PHOTO: Aaron J. Brown
Yesterday, Cleveland-Cliffs announced it would exit its agreement to manage Hibbing Taconite next year.
On Aug. 1, 2019 owners will need to have a new management structure in place to run the second largest iron mine in Minnesota.
Hibbing Taconite is owned by a combination of three companies. They include the world’s largest steelmaker ArcelorMittal (62 percent), U.S. Steel (15 percent) and Cliffs (23 percent). This ownership structure will remain intact.
However, ArcelorMittal and U.S. Steel contracted with Cliffs to operate the mine, handling administrative and operational duties. This arrangement has been in place since 1974. Now one of those two companies will need to step up, or they’ll have to find a third party contractor.
Hibbing Taconite employees will remain on the job. In a year they will, however, be transferred to the auspices of the new managers. That means that many sharing arrangements among Cliffs mines on the Mesabi will end by next year. Though this kind of change has been rumored in the past, it now takes real form.
Hibbing Taconite faces unique challenges. This mine, situated on what was once the richest iron ore deposit in the world, literally propelled the American war effort in both world wars. It was the wellspring of American industry and infrastructure. However today, the mine can see the end of its economically viable ore in the next decade or two.
HibTac needs ore. It could get ore by merging west into U.S. Steel’s Keewatin Taconite pit. It could jump Highway 169, obliterating yet another highway and the Minnesota Discovery Center in Chisholm (at untold cost). But both of these options hold limited appeal.
We see in the ongoing saga of the former Butler Taconite site in Nashwauk that Cliffs had sought ore from that location. Many at Hibbing Taconite believed that ore was for them. But that ore seems destined for the open market — either HibTac or the highest bidder.
We’ve got a year to figure it out, but this certainly has the attention of thousands of people in the central Mesabi Range.
This is probably a result of the Tom Clarke statements regarding a “commitment” to provide Nashwauk ore to HibTac that Cliffs said was false. Something happened that resulted in an impaired relationship between Cliffs and the other JV members. If Mesabi Metallics truly goes belly-up, not only will the DNR and Dayton have egg on their face for the mess, but they will have allowed the circus of Clarke to screw up a profitably operating Joint Venture relationship.
Clarke says he is an environmentally-minded miner, but the only things left in his wake are broken promises and in-operable mines. Maybe he’s being “environmentally conscious” by decimating industry.
In the grand scheme of the iron ore dilemma in Minnesota. I think this may be a minor issue compared to an unknown foreign entity taking over a large part of the states most valuable resource. It appears the Governor’s American friend has been squeezed out. Now, barring any corrective action by the state, they’ve got sole control. Even more frightening, is the possibility it may simply be “Essar part 2.”