Essar accepts Gov. Dayton’s repayment terms

(Aaron J. Brown)

(Aaron J. Brown)

On Dec. 31, Gov. Mark Dayton announced that Essar Steel Minnesota has accepted the repayment terms he laid out just before Christmas. This means that the company will repay almost $66 million over the next five years.

“This project is tremendously important to the Iron Range, supporting more than 700 construction jobs and an expected 350 permanent jobs once the plant opens,” said Governor Mark Dayton in his statement. “Essar Steel Minnesota CEO Madhu Vuppuluri’s willingness to accept the state’s final offer – and repay the loan because it did not live up to the terms of its original agreement – is an important step to move this project forward.”

The state granted the infrastructure money to Essar almost 10 years ago in a bonding bill. The company said it would produce value added direct-reduced iron at the site of the former Butler Taconite plant near Nashwauk. That idea excited local and state officials from the Iron Range, eager to modernize the region’s aging mining sector.

Unfortunately, tricky global financing and a dragging iron ore market have slowed the project. In the process, Essar downgraded the scope of its project. Instead of value-added iron or steel, Essar will first produce basic taconite pellets, hoping to add the rest sometime in the future. Meanwhile, Essar has run afoul of its vendors and contractors a few times, failing to make payments for services.

Nevertheless, construction has employed several hundred people over the past few years and significant progress has been made at the site, albeit in starts and stops.

Essar’s new mine will be one of the stories to watch in 2016. While it’s been a long, slow disaster to get built, once it’s up it purports to become the lowest cost producer of iron ore on the Range. If true, that could make Essar, or whoever owns Essar’s plant, more resilient in what is shaping up to be another dismal year for iron ore prices.

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