Iron Range's new mining projects stay on track

Undaunted by plummeting ore prices and a faltering steel industry, several multimillion-dollar mining initiatives continue to march forward on Minnesota's Iron Range.

Crude taconite is transported by a hauler truck en route to the crusher at Hibtac on Wednesday. These big mining trucks can weigh up to 480 tons under load. Amanda Hansmeyer /

Undaunted by plummeting ore prices and a faltering steel industry, several multimillion-dollar mining initiatives continue to march forward on Minnesota's Iron Range.

Tony Robson, an analyst for BMO Capital Markets, said global iron ore pellet contract prices are expected to tumble by 20 percent to 40 percent in 2009.

But Peter Kakela, a Michigan State University taconite industry analyst, pointed out that pellet prices are declining from record highs and still look to remain historically strong.

As tough as conditions may be at present, the ongoing interest in new Iron Range projects indicates that at least some in the industry remain bullish about the long-term prospects for profitable iron-mining ventures in northern Minnesota.

So far, Chris Nelson, mining section manager of the Minnesota Pollution Control Agency, said he has seen no sign of anyone easing up on efforts to obtain needed permits for proposed mining developments in the region.


"They all still seem to be high-priority projects," he said. "I haven't seen anyone stepping back or slowing their demand for permits."

The first of these projects likely to become reality involves reclaiming iron found in old mine tailings.


Just this past week, Magnetation Inc. began processing tailings near Keewatin with a mobile unit capable of operating on a commercial basis, said Larry Lehtinen, the company's chairman.

The operation is fully permitted, and Lehtinen said he expects to begin full commercial production of iron concentrate in a matter of weeks. He already has a customer, also a start-up operation, lined up to receive the material.

With the help of a proprietary patent-pending process, Magnetation aims to reprocess tailings from old natural ore mines that were active on the Range until the 1950s. These tailings often contain an iron content of 30 percent to 45 percent.

Lehtinen believes the portable processing unit his company has constructed will be capable of producing 225,000 metric tons of iron concentrate per year.

Iron concentrate is the primary component of iron ore pellets, but it also can be used to produce slab steel or iron nuggets.


All told, Lehtinen anticipates Magnetation will have sunk $9 million into the project by the time it's in full commercial production. The company currently employs about 20 people directly and an equal number of contractors, he said.


Construction of Mesabi Nugget in the Aurora/Hoyt Lakes area has continued unabated this winter, said Dave Bednarz, vice president of iron resources for Steel Dynamics Inc., a primary investor in the project.

"We know this project is a bit of an anomaly -- that we should still be moving full steam ahead despite the current state of the steel industry," he said.

But Bednarz explained that SDI considers the plant a critical future source of feed for electric-arc steel minimills it operates.

He expects to see Mesabi Nugget begin production by August or September. The facility still is awaiting permits needed to begin mining operations anew on property that was formerly home to LTV Steel. But in the interim, Lehtinen said Magnetation has agreed to supply iron concentrate to Mesabi Nugget's rotary hearth, enabling it to begin churning out nuggets.

The $250 million facility is expected to employ about 65 people initially and possibly more if additional processing units are built as anticipated.

While New York steel analyst Chuck Bradford remains skeptical that the economic stimulus emerging from Congress will do much for producers of iron ore pellets, he said it could be much more beneficial for outfits such as Mesabi Nugget, which supply feed to the minimills that produce most of the nation's steel construction components.


When asked whether the stimulus package presents an opportunity for SDI, Bednarz said: "Absolutely. SDI is a significant producer of structural steel, rebar, sheet piling, bars, joists and more."


Before the meltdown of the steel industry in late 2008, two longtime Iron Range fixtures announced plans to step up iron ore pellet production.

U.S. Steel unveiled a proposal to sink $300 million into Keewatin's Keetac pellet facility, increasing its annual production there from about 6 million to 9.6 million tons -- a 60 percent bump. The company projected the expansion would lead to the hiring of another 75 people, bringing Keetac's total work force to about 475 people.

Shortly afterward, Cliffs Natural Resources laid out plans to invest $104 million to expand its processing facility in Forbes in hopes of boosting output by 13 percent, or about 700,000 additional tons of pellets per year.

Nelson said MPCA's permitting work for both of these projects has not let up.

Maureen Talarico, a spokeswoman for Cliffs, confirmed that her company remains committed to the United Taconite expansion plans. But she added that those efforts are continuing "at a little less rapid pace than originally anticipated."

Cliffs Natural Resources earlier issued a forecast that its iron ore pellet production in 2009 will decline 39 percent from last year's levels.


U.S. Steel communications director D. John Armstrong did not respond to the News Tribune's request for an update on the Keetac project, but the company has made no indication it plans to hold off on the expansion. U.S. Steel had hoped to begin work on the construction in 2009, but it still is awaiting needed permits.

If either project receives permits, it will start the clock ticking. Permits remain good for 18 months, and continuous construction must begin before that time elapses or else the permitting process will have to begin anew.


By far the largest proposed project on the Range is a $1.65 billion slab steel plant Essar Steel plans to build near Nashwauk.

With necessary permits already in hand, Essar Steel Minnesota has begun site work, according to Debra McGovern, director of government and public affairs for the company. She said property for a plant has been cleared, dewatered, surveyed, and the first piece of foundation is now in the ground.

McGovern believes Essar is on track to open the first component of its operations -- a taconite plant -- by late 2010. She said a slab mill could follow and begin operation as soon as 2013. When completed, Essar Steel Minnesota, the state's first slab steel mill operation, is expected to employ about 500 people.

"Everything appears to be moving forward," McGovern said.


Peter Passi covers city government for the Duluth News Tribune. He joined the paper in April 2000, initially as a business reporter but has worked a number of beats through the years.
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