Rebirth plans for old Magnetation site put on hold

The much-anticipated rebirth of the former Magnetation iron-ore tailings operation in Grand Rapids, Minn., is on hold as the new owners wrestle with higher costs and bigger upgrades than expected.

The unexpected costs are associated with a related plant in Indiana where the Grand Rapids ore tailings would be converted into iron pellets.

Robb Bigelow, ERP Iron Ore's managing director, said in an interview Wednesday that air pollution controls and permitting in Indiana will require an investment of $10 million to $20 million. Until Indiana can be upgraded, there's no need for ore to be shipped from the Grand Rapids plant.

"We didn't know there was a nonfunctioning air pollution system there," he said, adding that the complication "probably pushes [the Grand Rapids plant restart] out 12 months."

The investors behind ERP have told public officials they will shift their attention to completing the deal to buy and reopen the bankrupt, half-built Essar Steel Minnesota taconite plant in Nashwauk. Both the former Magnetation property in Grand Rapids and Essar are controlled by companies whose main investor is Virginia billionaire Tom Clarke.

Iron Rangers and union leaders say they're disappointed by the turn of events. Many were counting on the former Magnetation plant being brought back online soon, restoring jobs on the western edge of Minnesota's Iron Range.

"We have people who were laid off from Magnetation who could use the work," said Mike Syversrud, president of the Iron Range Building and Construction Trades, who met recently with Bigelow to express his frustrations.

At the time, Clarke said he planned to have Magnetation's Plant 4 in Grand Rapids operating this year with 140 workers eventually hired. Clarke noted that the ore tailings from Grand Rapids would be hauled from Minnesota to Indiana and to a pig iron plant in Lorain, Ohio. The metal would later be turned into steel by others.

Local building contractors and Department of Natural Resources officials said another issue is concern that the quality of the ore tailings at Magnetation was lower than expected and might need to be blended with ore bearing a higher iron content.

With those setbacks, "they are now saying they need to build Essar first so they can get that iron ore concentrate to help run Magnetation," Syversrud said. "The whole thing throws big red flags up with all the trade groups around here."

With the Magnetation site on the back burner, Clarke and his Chippewa Capital Partners team are working to secure final financing to buy the old Essar site in Nashwauk out of bankruptcy court, say Bigelow and state and county officials.

The $1.9 billion Nashwauk project filed for bankruptcy in July 2016 after struggling for months and leaving contractors unpaid. Chippewa promised to secure another $500 million in loans and equity investments to buy the property and resume construction of the massive ore processing complex.

The briquettes are preferred to taconite pellets because they can be used in more modern electric arc furnaces. All taconite now produced on the Iron Range is fed into less-efficient blast furnaces that are considered outdated.

While the delays are disappointing, Clarke's companies followed through on a promise to pay contractors $39 million of the money Essar owed them, said Itasca County Auditor Jeff Walker.

The money covers roughly 50 cents on every dollar the contractors were owed, said Rep. Sandy Layman, R-Cohasset. Clarke's team also spent $46 million on engineering and construction plans for the site.

Paying back some funds and bringing limited crews to Nashwauk has restored hope in the region that Clarke will follow through with plans.

Other plants idled during the 2015 and 2016 downturn — United Taconite, Northshore Mining, Keetac and Minntac — are back online. Many sell more iron pellets than they have in years. Still shut down are Mesabi Nugget, Mining Resources, Magnetation and the half-built Essar. If full construction resumes at Essar, Chippewa will need 850 workers.