State proposes changes to mineral leases for Mesabi Metallics

Updated: November 30, 2020 06:22 PM
Created: November 30, 2020 11:55 AM

On Wednesday, the state's Executive Council is expected to vote on new lease terms with Mesabi Metallics for the partially built project in Nashwauk.

According to the agreement, the DNR is willing to amend the mineral leases contingent on a few things: 1) Mesabi and Essar Global's cure of existing defaults and outstanding litigations 2) Mesabi's binding commitment to construct a pellet plant 3) HBI Newco's commitment to progress the construction of an HBI plant.

Mesabi has been in material default of the terms of the leases, according to the state.

The new terms include Mesabi and Essar Global placing $24.5 million dollars into escrow for the the benefit of the DNR, DEED, and Itasca County. That due date is Tuesday, December 1st.

They are also supposed to pay $11.5 million dollars by December 1st for all 2019 rents and royalties owed under the leases.

Some milestones to be met include the completion of the primary crusher for the pellet plant by December 31, 2021, and the entire pellet plant would need to be ready for commissioning by June 30, 2024.

Also, the leases are being amended to include an HBI plant.

The DNR is saying they would have termination rights for things like failing to start mining from state properties or continue mining in at least two quarters prior to July 1, 2024.

Lawmakers have some concerns. Rep. Julie Sandstede, of Hibbing, said they were suprised to get the call from the DNR informing them about the proposed changes. "Nothing is in there that hasn't already been court-ordered. To me, nothing has changed. This is what they were supposed to have paid. I don't know what new we're getting out of this. I am skeptical this will move forward," she said.

Rep. Dave Lislegard echoed that, adding, "It's hard to understand how anyone who has followed or been directly affected by the aftermath left behind, of years of empty promises, could or would support more of the same. The $12 million payable in this proposed deal is enticing, but is not new money. It is money already owed."

They and other Range lawmakers sent a letter to Governor Walz in October, urging him to pull the leases from Mesabi and award them to a company that is financially sound.

Cleveland-Cliffs owns land in Nashwauk as well. They will soon control Hibbing Taconite, which is running out of mine life. Ore from Nashwauk is a possible solution. "Hibtac is in a situation where they need something to change for them. It's important to get the right company," Sandstede added.

The DNR said they would provide more details during the meeting and after the vote on Wednesday. The Executive Council is scheduled to meet at 10am.

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