Executive Council approves amended mineral leases for Mesabi Metallics

Updated: December 02, 2020 06:21 PM
Created: December 02, 2020 08:16 AM

On Wednesday, the state's Executive Council decided to approve an amendment to the mineral leases for Mesabi Metallics.

Itasca County Board Chair Ben DeNucci said, "We've got a good path forward, and we feel good about the opportunity for our men and women to work on a great project. And certainly the royalty payments are good for our schools, especially. Mesabi Metallics needs to perform now, follow through on the conditions and meet timelines. I don't think there will be a second chance."

The DNR had worked on this amendment, which included about $25 million dollars in money due on Tuesday this week. Assistant Commissioner at the DNR, Jess Richards, said the money was placed into accounts as promised.

The amendment also called for extensions for deadlines for construction and completion of the crusher and pellet plant, plus steps to build an HBI plant. The DNR said there is a limitation on Essar Global's participation, including no operational role until the pellet plant is done and they've spent $30 million dollars toward the value-added project.

Mesabi needs to meet several milestones by May 1, 2021, in order for this amendment to stay in effect. One of those is to secure an off-take agreement for pellets.

Several leaders from Itasca County testified in support of the amendment. County Board members Terry Snyder and Ben DeNucci shared their comments, as did Barb Kalmi, school board member from Nashwauk-Keewatin. Snyder said, "We need something now. There's already $850 million invested."

A couple of others spoke against.

During testimony during the meeting, the CEO of Cleveland-Cliffs made his case for the leases. Lourenco Goncalves said that he would put the same amount of money into escrow Wednesday, that Mesabi Metallics has. Goncalves said access to the ore in Nashwauk will save the 750 jobs at Hibbing Taconite, which is facing a limited mine life. They only have 3.5-4 year left, he said. Plus, he said they would build a second HBI plant in 2-3 years. Their first HBI facility started producing on Thanksgiving last week.

Chris Johnson, president of Local 2705, added, "While the change of leases would take time, it still gives us light at the end of the tunnel and hope at Hibbing Taconite."

Richards said if they terminate the leases with Mesabi, it's likely they will lose the permits for the project as well, which would mean starting over again.

A consultant for Mesabi Metallics, Marty Vadis, said the company wants to start construction again in 2nd quarter of 2021. When asked what's different this time, he mentioned Fluor would be in charge of construction, not Essar. And there are other investors, he said, like Mercuria.

Secretary of State Steve Simon made a motion to table the vote, but it did not pass.

Cliffs sent a statement later on Wednesday: "Today the Minnesota Executive Council approved an amendment to the Nashwauk State mineral leases that will, yet again, extend lease terms and grant other concessions benefiting only Essar/Mesabi Metallics.  Through over 13 years of involvement in this project, Essar has failed to live up to its obligations and has left nothing but unpaid bills and broken promises in its wake.  Today’s decision escalates Hibbing Taconite’s life of mine crisis as the amended lease impedes access to Cleveland-Cliffs’ ore reserves at the Nashwauk site. Cleveland-Cliffs stands ready to extend Hibbing Taconite’s mine life and pursue HBI development in Minnesota but first needs a willing negotiating partner in the Minnesota DNR."

The DNR sent one too: "While the project has had a difficult history while under the control of Essar Steel and other parties, only Mesabi Metallics possesses the facilities and environmental permits for the project. Under the negotiated lease terms, Mesabi Metallics and its investment partners have provided the state with a viable path forward for the project. Over the last several months, the company has agreed to significant changes to the leases in order to minimize the potential for a repeat of the issues that led to previous failures to complete and operate the project.

The DNR will continue to monitor compliance with the lease terms for this project to ensure the beneficiaries of state mineral leases receive the full benefit from the development of this ore body. The DNR looks forward to a significant ramp up of construction activities in 2021."

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