A day after meeting with Minnesota's governor, the company that controls the controversial Essar Steel Minnesota project on the Iron Range announced that it would have a new majority investor by the end of the year.
The move is raising eyebrows because the investor, Swiss firm Mercuria Energy, has ties to Essar Global, the parent company of Essar Steel, which left the $2 billion taconite project in Nashwauk, Minn., half built and contractors unpaid when it declared bankruptcy in 2016.
Mercuria, which is also 12 percent owned by the China-based ChemChina, made the deal with Mesabi Metallics, which is currently controlled by Nubai Global Investment, a British Virgin Islands firm. Mesabi bought Essar Steel out of bankruptcy in 2017.
Mercuria did not disclose the amount of its potential investment, but said it expects to acquire a "majority stake" when the deal closes in the fourth quarter. Mercuria spokesman Matt J. Lauer said the total investment of Mercuria and its partners would be at least $650 million.
"The investment is intended to support the creation of new long-term jobs in America's heartland and the century old iron mining district [called] the Mesabi Range in Minnesota," company officials said in a statement.
Gov. Mark Dayton's office received an e-mail heads-up Tuesday morning of the financial investment deal, but the governor's meeting just moments later with Mesabi Metallic interim CEO Gary Heasley yielded no further details.
"We have [since] reached out to the new majority investor, Mercuria, to clarify their involvement and that of any other party, including Essar," Dayton said in a statement. "These changing developments and the lack of prior notice about them are very concerning."
Dayton came out of the Tuesday meeting cautious but reassured by the $250 million investment that Mesabi had already committed to the Essar project, its pledge to spend another $400 million on the project and the proposed timeline that would have the mine and iron ore processing complex completed by December 2019.
Mercuria in its news release said it hopes to complete the taconite plant, and produce 7 million tons of ore a year.
Lauer said Wednesday that Mercuria officials would be happy to meet with Dayton and other Minnesota officials to explain their interest.
Lauer said that Essar Global still has financial obligations tied to its bankruptcy and the project. Once the Nashwauk facility is built and is up and running, that would free Essar to pay its debt holders. In the meantime, Mercuria will not involve Essar in the project.
Mercuria expects to put up about $100 million of its own money and to raise another $550 million from partner banks and investors participating in the "structured financing deal," Lauer said. Mercuria has 1,000 employees and access to about $104 billion in revolving credit from various banks and lenders.
Mesabi Metallics spokesman Darin Broton said in an e-mail that details of Mercuria's investment plans remain under discussion. To date, only a letter of understanding has been signed.
"As of [Tuesday] morning, Essar was positioned to be a significant player in Mercuria's investment," Broton said. "Since then, Essar's involvement is now is question, and it will not be a decisionmaker or investor in this project."
At the time of its bankruptcy filing in 2016, Essar Steel Minnesota and its parent — Mumbai-based Essar Global — had a 10-year history of problems with the Minnesota project. It has missed deadlines, broken promises to the state regarding public investments and was $1 billion in debt.
Essar had put almost $2 billion into the project but its timelines were repeatedly derailed by financial problems, unpaid bills and stalled construction.
In December 2017, the bankruptcy court allowed Mesabi Metallics to buy the Essar assets. The effort was led by Virginia businessman Tom Clarke and his Chippewa Capital Partners. Mesabi was then sold to Nubai Global Investments via two transactions.