Essar Steel Minnesota has another new name and a new business plan that could have bulldozers and cranes at the site in September.
Details of Chippewa Capital Partners' reorganization plan for the company in Nashwauk, Minn., were recently filed with a Delaware bankruptcy court. The court also reassigned state mineral rights to Chippewa, one of the last sticking points for the deal.
Now, as long as financing goes according to plan by Aug. 31, transfer of assets from Mesabi Metallics Co. — Essar's successor — to Chippewa will be completed.
The news was anticipated for months by locals on Minnesota's Iron Range who long hoped Essar's stalled $1.9 billion taconite project might be revived.
Chippewa, which won an auction bid for Essar in April, also bought bankrupt Magnetation's operations in Grand Rapids, Minn., and Reynolds, Ind., and plans to merge the operations.
Virginia billionaire Tom Clarke, Chippewa's chief investor, wants to finish the half-built Essar taconite pellet plant in 18 to 24 months, then add an advanced-technology direct-reduced-iron (DRI) plant in Nashwauk within 33 months. The DRI technology would be Minnesota's first and would produce ore-pellets or bricks that contain higher percentages of pure iron than were available in the past.
Officials involved in the reorganization confirmed that builders will return to the Nashwauk site after Aug. 31, nearly two years after unpaid contractors walked off the job site, according to court records and statements filed in the past two weeks.
A year ago, Gov. Mark Dayton and the state's Department of Natural Resources had terminated Essar's rights to the state's leases, citing too many broken promises, missed construction deadlines and missed payments on state loans.
Essar filed for bankruptcy the same day.
Since then, wrangling over the mineral leases became an issue in the bankruptcy proceedings.
Mesabi said this week that Chippewa "succeeded in resolving issues with the Minnesota DNR to keep intact the state mineral leases." The state filed confirmation of the transfer of leases in bankruptcy court.
In a meeting before the Minnesota Executive Council in June regarding the state's leases, Dayton said that resolving the mineral lease question was crucial.
"We had a nightmare with Essar," Dayton said, with the company's changing business plans and unpaid bills.
"The good thing about this new [Chippewa] company is that once the construction is completed, a lot of those vendors and contractors will be back providing services or goods as well as getting … some recompense for what is owed now," he said.
Should Chippewa Capital Partners fail to get the funding required to finish buying the Essar project by Aug. 31, the mineral lease rights will officially revert to the state, Dayton said.
Right now, Chippewa and Mesabi are in the process of implementing the reorganization plan, Mesabi officials said.
Under part of the plan, Mesabi will lay off 25 of the 50 workers in Minnesota who worked on Essar and tried but failed to secure the financing necessary to get Essar out of bankruptcy. Because Mesabi failed to get that financing, it did not challenge Chippewa's auction bid in bankruptcy court in April.
In its statement, Mesabi Metallics said that Chippewa plans to hire a third-party general contractor to complete construction of the Essar site.
It is not clear which contractor will oversee the project. Several contractors who are still owed money by Essar still have petitions making their way through bankruptcy court. A hearing on several debt matters is expected on July 27.
Dee DePass • 612-673-7725
