Essar rejoins Nashwauk project; ArcelorMittal looms large

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

The complex tale of an incomplete iron ore mine on the western Mesabi Iron Range took several new turns this week. Each twist reinforces a central truth. Distant, powerful corporate forces act on impulses far removed from Northern Minnesota’s hopes and dreams.

Mesabi Metallics still holds state mining leases on land outside Nashwauk. This was affirmed by Gov. Mark Dayton, who visited the site Tuesday morning. Expression frustration, Dayton nevertheless said he had been satisfied with the company’s plans to resume construction next March. The state invested in early infrastructure money for the project and remains a party to the concern.

Meantime, rival Cleveland-Cliffs bought critical land throughout the footprint of the original project this year when some private feeholders grew tired of waiting for Mesabi Metallics. Both companies argue they can mine ore from their side of the fence. That sounds logistically difficult, but it’s what they say.

And now the latest news is that Mesabi Metallics ownership takes a new form.

Chippewa Capital Partners was successful bidder for the bankrupt Mesabi Metallics project a year ago. That’s not a mining company so much as a group of investors cobbled together by entrepreneur Tom Clarke.

But over the summer one of the “partners,” Nubai Global Investments, successfully booted Clarke from the project. It would appear that his bankrupt ERP Iron Ore was a drain on efforts to raise money. Then, on Tuesday, new investors entered the mix.

The majority owner is a Swiss outfit called Mercuria Global Energy Solutions. They buy and sell commodities around the world. Another junior partner is a familiar name, Essar Steel.

That’s right. India’s Essar Steel, the bankrupt global giant that bought and partially developed the Nashwauk project more than 10 years ago.

One might be tempted to enter political hysterics over this matter. But it would appear this wheel is very much still in spin.

Another interesting tidbit: ArcelorMittal, the world’s largest steelmaker and owner of two Mesabi Range taconite plants, told the media it might be interested in buying the Nashwauk project “if the deal blows up.”

That’s interesting. But it’s only one of the ways A-M could end up with its hands on the old Butler.

ArcelorMittal is currently making an aggressive bid to buy Essar Steel in bankruptcy reorganization. If this happens, whatever Essar owns now belongs to ArcelorMittal.

(UPDATE: Jerry Burnes reports that Essar Steel Minnesota has maintained its corporate firewall between itself and former parent Essar Global, the subject of ArcelorMittal’s bid. So A-M would not automatically assume partial ownership of the Nashwauk project. However, the corporate lineage is close and it’s too early to say how this fits into big picture planning).

That’s where Essar’s involvement in Nashwauk becomes a hint of some bigger strategy.

Whether this is ArcelorMittal making a play behind the scenes, or an effort by Mercuria and Essar to loop them into a business arrangement, I don’t know. It’s just as likely that this Nashwauk situation is just a tiny blip on a global radar screen.

We do know that ArcelorMittal is majority owner of Hibbing Taconite, which will need a new supply of iron ore within about five years to remain viable. Furthermore, we also know that Cliffs is resigning as the manager of Hibbing Taconite next year, leaving ArcelorMittal and minority owner U.S. Steel to come to some new arrangement.

Oh, and who owns Keewatin Taconite, the mine in between the Nashwauk project and Hibbing Taconite? That would be U.S. Steel. KeeTac and Hibtac are mining toward each other and will one day meet.

Is this all related? Maybe yes and maybe no. But it’s certainly a set of interdependent factors.

The twists keep coming. Tomorrow at 1:30, Cliffs CEO Lourenco Goncalves will hold a press conference at United Taconite in Eveleth. The topic: Cliffs’ plans for its Minnesota operations.

The mining industry always drops its big news on Friday afternoons.

(Bonus drama: The Steelworkers unions at three Iron Range mines have authorized a strike vote).

Though many questions remain, one fact is certain: the ore beneath the old Butler Taconite mine is valuable and several companies want it.

But a steel mill on the edge of Nashwauk? Hundreds of new jobs?

The simplest explanation is usually correct. Thus we see that the ore is valuable and necessary, but investing in brand new private infrastructure is risky.

If Mesabi Metallics successfully builds a processing plant in Nashwauk, good for them.

But to me, it seems a good time to temper our expectations and hold our hats tight. Change is coming.


Comments

  1. http://Derek says

    HBI Joint Venture with Cliffs as operator, much like how Hib-Tac was/is organized?

    Aaron, how can we listen to the press conference, you are the first source I’ve come across announcing the press conference.

    • I wouldn’t be shocked to see a Cliffs/Arcelor project come out of this. An HBI plant with additional concentrate going to Hibbing would be a good outcome. I wish I could attend this press conference, but I’m teaching at the time. I’d say follow Renee Passal on Twitter.

  2. http://Derek says

    well nothing happening yet. LG challenging the Governor again. But he says that HBI would be his goal before making another pellet plant at the site.

    Thanks for the follow Renee tip.

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