Mesabi Metallics, the beleaguered iron ore mine and half-built processing plant near Nashwauk, sued the Minnesota Department of Natural Resources for terminating the company's mineral leases last week.
In a lawsuit filed Friday in State District Court in Ramsey County, Mesabi Metallics claimed the DNR violated the master lease amendment when the state agency moved to terminate the leases. The amendment included a set of last-chance requirements the company had to meet by May 1 if it wanted to keep its leases at the site.
The company asked the court to prevent the DNR from taking additional steps to terminate the leases.
In early May, the DNR said Mesabi Metallics made only half of a required $200 million available by May 1. Later, the DNR deemed one of the company's lenders not credible.
The company does not dispute the missing $100 million, blaming the COVID-19 crisis in India for the delay in making the cash available. Essar Global, Mesabi Metallics' parent company, is based in Mumbai, India. In its lawsuit, Mesabi Metallics said the pandemic made making the full $200 million available "impractical and/or impossible … and should thus be excused."
The company took issue with the DNR, describing one of its lenders, Mark AB, as not credible because there were so many contingencies tied to its funding.
"Nothing in the 2020 Amendment provides that the 'binding and enforceable commitment' be entirely unconditional or non-contingent. Indeed, such a requirement would be absurd and unobtainable from any reasonable lender," the company said in the complaint filed Friday.
The DNR had described Mark AB as "not a credible lender for the project" and cast doubt on whether it could actually provide $450 million in financing since that would make up more than 40% of its $1.1 billion in total assets.
"Mesabi Metallics is confident that the recent actions of the DNR fail to meet the legal standard of reasonableness required of the DNR as a party to the Master Lease Amendment, and as a state agency that must manage Minnesota’s resources in an even-handed manner for the good of the state and its residents," the company said in a news release Friday.
Since 2007, iterations of Mesabi Metallics — the former Essar Steel Minnesota project that has had multiple owners, managers and names — has floundered through construction stoppages, bankruptcies, missed deadlines, late payments and other legal battles. In the works for more than a decade, the project sits about half-finished. While Essar walked away from the bankrupt project in 2015, leaving behind $1 billion in debt, the company reentered the picture after settling some $260 million of debt.
The DNR has said Mesabi Metallics missed deadlines and requirements as fitting "Essar Global’s long-established pattern of showing up late, with less than what is required, and with illusory promises of financing that is unlikely to ever materialize. This is also exactly the type of intentionally deficient performance that caused the project to fail in 2015."