Australian iron mine gets U.S. Export Bank loan for U.S. equipmentA new Australian iron ore mine will get a $694 million loan from the Export-Import Bank of the U.S. under a deal approved Thursday in Washington but panned by Minnesota lawmakers and a major U.S. mining company.
By: John Myers, Duluth News Tribune
A new Australian iron ore mine will get a $694 million loan from the Export-Import Bank of the U.S. under a deal approved Thursday in Washington but panned by Minnesota lawmakers and a major U.S. mining company.
The bank’s board of directors gave preliminary approval of the loan to Australia’s Roy Hill mine in order to buy U.S.-made bulldozers, trucks and heavy mining equipment.
“Today’s preliminary approval of a $694 million direct loan to supply American-made equipment for an Australian mining project is an important step toward supporting an estimated 3,400 export-related U.S. jobs,’’ Daniel Reilly, spokesman for the Export-Import Bank of the U.S., said in a statement.
Reilly said the vote will benefit Caterpillar, General Electric and Atlas Copco Drilling Solutions Inc. But it also would hurt American industry on the Iron Range, said U.S. Rep. Rick Nolan, D-Minn.
“We ought not to be financing foreign companies that are ultimately going to be directly competitive with us,” Nolan said Thursday, adding that the beneficiary would be a mine owned by multi-billionaire Gina Rinehart.
“For American taxpayers to be providing financing for the richest woman in Australia, I think is an outrage,” Nolan said. “We’ve got 35 days here in the Congress to comment on this thing and I’m going to fight it.”
Sen. Amy Klobuchar also disagreed with the bank’s decision.
“I don’t agree with the Bank’s decision to move forward on this loan today, and I will continue to work to support Minnesota miners,” she said in a statement.
Because the deal is more than $100 million, it will be sent to Congress for review and comment. But it does not require congressional approval, and bank officials said they expect a final board vote on the deal, usually considered automatic, in December.
First reported by the News Tribune in August, the deal was strongly opposed by Nolan and U.S. Sens. Amy Klobuchar and Al Franken. The Minnesota DFLers wrote letters to the bank in advance of the vote saying the loan could weaken U.S.-based mining companies like Cleveland-based Cliffs Natural Resources.
The Roy Hill project is so big and so remote that entire new cities, ocean ports, roads, an airport and a 220-mile railroad are being built for a single mine that will produce 55 million tons annually — more iron ore than all U.S. mines combined.
Cliffs, which operates three Minnesota taconite iron ore mines and one in Michigan, says the deal unfairly benefits the massive mine in Australia’s outback in the competitive global market for iron ore, especially the Asian market including China.
Raga Elim, Cliffs’ vice president of government and public affairs, said Cliffs was “disappointed’’ with the bank’s vote.
“This action seems to signal the bank’s desire to continue its pattern of support for foreign iron ore projects that undermines the global competitiveness of U.S. producers,” he said.
It’s not the Australian mine that Cliffs had any thoughts of stopping, but the investment by a U.S. government-sanctioned bank tilting the playing field. Cliffs officials had said Roy Hill would “substantially injure U.S. iron ore producers” by pushing down the global price of iron ore by increasing the supply of iron ore, displacing U.S. iron ore exports headed to Asia.
And it’s not just global-market iron ore producers that could be hit. All that new Asian steel produced with cheaper Roy Hill iron ore will hit U.S. steel producers when that cheaper Asian steel is shipped to the U.S for construction projects here.
And if less U.S. steel is produced, that means reduced demand for all Minnesota taconite. In its argument against the loan, Cliffs estimated Roy Hill’s output would displace nearly $600 million of U.S. iron ore exports and would cause a reduction of about $1.2 billion in U.S. domestic sales.
The United Steelworkers Union joined Cliffs, some domestic steel producers and politicians in opposing the loan.
Caterpillar officials say the Roy Hill mine will be built with or without U.S. equipment. But without the loan, the equipment used in the mine probably would come from Korea or Japan.
Caterpillar said the $694 million contract to provide giant haul trucks, bulldozers, lift shovels and more is a huge contract that will spur jobs in places such as Decatur, Aurora and East Peoria, Ill., and Milwaukee.
The little-known Export-Import Bank generally operates without much public attention. But it has come under fire before from global aircraft manufacturers, free-market think tanks and others for providing billions in loans to foreign airlines to purchase airplanes from U.S.-based Boeing.