After seven years, Essar's giant Iron Range project finds a groove

NASHWAUK, Minn. – Mayor Bill Hendricks snatched a dusty bottle of champagne off a bookcase, a treat he's saving for when the $1.8 billion revival of the old Butler taconite mine two miles outside of town is done.

"We'll be happy to have those taconite jobs," Hendricks said as he showed off the bottle. "This is a depressed area for sure. And it's been a long haul."

The mayor may soon get to put the bottle on ice.

The largest project in Minnesota's Iron Range — and one of the largest economic investments in the state, costing nearly twice as much as the new Vikings stadium in Minneapolis — turned a corner in October after seven years of start-and-stop progress.

Essar Global, a conglomerate controlled by a pair of billionaire brothers from India, scored the last $800 million needed to finish the Nashwauk project.

The money should mean the end to years of construction delays, missed payments, liens and frustration that have dogged its local unit, called Essar Steel Minnesota.

The company backed away from the state's biggest goal, which was to build Minnesota's only steel mill, a disappointment to local and state officials.

"I don't feel vindicated. I feel tremendous satisfaction," Madhu Vuppuluri, Essar Steel's chief executive, said as he stood on a hill overlooking the site, which was dotted with workers earlier in November. "Months ago, we knew very well that we will be finishing this project. This is the largest metals and mining project in North America in terms of scope, scale and investment."

From 85 workers in October, there are now about 200 people at the site and another 100 expected in December.

"At peak, we will have 800 construction jobs," Vuppuluri said. "When finished, we will have 350 permanent jobs."

Vuppuluri first visited the Iron Range on a mine scouting mission for Mumbai-based Essar in December 2006. He inspected the Butler mine, which opened in 1967 and closed in 1985, and met with its then-owner, Minnesota Steel Industries. He also met Gov. Tim Pawlenty, who later led a trade delegation to India where he again saw Vuppuluri, dined with Essar's owners and celebrated their Made-in-Minnesota dream by planting a tree.

The state has paid $65.9 million in infrastructure grants and $7 million in loans that hinge on Essar's completion of the project by next September.

Essar Steel Minnesota was strapped for cash for two years, leading to delays in payments to suppliers. Contractors walked off the project in both 2012 and 2013, taking equipment and crews, after not being paid.

Essar's two largest contractors, Hammerlund Construction and Northern Industrial Erectors, both in Grand Rapids, are now back at the job site after being paid. Woody's Rebar, Rice Lake Construction, Hoover Construction and Seppi Brothers Concrete also returned.

LeJeune Steel Co. in Minneapolis isn't back just yet. "We are entertaining the idea. But the problem with that project is payment," Jim Torborg, LeJeune's president, said. "We would want some types of payment assurances."

Woody's ironworker Chris Raddant said he was thrilled to be back, despite a nearly two-hour commute from his home in Duluth. "I worked here on and off for years. I left in January because they had problems with financing," Raddant said while tying the rebar grid for a maintenance shop floor. "If this really takes off and keeps going this time, it's going to be off the hook. It will put a lot of food on the table."

Essar's bankers visited from India in October to see the progress. They met Jeff Walker, the Itasca County treasurer and auditor who is charged with seeing that the state's grants are repaid if the firm misses the September deadline.

Indeed, in recent weeks, county and Iron Range Resources and Rehabilitation Board commissioners, mayors, bankers and even Gov. Mark Dayton toured the site to see the revival of activity for themselves. "We left hopeful," Terry Snyder, Itasca County's Second District commissioner, said after his tour.

For Essar and Minnesota, the abandoned Butler site held huge promise because the land still contained miles of ore with unusually high quantities of iron.

Over seven years, the state and Essar built 13 miles of railroad tracks and Minnesota Power built transmission substations. Essar spent about $1 billion constructing 12 buildings including two ore-crusher plants, a massive maintenance shop and a concentrator plant. The concentrator — a quarter-mile stretch of ore-storage buildings, grinding mills, magnetic separators and slurry tanks — still needs walls, roofs and equipment.

Thirty feet of topsoil has been cleared from the rusty-red mining site. "Blasting begins in May and we'll produce the first pellets by December 2015," Vuppuluri said.

To the east, contractors are building the ore-tailings basin. Far to the north, a crew is reviving work on Essar's iron-pelletizing plant, said Vuppuluri, pointing out the distant smokestack that's visible for miles.

But right now, Derek Bostyancic, president of Northern Industrial Erectors, is sweating the details of the construction work.

"There's 28,000 tons of steel on the ground right now that I need to put up in 13 months. Is it possible? It's definitely possible," he said. "We will work six days a week, 10 hours a day. And we'll work a lot of overtime."

On a recent workday, Bostyancic drove the eight miles from the north tip of the complex to the south and was soon shaking hands with newly rehired workers he had asked to give the Essar project one more chance. Some of them left steel jobs in Indiana and Iowa.

"These are all my steady guys. I try to take care of them," Bostyancic said. "I'll have 50 workers here by Thanksgiving and 350 at the peak in the spring."

Dee DePass • 612-673-7725