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Mesabi Metallics gets court permission to sign labor deals

Mesabi Metallics continues its efforts to revive the former Essar Steel Minnesota project in Nashwauk. The company is battling Cliffs Natural Resources for support from state officials to gain critical state mineral leases at the site. (2015 file / News Tribune)

A federal bankruptcy judge has given Mesabi Metallics authority to renew labor agreements with construction workers and eventual employees of the proposed new taconite mine and processing center in Nashwauk.

The company, which is trying to salvage the former Essar Steel Minnesota project, now can renew the project labor agreement with the Iron Range Building and Construction Trades for future construction work on the project.

The court order on Thursday also authorizes Mesabi Metallics to enter into a "neutrality/card-check" agreement with the United Steelworkers of America for employees at the plant — if the project is ever finished.

Mesabi Metallics is trying to acquire the bankrupt Essar Steel Minnesota project, pay off some of the past-due debt and restart work on the project that's been shuttered, half built, for 15 months.

The company says it has a viable plan to take Essar's $1.6 million already spent, invest another $800 million to finish the project and put 350 Steelworkers to work at the state's first all-new taconite operation in nearly 40 years. The company also wants to pay off vendors and contractors, most of them Minnesota firms, at least in part for the work already completed.

"Mesabi Metallics is firmly committed to having this project constructed by trade union workers from the local building and construction trades," Mitch Brunfelt, spokesman for the firm, told the News Tribune. Allowing for the card-check agreement "essentially opens the door wide open for the Steelworkers union to engage in a campaign to unionize/organize Mesabi Metallics' hourly employees. Ultimately, the decision of whether to unionize with the Steelworkers union is completely up to the hourly workers and is not a decision made by the company."

The pro-union efforts by the company have drawn support from most Iron Range lawmakers who are backing Mesabi Metallics in its efforts to restart the project. But not all state officials agree. Minnesota Gov. Mark Dayton continues to thwart Mesabi Metallics, instead favoring Cliffs Natural Resources to acquire the rich taconite iron ore under the Nashwauk site. Dayton is trying to withhold state mineral leases that cover about 40 percent of the mine site. Ultimately, the fate of those leases lies with the bankruptcy judge in Dover, Del.

The battle for the hearts and minds of local officials has gotten personal in recent weeks. Some of Cliffs' shareholders, of which there are many on the Iron Range, have been recruited by the company to convince Range lawmakers to back Cliffs, and not Mesabi Metallics, for the Nashwauk site.

So far, most Range lawmakers — with the exception of Sen. Tom Bakk, DFL-Cook — are bucking Dayton and backing Mesabi Metallics. In a Jan. 12 letter to DNR Commissioner Tom Landwehr obtained by the News Tribune, Sen. David Tomassoni, DFL-Chisholm, and six other Range lawmakers said they want the state leases to go to Mesabi Metallics, not Cliffs.

"We are satisfied that the interests of the state and local stakeholders are being adequately addressed through the terms being proposed by Mesabi Metallics," the letter noted. "Based on our discussions with Mesabi Metallics' management team, we also believe the company management is doing everything it can to make sure the millions in past due amounts owed to local contractors and vendors for their past work on the project will be adequately addressed."

The lawmakers urged the DNR to award the state leases to Mesabi Metallics for a limited time to help kickstart the project.

So far, Dayton has not allowed that. Mesabi Metallics has pleaded to meet with Dayton, so far to no avail.

"No other company has made any commitment to pay anything to the local businesses for past work on the project," the company said in a statement to the News Tribune. "If Mesabi Metallics successfully reorganizes and exits bankruptcy, it is clear that Mesabi Metallics is absolutely committed to moving forward with completing the project, which translates into hundreds of millions of dollars of additional investment in our region, in the near term. Obviously, these area legislators do not want to see such an enormous investment in the region simply go by the wayside. No other company has presented any specific plans nor made any firm commitments to actually complete this development project if they somehow succeeded in acquiring this asset."

A key court hearing in April could determine the fate of the bankruptcy effort. If the judge agrees that Mesabi Metallics has adequate financing to revive the project, and adequate orders for its taconite, the judge could simply award the state leases to the new company over Dayton's objections.

Cliffs so far has not made an offer for the project but would be able to do so when the current "period of exclusivity" is over that gives Mesabi Metallics first chance to revive the project. Others have speculated that Cliffs CEO Lourenco Goncalves is trying to thwart Mesabi Metallics' success in Chapter 11 so the project falls into Chapter 7 liquidation, at which point Cliffs could acquire the project in a fire sale for pennies on the dollar.

Goncalves has called Mesabi Metallics a "fly by night" operation and has said that there's no need for any new taconite iron ore production for the domestic steel industry.

Goncalves claims that, if Mesabi Metallics opens, it will simply displace other taconite workers, likely at Cliffs plants on the Range. He's urged state officials and Iron Range residents to back Cliffs, a known company with history of employing Iron Range residents.

But Mesabi Metallics said Goncalves is simply fear-mongering, and that increasing demand for U.S.-made steel already is opening up new customer orders for taconite well beyond what is currently being produced.

"Some critics of the Mesabi Metallics project have been making inaccurate statements that there is an oversupply of iron ore pellets in the market and, consequently, there are no customers to buy the pellets that would be produced by Mesabi Metallics. Some critics are even going so far as to incorrectly claim that any new pellet supply capacity coming on line could displace other Iron Range mining operations and lead to layoffs at those facilities," Mesabi Metallics said in a statement. "Those are just unfortunate, red-herring scare tactics. ... There are a number of off-take opportunities that exist in North America that are not being supplied by other Iron Range mining operations and that can be supplied by Mesabi Metallics, particularly in DR (directly-reduced iron) grade and flux pellets."

Goncalves says he wants the ore at the Nashwauk site to make directly-reduced iron that can be used in electric arc "mini-mill" steel mills. But it's unclear what his plans are for facilities at the site. He has said there's no need to build another taconite plant at the site — even though the facility is half-built.

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