IRRRB approves tax rebate for Magnetation

The Iron Range Resources and Rehabilitation Board on Monday approved a $736,000 iron ore production tax rebate for troubled Magnetation LLC to help pay for recent improvements at the company's Plant 4 outside Grand Rapids. The rebate, which was t...



The Iron Range Resources and Rehabilitation Board on Monday approved a $736,000 iron ore production tax rebate for troubled Magnetation LLC to help pay for recent improvements at the company's Plant 4 outside Grand Rapids.

The rebate, which was tabled at a meeting late in 2015, is part of the state's ongoing program to encourage capital investment by mining companies by rebating a portion of their per-ton ore production tax.

All mining companies on the Iron Range can apply for the rebate, and all have received them, with each company's own investment required to match the tax rebate for each project.


Larry Lehtinen, Magentiaton chief executive officer, said the $1.5 million project made improvements made to the plant's "flotation circuit" system has helped the plant produce among the highest quality iron ore concentrate in the nation. The company's concentrate moves by rail to Indiana where Magnetation makes them into pellets that go to an AK Steel mill in Ohio.

Iron Range lawmakers who comprise the IRRRB tabled the rebate in December after questions were raised on whether contractors that made the improvements were paid and whether the company is current on state loans. In late 2014 Magnetation received $13 million in public loans to cover cost overruns at its new Plant 4 in Bovey - a $6.5 million bridge loan from the IRRRB to help cover the cost along with another $6.5 million from the Minnesota Department of Employment and Economic Development.

A little more than four months after receiving the state loans, however, Magnetation filed for Chapter 11 bankruptcy and has yet to emerge.

Lehtinen assured the board Monday that all vendors on the rebate project were paid and IRRRB staff confirmed the company is current on repaying the loans despite the bankruptcy.

Magnetation LLC was founded in 2006 and is a joint venture between Grand Rapids-based Magnetation Inc. and AK Iron Resources LLC, an affiliate of steelmaker AK Steel. Magnetation, which recovers valuable iron ore from waste dumps left behind by long-closed mining operations, grew rapidly, building four processing plants on the Iron Range and a pellet plant in Indiana in just a few years.

But Magnetation was hit hard when the price of iron ore plummeted through 2014 and 2015 from more than $100 per ton to about $50 today. The company has idled three of the four plants it is involved in across the Iron Range, with only Plant 4 still operating. In 2014, Magnetation LLC lost about $16 million on revenue of about $96 million, the company noted in May court documents.

Lehtinen said the company expects to emerge from Chapter 11 protection in mid-2016.

But he told the IRRRB board Monday that the idled plants won't reopen until the global spot price of iron ore recovers considerably more than it has in recent weeks.


"The reopening of plants is completely dependent on the price of iron ore," Lehtinen said.

When asked if Plant 4 was making money currently, Larry Lehtinen told the board that "in the iron ore business, I'm not sure anybody is making money at this time."

In addition to its three plants, Magnetation also was instrumental and part owner in a third facility in Chisholm owned by Mining Resources, which is now closed but which formerly supplied the now-shuttered Mesabi Nugget with iron ore concentrate.


School collaboration money approved

In other action Monday the IRRRB approved:

  • School collaboration projects that will be paid for out of a special fund of taconite tax revenue created by state lawmakers in 2014. The board approved $1.76 million annually to help pay for a new school for the Mountain Iron-Buhl School District - but only if the school referendum is approved by district voters.
  • $2.5 million annually for a joint curriculum project between the Grand Rapids, Greenway and Nashwauk-Keewatin school districts along with Itasca Community College. The program will focus on science, technology, math and engineering courses.
  • $2 million annually for the St. Louis County School District to pay off loans from a past school merger effort and $500,000 for the Mesabi East School District to help pay off bonds from a past merger effort. The money in each case continues until bonds for projects have been repaid.
  • A $455,000 IRRRB-backed bank participation loan for Bovey-based fishing tackle manufacturer KMDA, part of a $1.56 million expansion. The company is expanding its hunting and fishing product manufacturing operation with the purchase of Baker Tools, currently located in Pennsylvania. Baker Tools' manufacturing will be moved to Bovey into a new facility in July to house both existing KMDA operations and Baker Tools. The expansion is expected to add four new jobs.
  • Releasing $500,000 for a special lodging tax fund to pay for new amenities at Giants Ridge Ski area near Biwabik. The project includes new bike trails, a climbing wall and a playground. Giants Ridge currently is building a new main chalet and is expected to ask state lawmakers for a new chairlift this year.
  • Releasing $2.4 million in taconite tax revenues for 15 community projects across the Iron Range for public improvements totaling $37 million.
John Myers reports on the outdoors, natural resources and the environment for the Duluth News Tribune. You can reach him at
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