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Judge upholds DNR's termination of Mesabi Metallics' leases

The project failed to raise the full $200 million required by the agency in a last-chance deal last year.

Workers in a boom lift work in a half-finished building.
Workers in a bucket boom ready the beams for metal sheeting in the fine ore storage building at Mesabi Metallics in 2017.
Bob King / File / Duluth News Tribune
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DULUTH — A judge upheld the termination of leases for a long-stalled iron ore mine and half-built processing plant near Nashwauk.

Judge Robert Awsumb said in an order filed Thursday in State District Court in St. Paul that the Minnesota Department of Natural Resources properly terminated Mesabi Metallics’ leases in May after the company failed to meet a last-chance requirement set by the state after years of missed lease requirements and deadlines.

Mesabi Metallics.jpg

Awsumb said Mesabi Metallics must also pay $17.5 million in royalties to the DNR.

Mesabi Metallics only made half of the required $200 million available by May 1, 2021, blaming the COVID-19 crisis in India, where its funder, Essar, is based, for the shortcoming. Additionally, the DNR deemed one of Mesabi Metallics' lenders as not credible .

Mesabi Metallics filed a lawsuit in June arguing nothing in the agreement it formed with the DNR was “entirely unconditional or non-contingent.”
But Awsumb said otherwise Thursday and wrote that the full $200 million was a key part of the contract.

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“The undisputed facts included in the pleadings and related documents demonstrate that the $200 million deposit requirement was material as a matter of law,” Awsumb wrote. “In fact, it was foundational.”

In a statement, DNR spokesperson Gail Nosek said the agency was “pleased” with the court’s decision.

“As the DNR has consistently said, our focus and priority is on facilitating an operational, value-added facility that optimizes the outstanding ore body at Nashwauk,” Nosek said. “Going forward, we will carefully evaluate our options for doing this and will consider putting the leases up for bid or negotiating with qualified parties.”

READ MORE ABOUT MINING:
Talon, which has not yet began the permitting process, would need to start shipping concentrate by 2026.

Iron ore miner and steel producer Cleveland-Cliffs has long sought a project on the site, where it also holds a patchwork of mineral leases. Competitor U.S. Steel has also expressed interest in the site.

The $17.5 million in owed royalties goes toward schools, universities and the school trust fund, Nosek said.

In a statement to the News Tribune, Mesabi Metallics President and COO Larry Sutherland said the company will still pursue a project on the site.

It is unclear what it can do to make that happen without mineral leases.

“While we are reviewing today's court decision to determine next steps, we also hope to collaborate on concrete plans with all key stakeholders including with the state of Minnesota to get this massive project moving towards completion,” Sutherland said.

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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.

READ MORE BY JIMMY LOVRIEN:
With no special session, the earliest the Minnesota Legislature could take action is January.

Jimmy Lovrien covers energy, mining and the 8th Congressional District for the Duluth News Tribune. He can be reached at jlovrien@duluthnews.com or 218-723-5332.
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