary for the Mesabi Iron Range to stay relevant as a mining region over time. Cliffs would, however, have to rebuild much of the existing infrastructure due to problems with the original Essar construction. Cliffs would also need to build entirely different facilities for making iron briquettes.

Further, the last time I wrote about this, workers from a shuttered Cliffs mine in eastern Canada flooded my site and e-mail with complaints about how Cliffs shed their pensions last year. It’s not clear how many favors Canada would grant the company. Point is, the Iron Range is the best location for a Cliffs iron briquette plant. Threatening to leave seems more a bargaining gambit.

And Mesabi Metallics? The list of variables with this company is much longer. We don’t know where they’ll sell ore or where they’ll get the money they claim to have lined up. This presents a new version of the same roll of the dice that Essar Steel offered, with only the promise of better management this time.

None of this will really be resolved until the bankruptcy court rules on the case. The way the two companies sling press releases it appears they believe the judge will take into consideration news coverage.

So, between you and me bankruptcy judge and clerks, you might consider offering clarity by deciding which company has the best chance of fulfilling a long overdue promise to the people of Northern Minnesota. I can only write this same post so many times.

Comments

  1. independant says:

    The statement that “Cliffs would also need to build entirely different facilities for making iron briquettes” is not correct. Most if not all of the existing infrastructure and facilities built on site would be required for a HBI operation. As a matter of fact if Mesabi Metallics takes over and completes the taconite facility I wouldn’t be surprised if a DRI, HBI or Iron Nugget line is added in addition to the facilities pellet lines almost immediately.

  2. Aaron, thanks for the update! Frankly, human nature is to “take the course of least resistance”, which seems to be the position of those opposed to the Cliff’s proposal. It seems fair to say that one of these proposals reflects an avenue to the future of mining/steel making, while the other settles for the comfort of the past. Additionally, while I am truly sympathetic with those Canadian workers who lost their pensions, Goncalves inherited a Company that was headed for bankruptcy. Hard, hard decisions had to be made to save the enterprise and many other jobs both on the range and in Cleveland. He did what he had to do to preserve Cliff’s as a going forward enterprise and is now preparing the Company and it’s remaining stakeholders for growth…JMHO.

  3. Cliffs is welcome back in Canada BUT, they have bills to pay before digging the first shovel full of dirt.
    We have lots of Iron Ore.

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