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Prairie River Minerals faces foreclosure

Lakehead Constructors moved to foreclose on the start-up scram mining company, which still owes the general contractor almost $2.4 million.

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A start-up scram mining operation on the Iron Range has not paid its general contractor or others for building its demonstration plant and is now facing foreclosure.

Prairie River Minerals, which bought up two former Magnetation/ERP Iron Ore properties out of bankruptcy in 2019 with the intention of using flotation to extract iron ore from waste rock left behind by old mines, still owes Superior-based Lakehead Constructors Inc. almost $2.4 million for the construction of its demonstration plant near Coleraine, the News Tribune reported Wednesday .

But on Friday, Lakehead intensified its efforts to recover the money, filing a complaint to foreclose in State District Court in Grand Rapids on the mechanic’s and miner’s liens it placed on Prairie River Minerals’ property.

Prairie River Minerals still owes Lakehead almost $2.4 million for the construction of its $5.9 million demonstration plant. It blew past a Sept. 25, 2021, deadline the companies agreed on through a settlement reached after Lakehead put liens on the property in February 2021 and filed a lawsuit against the mining company the following month.

“To date, Prairie River has not secured any financing and funding to pay-off the amounts due and owing under the Settlement Agreement,” Lakehead wrote in Friday’s complaint. ”Upon information and belief, Prairie River representations to Lakehead regarding financing and funding were knowingly false as Prairie River knew it would not be able to secure financing and funding.”

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Lakehead CEO Brian Maki and an attorney for Lakehead declined to comment.

Prairie River Minerals CEO Scott Conley and an attorney for the company did not respond to multiple phone calls from the News Tribune seeking comment.

The company said it was testing its ore recovering methods at a small scale and would be sending samples of its product out by ship from the port of Duluth-Superior to an unspecified steelmaking company that Prairie River Minerals had hoped to secure as a customer so it could ramp up production.

According to the March lawsuit, Prairie River Minerals officials told Lakehead that they had the financial support of Anglo American plc, a London-based mining company.

Prairie River Minerals also owes $36,000 to Ferguson Enterprises LLC, a state of Virginia-based plumbing supply company, according to a separate lawsuit Ferguson filed against the mining company in October 2021.

According to its March lawsuit, Lakehead began work on the demonstration plant in April 2020 but had to pause for six weeks because Prairie River Minerals “failed” to receive key permits from the Minnesota Pollution Control Agency . It received a water permit in September 2020 and its air permit in November 2020 . Lakehead finished work on the demonstration plant in December 2020.

Prairie River Minerals paid approximately $1.8 million of the $5.9 million billed by Lakehead beginning in July, but made its last payment in September.

In the March 2021 lawsuit, Lakehead said company officials “lied to Lakehead at the inception of the contract and throughout the Project in order to fraudulently induce Lakehead to work for (Prairie River Minerals) and to continue working once construction was underway.”

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By then, it still owed Lakehead more than $4 million.

The two companies reached a settlement and Lakehead voluntarily dismissed its lawsuit without prejudice in June.

The settlement required Prairie River Minerals to pay Lakehead the $4 million by the end of September 2021. But it failed to meet that requirement and only paid Lakehead $1.7 million, leaving $2.4 million that still remains unpaid.

Lakehead is seeking the property be foreclosed and then “sold by the sheriff to satisfy Lakehead’s liens and that the proceeds be applied to the amount judged to be due and owing to Lakehead.”

Earlier this month, a federal bankruptcy judge approved the sale of Prairie River Minerals’ Jessie Loadout rail facility to MagIron , a different start-up scram mining company, for $500,000.

Lakehead had initially opposed the sale, but withdrew its objection to the sale of the Jessie Loadout facility to MagIron after language was included that its liens would not be impacted, according to court filings.

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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