Out of cash and unable to finish its half-built taconite mine and processing center in Nashwauk, Essar Steel Minnesota is preparing to move into bankruptcy.

Essar has hired financial and legal advisers to help restructure its debt, several financial news sources reported over the weekend, citing unnamed sources close to the situation.

Reuters reports that Essar has hired investment bank Guggenheim Partners LLC and law firm White & Case LLP as debt restructuring advisers. Essar Steel Minnesota has about $1 billion in debt on the project and no income.

The company's $1.9 billion mine and processing facility, Minnesota's first all-new taconite iron ore operation in nearly 40 years, sits idled with little hope for the 350 jobs it once promised.

The looming bankruptcy also leaves in question how much money the state of Minnesota will get out of the nearly $66 million Essar owes for not living up to an economic development grant deal to create jobs in an ironmaking plant at the Nashwauk site, a project that Essar has long since scrapped.

Essar faces a Friday deadline to make the first $10 million payment on that state debt.

Essar also owes million of dollars to vendors and contractors, some of which already have filed suit. And the company owes millions to a natural-gas supplier that won a federal court case last year against Essar for breach of contract.

State Rep. Tom Anzelc, DFL-Balsam Township, said a representative of major investors in the Nashwauk plant have been on the Iron Range in recent days investigating how the project might proceed without Essar involved.

"I'm actually optimistic that by getting Essar out of the way, we may see good things still happen" at the Nashwauk site, Anzelc said Sunday. "The investors are apparently willing to move ahead, possibly looking for other new partners, and finish the project. They also seem interested in moving toward a DRI (direct-reduced iron) product as well."

Anzelc said the path to having Essar out of the project remains unclear, with Essar either walking away on its own, a foreclosure of sorts by investors or full-blown bankruptcy reorganization.

Essar Steel Minnesota is a U.S. subsidiary of shipping, natural resources and power conglomerate Essar Global Group in Mumbai, India. Mitch Brunfelt, spokesman for Essar Steel Minnesota, did not immediately return a request to comment on the developments on Sunday.

To the rescue?

As the News Tribune reported last week, Cliffs Natural Resources CEO Lourenco Goncalves made a thinly veiled plug for his company - facing debt issues of its own during the iron ore downturn - to somehow acquire the Essar site to make a new kind of taconite pellet that can be made into direct-reduced iron at the site.

That final iron nugget product would be used to make steel in electric hearth furnaces, so-called mini-mills that now account for two-thirds of all steel made in the U.S. Nearly all of Minnesota's taconite iron ore traditionally has gone to blast furnace steel mills which now account for only one third of domestic steel.

Goncalves said the Essar site has the perfect iron ore - low in silica - and that Minnesota's Iron Range should have an iron nugget plant to feed mini-mills.

"We are only scratching the surface with one third of the market,'' Goncalves said at a meeting in Virginia on Wednesday. He met with Minnesota Gov. Mark Dayton earlier in the week.

"We need to put a DRI facility in Minnesota,'' Goncalves said, adding about the unfinished Essar project "it's clear something has to happen there. ... We're going to deal with that situation."

But Anzelc noted that Cliffs already is facing a crushing debt load and appears unable to raise the money needed to acquire the Essar site even in a bankruptcy sale. Anzelc said it may take a "consortium of partners," such as steelmaker ArcelorMittal, and including the state of Minnesota, to finally finish the Nashwauk project

Anzelc also sees North Carolina-based Nucor Steel as a player, noting the mini-mill steelmaker already has the technology to turn taconite iron ore into steel in electric furnaces.

"Nucor has the technology that seems to be in vogue right now," Anzelc said. "How we get there from where we are, I'm not sure yet. But I'm more hopeful something is going to happen now that they are pushing Essar out of the way."

Unpaid bills, troubled history

Essar Steel Minnesota's history has been marked by controversy for more than a decade. The project was originally proposed in the 1990s as Minnesota Steel. That company foundered, however, and India-based Essar appeared as a savior in 2007 when it agreed to take over the project that included not only an iron ore mine and processing center but also an iron plant and steel mill. It would have been North America's first such operation, where ore would go from the ground to finished product at the same site. The project would have created more than 1,000 jobs with twice that many spin-off jobs.

Ground was broken in 2008. But work has occurred in fits and starts, first hit by the Great Recession and then seeing little progress even as the global economy improved. Essar said it obtained $850 million in financing in 2014 and indeed restarted work in earnest last year. The company as recently as October appeared poised to finish the project and begin making taconite pellets later in 2016.

But that promise was dashed near Christmas when 700 construction workers and even Essar's own newly hired employees were pulled off the project and sent home.

Earlier this month the News Tribune first reported that Essar Steel Minnesota was being sued by the companies that provided the potential Keewatin taconite company with giant haul trucks and front-end loaders that allegedly haven't been paid for. The suit, filed in State District Court in Itasca County, claims that Essar owes New York-based Axis Capital Funding more than $27.6 million in accelerated rents, damages and other fees under a lease agreement Essar has violated.

The suit, filed last month, also claims Essar owes Nebraska-based ESML Funding $1.3 million. The suit claims Essar hasn't made monthly payments for 10 different Caterpillar trucks and loaders - the giant pieces of equipment that lift ore-bearing rock out of mine pits and haul it to the processing plant.

It's not the first time Essar was sued by vendors and contractors for not paying its bills. Several companies filed suit in 2014 when Essar stopped paying bills.

With iron ore prices low and a glut of ore on the world market, many companies are idling mines, making it a tough economic environment for Essar to open a new one. There's also less domestic demand for taconite iron ore pellets, with U.S. steel mills still recovering from an influx of cheap foreign steel dumped into the domestic market. Industry experts have noted that Essar's new taconite would simply replace pellets from another domestic company, with no need for additional pellets.

Essar officials in January said the latest construction shutdown and layoffs would be only temporary but that any recall of workers "will depend on several factors over the coming weeks." Those factors included the company's ability to find even more funding to continue work on the project, something that still hasn't happened.

Essar Steel Minnesota's move to restructure its debt comes shortly after its Canadian sister company, steel manufacturer Essar Steel Algoma Inc., also filed for bankruptcy. And Essar's India-based steel company also is moving to restructure, according to newspapers in India. According to Credit Suisse, Essar Steel's debt in India hit about $7.8 billion in 2015.