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Bankruptcy petition filed against ERP Iron Ore

Final product is carried by a conveyor belt in the former Magnetation Plant 2. ERP Iron Ore, which purchased Magnetation earlier this year, plans on producing pig iron for Ohio steel mills. (2014 file / News Tribune)

ERP Iron Ore, the company trying to revive the bankrupt Magnetation operations in Grand Rapids, could be headed in the same direction as its predecessor after four companies filed a Chapter 7 bankruptcy petition against the company Friday.

ERP owes one creditor — Minnesota Power — $4.4 million for electricity and service, according to the petition. That resulted in the power company terminating ERP's service on April 17, said Pat Mullen, senior vice president of external affairs for Allete, Minnesota Power's parent company.

"When we cut off the power, it was because we had tried to reach out to representatives from his company to satisfy the payment on the bill and we cut it off for failure to reach an agreement for them to pay their bill," Mullen told the News Tribune Tuesday.

The other debts include $47,000 to Chester Company Limited, $6,750 to HT Surface and Mineral and $21,000 to Glacier Park Iron Ore Properties, the successor to the dissolved Great Northern Iron Ore Properties, for 2016 royalties relating to the Holman Tailings Basin License Agreement as well as $398,000 to Glacier Park for 2016 royalties from various mineral leases.

ERP owner Tom Clarke told the News Tribune by phone Tuesday that those debts mostly rolled over from the January 2017 purchase of Magnetation.

Friday's petition, he said, was "filed in bad faith" and his lawyers are preparing to file motions for dismissal.

An involuntary petition filed by creditors forces debtors to repay or risk going into bankruptcy.

ERP has already begun to repay the creditors, Clarke said.

"Three of them have already been paid. The fourth one is going to be paid (Wednesday) I believe and then the largest, Minnesota Power, I'm communicating with them — we're going to work it out," Clarke said.

Jennifer Bell, chief investment officer for Tom Clarke's entities, said the debts owed to HT Surface and Mineral and Chester Company Limited and the smaller amount owed to Glacier Park were repaid Tuesday morning.

The two largest amounts — to Minnesota Power and another to Glacier Park — have yet to be paid, but Bell said they are working with investment partners to secure funding.

"We are working right now to get the cash in as quickly as possible," Bell said in a telephone interview Tuesday afternoon.

While the former Magnetation site is not yet operational — Clarke expects it to be up and running in July — the six or seven employees with office space there needed to be relocated after the power was cut last month.

Friday's petition is the latest legal hurdle for Clarke and his Iron Range ambitions. Clarke also owns Mesabi Metallics and Chippewa Capital Partners.

Earlier this month, a federal bankruptcy judge heard oral arguments on whether Glacier Park had the right to pull its mineral rights at the Mesabi Metallics Nashwauk mine site out of a bankruptcy agreement and sell them to Cleveland-Cliffs.

Jimmy Lovrien

Jimmy Lovrien is a reporter for the Duluth News Tribune. He spent the summer of 2015 as an intern for the Duluth News Tribune and was hired full time in October 2017 as a reporter for the Weekly Observer. He also reported for the Lake County News-Chronicle in 2017-18. Lovrien grew up in Alexandria, Minn., but moved to Duluth in 2013 to attend The College of St. Scholastica. Lovrien graduated from St. Scholastica in 2017 with a bachelor's degree in English and history. He also spent a summer studying journalism at the University of California, Berkeley.

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