Cleveland Cliffs pulls the plug on nugget projectby Bob Kelleher, Minnesota Public Radio
There's been a big set-back for a long-awaited Iron Range industrial development. Backers said the Mesabi Nugget project would be making a high iron product at a Hoyt Lakes plant in just over a year. But now key partners say they're dropping the project. The State of Minnesota invested millions of dollars in Mesabi Nugget. Supporters say, there will be a nugget plant, but it won't likely be in Hoyt Lakes and it won't be any time soon.
Hoyt Lakes, Minn. — Mesabi Nugget planned to produce a high iron nugget - a nugget with much more iron than now found in Minnesota's taconite pellets. The nuggets would open up a whole new source of customers for Minnesota iron. The project was also supposed to bring jobs to an area that lost 1,400 positions when LTV Steel closed five years ago.
Mesabi Nugget was one of two major projects expected at the former LTV Mining Company site in Hoyt Lakes. News that the project is canceled hugely disappoints Hoyt Lakes Mayor Marlene Pospeck.
"At the 11th hour, actually, the deal fell through," Pospeck says. "We had every reason to believe that the project was going forward, and would in fact be breaking ground in the very near future. So, this latest development is just extremely frustrating and very disappointing."
Mesabi Nugget would have created 100 permament jobs, with many more construction jobs and a regional economic boost.
Cleveland Cliffs Corporation announced the project's demise. According to Dana Byrne, with Cleveland Cliffs, the problems with Mesabi Nugget were business related.
"It wasn't that there were problems out there, or any disagreements," Bryne says. "But we just weren't able to reach agreement on some of the key economic and commercial terms that were needed to move this project forward. In addition to that, I mean, we have not completed the financing for the project."
The state granted Mesabi Nugget an expedited permitting process and the project had the necessary environmental permits in hand to begin construction. A pilot project in Silver Bay proved the technology would work.
Iron Range Resources Commissioner Sandy Layman echoes the disappointment with the project's cancellation.
"The state, and Iron Range Resources, is really frustrated that the project is not moving forward as we had hoped," layman says. "The state has done everything to set the table for this project. We've made the guests feel welcome. And folks aren't coming to the table, it appears, in the near future. I would say we are extremely frustrated at this point."
The State of Minnesota loaned $16 million to Mesabi Nugget through the Department of Employment and Economic Security and through Iron Range Resources. The IRR holds $500,000 worth of equity in Mesabi Nugget. Layman says it remains to be seen if that investment will ever be recovered.
"Well, we don't know yet," Layman says. "We don't know the future of Mesabi Nugget. You know, that story will unfold in the future. On the debt piece we have security in the royalties that will be generated once this technology is deployed - where ever it's deployed."
Most of the state loan money is backed by the licensing for the iron nugget process. If the loans aren't paid back, the State gets royalties when other companies pick up the promising nugget technology. In fact, Cleveland Cliffs Corporation is already making plans to do that, by building a similar sized nugget plant at Cliff's Northshore Mining Company in Silver Bay.
But Cliff's officials admit that it will take time to prepare the planning and engineering - and get necessary environmental permits - at the Silver Bay location. It will probably take years. According to the IRR's Sandy Layman, the state's investment in nuggets should eventually pay off.
"The public side of this project is the patience side," Layman says. "And our patience is being tested here."
But the jobs targeted for Hoyt Lakes won't be coming back in a nugget plant, at least not in the for-seeable future.
- All Things Considered, 11/20/2006, 5:52 p.m.