Essar Steel Minnesota gets another loan extensionThe Iron Range Resources and Rehabilitation Board on Thursday agreed to extend the payback period on a $6.7 million loan to Essar Steel Minnesota by nearly two years.
By: John Myers, Duluth News Tribune
The Iron Range Resources and Rehabilitation Board on Thursday agreed to extend the payback period on a $6.7 million loan to Essar Steel Minnesota by nearly two years.
The loan, due at the end of the month, will be extended to Oct. 1, 2014.
It’s the third time the loan, originally made in 2004 to Essar’s forerunner, Minnesota Steel, has been extended. Essar continues to make progress on completing a new taconite mining and processing operation in Nashwauk and remains hopeful of also building a steel mill at the site.
But the project, which had a groundbreaking in 2008, has moved ahead slowly. The company still isn’t producing any product, and thus can’t repay the loan yet. The extension will allow Essar to begin producing taconite before payback is required, said Tony Sertich, IRRRB commissioner.
“It reflects the reality of the current economic conditions and where the project is,” Sertich said.
The $1.7 billion operation will employ 300 people and will be Minnesota’s first new taconite mining and processing operation in 35 years when it opens.
Construction is advancing and the plant could be ready to produce pellets late in 2013, said Kevin Kangas, Essar spokesman. Taconite will run out of the plant by rail and on to Essar’s Algoma steel mill in Canada, to other U.S. mills through the spot market or even as far as Essar steel mills in India, company officials have said.
But the taconite plant has always been considered just the first stage of a two-stage project, with a $1 billion direct-reduced iron mill expected in the future. It would be the first such facility ever in the U.S., with mine, ore processing and steel mill at the same location, and would fulfill a long-held dream of Range leaders to add value to taconite in Minnesota rather than far-flung mills.
On Thursday Steve Rutherford, Essar’s project director, told IRRRB officials that the company is in negotiations with three potential partners for the steel mill portion of what would be among the largest single private projects in state history.
Rutherford stopped short of naming the potential partners or saying when a deal might be struck. He said options included a company coming onto the Essar site to build the plant independently or coming in as a partner with Essar.
Sertich said adding a partner makes sense for Essar, noting another $1 billion investment for the company might be too much. Essar already has obtained all needed permits for both the taconite plant and steel mill stages of the project.
“I see this is good news simply because of the capital investment involved here. It would be hard for any company to come up with $1 billion on top of what already is going to be close to $1.7 billion all on their own,” Sertich said.
The steel mill portion of the project would add another 100 employees in addition to the taconite operations.
Essar Steel Minnesota is a subsidiary of Mumbai, India-based steel giant Essar Group, a $20 billion firm with about 70,000 employees worldwide.