Federal judge denies Mesabi Metallics effort to delay Cleveland-Cliffs state mineral leases

NASHWAUK — A federal bankruptcy judge denied a motion that would have blocked Cleveland-Cliffs’ ability to obtain state mineral leases near Nashwauk this week.

After a hearing lasting more than four hours in U.S. Bankruptcy Court in Delaware on Tuesday afternoon, Judge Craig Goldblatt said the injunction would likely have harmed Cliffs and may not affect Mesabi at all.

He said the evidence shows Minnesota officials have long been frustrated with Mesabi and he remained unconvinced that the state would ever grant state leases back to Mesabi.

Goldblatt also said he was uncomfortable intervening in a state’s ability to take action in its best interest.

Cliffs has said it will use the ore mined from those leases to keep its Hibbing Taconite plant open for decades. It would otherwise run out of ore by 2026.

Mesabi maintains it could complete its direct-reduced iron pellet plant by 2026, but it will likely need some of the state leases in Nashwauk to make the project work. Both Mesabi and Cliffs have private mineral leases adjacent to the state leases. Mesabi's project is half-finished.

Mesabi, owned by Essar Global, has for 16 years had multiple owners, managers and names as it floundered through construction stoppages, bankruptcies, missed deadlines, late payments and other legal battles.

Earlier in the hearing, David Suggs, an attorney representing Mesabi, said a denial of its injunction motion would likely send the company into bankruptcy. Without more leases, the project would not be viable.

“Without the preliminary injunction … Mesabi will likely die,” Suggs said.

The injunction motion was filed as part of a lawsuit dating back to September 2017. In the lawsuit, Mesabi claimed Cliffs committed “tortious interference with plaintiff’s contractual and business relations in violation of Minnesota law, violation of antitrust laws” under the Sherman Act and alleged that Cliffs is guilty of “civil conspiracy” against its business efforts.

Although he said what’s in front of him was “incomplete,” he said some facts could support damages under antitrust law.

“There’s enough here to cause real concern,” Goldblatt said.

A number of emails obtained by Mesabi during discovery show what Mesabi alleges were plans by Cliffs, which it called a monopoly, to destroy Mesabi, its competitor.

Suggs had hoped an injunction would allow the case, which alleges Cliffs violated antitrust laws, to proceed to until a summary judgment or trial concludes.

Mesabi alleges that Cliffs told contractors they would not hire them for their projects if they did any work for Mesabi and engaged in other anti-competitive behavior. Suggs said Cliffs only wanted the leases in Nashwauk to put Mesabi out of business and that it has “plenty of options to extend the life of Hibtac.”

Those allegations were denied by Robert Faxon, an attorney representing Cliffs. He dismissed the emails as taken out of context or sent by lower-level Cliffs employees and that it didn’t reflect company policy.

During his testimony, Matt Holihan, Cliffs’ vice president of mining and pelletizing, said “we need this ore” to keep Hibtac open and without it, Hibtac would close, taking almost 750 jobs with it and 950 jobs at steel plants that are fed by the pellets produced at Hibtac.

The Minnesota Executive Council, which is chaired by Gov. Tim Walz and made up the state’s constitutional officers, on Thursday, May 25, will consider granting the mineral leases to Cliffs.

Last week, the Itasca Board of Commissioners voted to submit a letter to the council urging it to at least split the state leases between Mesabi and Cliffs so both could have a viable amount of ore for their operations.

Earlier this month, the Minnesota Department of Natural Resources, which pulled the leases from Mesabi in May 2021 after it missed key last-chance requirements set by the state, recommended all of the leases go to Cliffs.