Essar Steel Minnesota LLC said Tuesday that its parent company does not plan to sell it, trying to quell concerns rooted in the financial condition of the bigger firm.
Media reports gained international scope on May 22 when Bloomberg News reported that Essar Steel Minnesota was one of several assets that might be sold as India-based Essar Group is restructured by its billionaire owners, brothers Shashikant and Ravikant Ruia.
Early last month, Essar Steel Minnesota concluded a $450 million sale of high-yield bonds to raise funds to resume construction of a taconite plant in Nashwauk. Problems with the cash-strapped project began more than a year ago when Essar officials decided to expand their taconite production goal to 7 million tons from 4 million. The sudden jump increased the project’s cost to $1.8 billion from $1.1 billion and sent the Mumbai, India-based parent company scurrying for more money.
“We are very pleased to have closed $450 million of bond financing for ESML in the last few weeks,” Madhu Vuppuluri, president of Essar Steel Minnesota, said in Tuesday’s statement. With that, he said, the company looks forward “to a very exciting future.”
Vuppuluri called the company a “world-class asset that we believe will be one of the lowest cash cost producers of iron ore” in North America. “Accordingly, it is a core investment in the EGFL portfolio,” Vuppuluri said, using an acronym for Essar Global Fund Ltd., the group’s investment unit.
The speculation that the Minnesota unit might be sold is just the latest wrinkle in the long development of the Nashwauk project. Essar’s decision a year ago to increase the size of the plant led to the halt in construction in October.
Essar broke ground on the project in 2008 and unveiled a plan for an integrated operation that would mine iron ore, reduce it into iron pellets and use special furnaces to produce finished steel slabs, all on the same site. However, the project suffered multiple delays that caused the bulk of the work to begin in earnest in 2011.
The Nashwauk site on Minnesota’s Iron Range has its concrete foundations poured, most steel beams erected and giant iron-ore crushers installed. Over the next few months, the remaining steel beams and factory walls will be erected and other equipment will be put in. The plan eventually calls for 350 full-time taconite workers at the facility.
The Bloomberg report said the Ruia brothers aim to take Essar companies that are involved in shipping, ports and oil private in coming years.