DNR starting process to terminate leases with Mesabi Metallics | www.WDIO.com

DNR starting process to terminate leases with Mesabi Metallics

Updated: May 05, 2021 09:16 PM
Created: May 05, 2021 12:50 PM

Big news for the mining world on Wednesday. The DNR said they are beginning the process of terminating the mineral leases with Mesabi Metallics. Back in December, the executive council had approved a lease amendement for certain requirements, with the deadline of  May 1st.

Now, on May 5th, the DNR said certain requirements were not met, and that means the amendment is no longer in effect. One of those requirements not met include failure to demonstrate that the company had $200 million immediately available in its accounts. 

The DNR said in a statement, "While the DNR is continuing to review all of the documents submitted by Mesabi, this failure to meet a fundamental requirement warranted notification that the amendment is not in effect. As outlined in the DNR’s letter, the project remains subject to the lease terms that were in place immediately prior to the 2020 amendment, which included minimum payment and performance requirements."

Also, the DNR said Mesabi owes $18 million dollars in minimum base payments for 2020.

And finally, the agency said Mesabi Metallics has 20 days to cure the lease defaults or the termination action will go into effect.

Range lawmakers had distrust of the leaders of Mesabi for years.

Representative Julie Sandstede said she plans on pushing to preserve the leases, so they don't get caught up in bankruptcy court. She wasn't surprised by Wednesday's announcement, although it came sooner than she expected.

"It's unfortunate they (Mesabi) haven't been able to do it. But they haven't been able to do it. Now it's time to turn our attention to what tomorrow holds. It's a new day for us, and I think it's ready to start moving in that direction," Sandstede told us. She also went on to say that Itasca County did get some of the money owed to them.

Representative Dave Lislegard sent a statement on Wednesday, saying: “Today’s announcement validates everything we’ve said about this organization, and what Mesabi Metallics put forth recently was just more in a long line of continued failed promises. While we have lost precious time and economic opportunity over the last 13 years, now is the time for us to move forward. I'm extremely pleased that today the DNR has listened to the will of the people of the Iron Range who have been impacted by this bad actor’s inability to meet its commitments. It’s critical the decisions we make today protect the assets and our ability to finally move the project in Nashwauk forward with a viable and credible partner, and finally give us the opportunity to strengthen our region’s economic future.”

Mesabi Metallics countered with their own statement:

"On May 1 Mesabi Metallics provided the DNR with documentation that met six of seven preconditions laid out by the Master Lease Agreement. Also on May 1 Mesabi Metallics deposited $100 million into an operating account that was immediately accessible to pay for contractors and materials. As the DNR noted in its recent statement, the MLA required deposit of $200 million by May 1st. Because of the unprecedented COVID crisis in India the deposit of the remaining $100 million has been delayed."

Mesabi Metallics is currently spending money from this account in support of the construction project and there will be over 40 new workers on site this week. We are confident that the additional funds will be in the operating account within the next few weeks. The $100 million currently in the account is sufficient to keep the project on schedule."

Mesabi Metallics understands that there are those who believe that the entire project should not go forward because of this delay. We strongly believe that it is in the best interest of Minnesota for the Nashwauk project to be allowed to commence, and have demonstrated our strong commitment to the project by making $100 million immediately available.

Mesabi Metallics has binding commitments of $650 million for the project, as well as a binding and enforceable off-take agreement for 4 million tons of pellets per year. The only piece of the puzzle outstanding is the deposit of the remaining funds in the operating account."

The partially built mine and plant in Nashwauk holds the promise of many jobs and good minerals, but hasn't had much meaningful action in years.

Essar had originally broken ground on it in 2008. But then filed for bankruptcy. 

Cleveland-Cliffs has mineral rights in that same area, and CEO Lourenco Goncalves had said he wanted to use them to help extend the life at Hibbing Taconite.

Goncalves sent a statement: "Cleveland-Cliffs applauds the move made today by the DNR to address the long term injury inflicted on the Minnesota Iron Range by people with no agenda other than the goal of extracting benefit for themselves. We also appreciate the relevant support from the Iron Range legislators, the local associations, the Mayors, the United Steelworkers and the population in general. As soon as the legal process of terminating the leases is completed by the State, and assuming that at this time the saga will come to an end, Cleveland-Cliffs is ready to step in and do what we have been doing for decades, by developing Nashwauk and generating a big number of good paying middle-class union jobs for the people of the Iron Range."

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