Chippewa Capital Partners buys land, half of Nashwauk ore
A sister company to Chippewa Capital Partners has purchased 1,040 acres of land and the rights to half the iron ore below at the Nashwauk mine site of its fledgling Mesabi Metallics taconite project.
Deeds for the purchase were filed with Itasca County on Wednesday.
The purchase appears to secure the taconite iron ore that Chippewa needs for the rebirth of the bankrupt, partly-finished former Essar Steel Minnesota project. Mesabi Metallics workers this week moved a large mining drill into place to begin the process of blasting and stripping ore off the mine wall, the first such action under the new company.
The purchase gives Chippewa owner Tom Clarke not just the land but also half-ownership of the privately-owned taconite iron ore at the site, with Cleveland-Cliffs claiming ownership of the other half.
The two possible co-owners have been locked in legal wrangling and verbal sparring over the ore for months.
Clarke also has first rights to state of Minnesota iron ore around the Nashwauk mine site, but only if he gets the Mesabi Metallics project up and moving toward completion by summer.
Clarke said he could not comment on details of the purchase. But according to Nicolle Zuehlke, Itasca County register of titles, the purchase was made by Miranda Mineral Resources LLC, one of the companies owned by Clarke and his wife. It appears one deed is for about $31 million to buy 440 acres of the land, and rights to half the ore, from Superior Mineral Resources LLC. There apparently is a mortgage for about $38 million for the 600-acre parcel, bringing the total purchase price to about $69 million.
"We still firmly believe that (Essar Steel Minnesota Bankruptcy) Judge (Brendan) Shannon would have agreed with us that we still had the lease rights to that land. But with this purchase, it removes any doubt that it's our land and our ore," Clarke said Thursday. "We had to get rid of that cloud over access to the mine site and we've done that now. We're going to start mining right now."
In addition to mining ore at the site, Clarke says he hopes to speed up construction at the nearby plant site in coming months, saying he already has willing buyers for taconite iron ore concentrate as well as finished pellets and possibly raw iron ore.
A Cleveland-Cliffs spokesperson did not return a request to comment on the development.
Battle for ore
Mesabi Metallics plans to mine and process taconite iron ore and turn about half into pig iron at the Nashwauk site. That pig iron will be used as an additive to make steel in electric arc mini-mill steel mills, breaking into a U.S. pig iron market that has been cornered by Brazil, Russia and the Ukraine. The other half of the taconite pellets will be sold to Mexico and Asia, Clarke has said.
Superior Mineral Resources was co-owner of the private mineral rights at the site with Glacier Park Iron Ore Properties LLC. Glacier Park apparently sold its half to Cleveland-Cliffs in December, although the federal bankruptcy judge is still deciding if that sale is allowable under the Essar bankruptcy agreements.
If the judge allows the December Cliffs purchase, Clarke and Cliffs would each own half the iron ore below the site. (Cliffs also has purchased other, nearby private ore.) If the judge disallowed the sale to Cliffs, Clarke would have the opportunity to buy all of the private ore at the site.
"In the worst-case scenario, we are 50-50 partners with Cliffs in that ore. But we own the land we need. We have the mining permit. We will get the state" iron ore as well, Clarke said. "Things are rapidly falling into place now. Good things are happening."
Once completed, the all-new Mesabi Metallics facilities would employ about 350 people, with Clarke vowing to let the United Steelworkers union organize the project if the workforce chooses. If all goes well, Clarke hopes to be producing taconite pellets and pig iron in late 2020 or early 2021.
India-based Essar Steel Minnesota spent $1.8 billion on the project and wasn't close to finishing the job when it walked away late in 2015 and later declared bankruptcy after years of delays and mismanagement. Engineering consultants tell Clarke it will cost another $1.3 billion to finish the mine, concentrating facility and pelletizer, then another $650 million to build the pig iron plant. Add it up, and at $3.7 billion or so it's by far Minnesota's most expensive single private construction project ever.
Cliffs sues Superior Mineral Resources
The saga over control the Nashwauk iron ore became even more entangled recently when Cleveland-Cliffs filed suit in State District Court in Itasca County against Superior Mineral Resources.
Cliffs is claiming that Superior is somehow acting wrongly by not negotiating or selling to the Cleveland-based company. The six-page suit, filed Feb. 26, also asks the court to order the owner to give Cliffs access to the land, apparently now owned by Chippewa, so Cliffs can start mining there.
Meanwhile, Cliffs' December purchase of the other half of the Nashwauk ore from Glacier Park remains ensnared in the federal bankruptcy case that is determining the future of the former Essar Steel Minnesota project as Mesabi Metallics.
Clarke's Chippewa Capital Partners has asked the bankruptcy judge to nullify the sale as a violation of the lager bankruptcy agreement Clarke struck to gain control of the Essar project last summer. The company officially emerged from bankruptcy the week before Christmas.
While Cliffs CEO Lourenco Goncalves said he wants the Nashwauk ore to solidify the future of the Hibbing Taconite operations his company manages, Clarke said he's willing to share the ore with Cliffs, much like Hibbing Taconite's current owners — Cliffs, ArcelorMittal and U.S. Steel — already share the Hibbing mine ore.
Clarke says he has no intention of competing with other Minnesota taconite producers by selling taconite pellets to U.S. blast furnace steelmakers.
"We could ship our ore over to Hibbing Taconite right now," Clarke said.
But Goncalves has said he will never enter into any partnership with Clarke or Chippewa for ore at the Nashwauk site. In addition to managing and minority interest in Hibbing Taconite, Cliffs owns and operates United Taconite and Northshore Taconite in Minnesota.
The issue has pitted Goncalves against state officials and Iron Range leaders who have backed Clarke, and the promise of 350 new jobs, over Goncalves' effort to secure the ore but create no new jobs in Nashwauk. Goncalves has threatened to litigate against the state for access to state ore at the Nashwauk site and has threatened to move any expansion of his company to Michigan rather than Minnesota if he loses the battle for the Nashwauk ore.
Meanwhile, Clarke has reached out to ArcelorMittal, the majority owner in HIbbing Taconite, in an effort to broker a deal so both firms could have the ore they need.
Ohio pig iron project advancing
Clarke last year announced a partnership with Republic Steel to make pig iron using his Minnesota iron ore at a new facility in Lorain, Ohio. Officials from both companies in recent weeks said that project continues to progress. Most of that ore will come from Clarke's ERP Compliant Iron Ore, the former Magnetation operations in Grand Rapids. ERP has been shipping already-processed iron ore concentrate to Mexico via rail in recent weeks.
Republic and ERP formed Lorain Pig Iron and said they have retained "technical service providers" to study recommissioning Republic's blast furnace 4 in Lorain. LPI said it expects to begin producing pig iron with Minnesota ore in Lorain before the end of this year.