Make or break moment for Iron Range mining projects

A truck hauls fill at the Essar Minnesota site in 2015. (PHOTO: Aaron J. Brown)

I’m part of a tortured, high-strung group of people who receive regular e-mail and social media updates about the mining business. It’s part of my duty to better understand the industry that shapes Iron Range history and its current economy. And in recent months the news has been far less depressing than usual.

For instance, the Iron Range’s top mining companies, Cleveland-Cliffs and U.S. Steel, both reported profits last quarter. Demand for their products has been steady, even growing slightly. All Iron Range taconite plants are running hot.

Subsidized Chinese steel, long the bane of U.S. steel markets, has been waning, in part because of last year’s tariffs, and in part because the Chinese scaled back production voluntarily due to cost. Talk of adding new tariffs on Chinese steel remains on the lips of politicians and steel companies, even if it’s not clear when or if those measures will actually happen.

Last Sunday, the Mesabi Daily News reported on the lowest unemployment rate on the Iron Range since 2000. That’s significant, because 2000 was before two absolutely devastating economic busts — one in the early 2000s and another that started in 2008. Arguably, we’ve been playing catch-up ever since.

It also means that, in terms of investment, it’s now or never for new mining projects.

Yes, permitting remains a big issue for nonferrous mines. But to know the real story, watch the financing for projects that are already permitted — ones like the new iron ore plant owned by Chippewa Capital Resources in Nashwauk. If outfits like these can’t raise the money in this environment we should be deeply skeptical about the others, too.

And there is reason for some concern. Chippewa Capital Partners told the Itasca County Board earlier this month that they’re still formulating a financial plan. They have paid off some debts and invested money, but the bulk of what they need remains in the pockets of would-be investment firms. That’s very much the same thing that Essar Steel Minnesota used to say when it ran the project.

Meanwhile, two former Cleveland-Cliffs iron mines in Canada show signs of life. One, in Quebec, prepares to reopen in March. Another effort, backed by former Magnetation officials from here in Northern Minnesota, seek new funding for another former Cliffs mine in Labrador.

So far, we’ve been talking about iron. And while the differences between iron mining and other forms of mining occupy the environmental debate about projects like PolyMet, the financial picture of the two remains similar. Either new money goes in soon, or a host of “maybe someday” projects go back on the shelf for who knows how long.

Developers are clamoring for cash. That’s a signal of business opportunity. But a fire needs more than oxygen. It needs a fuel source. A rising economy might create demand. But add in … I don’t know, an enormous corporate tax cut? Or disappointing inaction on tariffs? That might also bring inflation or other reactions that prematurely burn out the economic boom.

For these fat stacks of high-level money investors will need to believe they’re buying into decades of mostly profitable years of mining. And they’ll be thinking about this in terms of the whole world, not just how nice it would be for the greater Iron Range economy. That’s a tall order.

Which is why next year will prove to be so important for Iron Range mining. Don’t watch the public forums or the endless parade of editorials; watch the money. If it comes for the more advanced projects, a lot could happen quickly for the rest. If it doesn’t, well — Faulkner once wrote about the sound and the fury, and what it signified.

Meantime, remember that structural problems in the Iron Range economy will remain until we diversify our economic base.

Comments

  1. independant says:

    One thing to keep in mind is Minnesota state and Federal government interfering in established environmental review processes because emotional pressure from environmental groups supporting candidates. Investors look at risk and you note that in this current commodities market they should be more likely to invest. This is true with one huge unmentioned issue. If I were an investor looking to invest in a mining operation would I sink millions or billions into a project in the state that just let Twin Metals invest 400 million dollars into a project and then pulled their mineral leases out from under them and changed the rules of the game mid stream… hell no I wouldn’t. Steady and established science based environmental review processes should be the name of the game if you want investments to be made. An ever changing target based on emotional pressure is a sure way to chase away any investments in the industry, then again maybe that is exactly the goal of some.

  2. That darn, old iron ore industry that’s supported 100’s of thousands of Range families, multiple generations of kids, over the past 100 years just won’t die!!…like some are hoping. Trump, dag nabbit!!

    DNT 11-27-2017
    Iron ore exports rose at an explosive pace in the third quarter, according to the Minnesota Department of Employment and Economic Development, with all ore, slag and ash products bound for other countries rising 769 percent.

    Between July and September Canada bought $88 million worth of Minnesota ore, slag and ash — up from $1 million during the same period last year — and Japan increased its quarterly purchases from $4 million to $48 million.Nearly all products in the ore, slag and ash category are iron ore, DEED said.

    Minnesota exports overall hit $5.4 billion in the third quarter, with Canada, Mexico and China the top buyers.

    “Minnesota exports are having a strong 2017, with sales up 8 percent through the first nine months of the year,” DEED Commissioner Shawntera Hardy said in a news release. “That’s good news for the economy, because exports support an estimated 120,000 jobs in the state.”

  3. As most interested parties already know, Congressman Rick Nolan’s bill to block access to the courts for opponents of the Polymet land swap passed the House yesterday. It is expected to pass the Senate as well, and be signed by the President.

    From a legal point of view, this is an interesting attempt by Congress to block the courts from exercising their typical right to entertain litigation about the actions of the government, short circuiting the usual legal process. As such, it would seem, at least superficially, to be a violation of the Constitutional Separation of Powers, and is almost certain to be met by lawsuits challenging the law itself and by associated court orders. The courts, even courts dominated by conservatives, have historically been very protective of their right to exercise judicial review over laws and administrative actions, so although it is impossible to definitively guess the outcome, Nolan has stepped into a judicial minefield here. In the long run, the law could actually increase the amount of time that litigation over the issue blocks the swap.

    Of course people on both sides of the issue will react by claiming that God is on their side, so I would expect a flurry of meaningless noise as well. However, regardless of the passage of the law, the main action is going to be in the progress of litigation, both the original cases and the new cases against Nolan’s law, and then, depending on the outcome of the separation of powers litigation, potentially back to the original cases once again.

    No news about the progress of Nolan’s other bill, the effort to block the state from acting on its revocation of the Twin Metals leases and to abort scientific studies of the potential impact on the Boundary Waters watershed by non-ferrous mining. I tend to guess that that will pass as well, and then also be met with additional litigation.

    Nolan is certainly creating more work and income for attorneys. Other impacts of the law remain to be seen.

    • Actually there is news on the second bill. This evening the Duluth News Tribune web site says the bill to override the refusal to renew the mineral leases and to abort the Forest Service research project is being delayed by the House whip until at least Thursday.

      A whip delay usually means that the votes to pass a law are not there at the moment, but that the House leadership thinks it may be able to change enough votes to pass the bill in a later effort.

      As in Minnesota, the issue of the Boundary Waters seems to make Twin Metals a much more contentious issue at the federal level than other non-ferrous mining projects.

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