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Billionaire tours Iron Range touting $3.5 billion project

NASHWAUK, Minn.—Tom Clarke, the billionaire health care and coal executive who is trying to become a major player in the global iron ore industry, toured the Iron Range on Monday, touting the potentially bright future of his big projects.

Clarke last winter purchased bankrupt Magnetation operations and is moving to restart the Grand Rapids-area processing plant in coming months as soon as air pollution violations left behind by previous owners are settled at the company's Indiana pellet plant.

Clarke this summer also won the rights to take over the bankrupt, half-finished Essar Steel Minnesota project in Nashwauk, and appears to be getting closer to landing the money needed to finish the project.

On Saturday, Gov. Mark Dayton gave his blessings to Clarke's Chippewa Capital Partners, agreeing to relax an Oct. 1 deadline for Clarke to have financing secured and start work on the Nashwauk project. Clarke didn't make that deadline, but Dayton has apparently removed the threat of taking back state mineral leases critical for mining operations at the project.

"It's a great feeling to be where we are right now. But we're not at the finishing line yet," Clarke said Monday after meeting with employees, Iron Range lawmakers, Nashwauk Mayor Ben DeNucci and other officials.

Clarke said he hopes to have all of the key elements in place by the end of 2017 as the Nashwauk project finally emerges from bankruptcy — including purchase agreements for taconite pellets, from a Chinese steelmaker, and for the hot-briquette iron he plans to make, the first directly reduced, added-value iron product ever made on the Iron Range. Other elements include $500 million in equity financing and up to $600 million in bank financing. It will cost another $600 million or so to build the iron plant at the site.

Clarke estimates that, in all, Chippewa Capital Partners will pump another $1.6 billion on top of $1.9 billion already spent by Essar for a combined $3.5 billion project, by far the largest private investment in Minnesota history.

Construction could resume as early as March, Clarke said, and will take 25 months. It will take another 6 months to "commission" the facilities and sell finished product.

That's about mid-2020 before everything is operational, if all goes well.

"But before then we'll have more than 1,000 construction workers on the job and a lot of economic activity going on across the Iron Range," Clarke said.

Eventually the two facilities at the site could employ about 450 people.

Clarke said a key element of the Nashwauk project is that about 2.5 million tons of the plant's taconite will go to the on-site iron plant. The other 4.5 million tons annually has been pledged to a Chinese steelmaker.

Chinese mills are seeking out and will pay more for taconite pellets because they don't need to be sintered. It's the sintering process for natural ore fines or lumps that creates much of China's infamous air pollution problem.

"The Chinese (mills) are paying a $41.50 premium per ton (over global iron ore prices) for pellets so they can cut their pollution. It's a mandate from their government," Clarke said, noting he expects to produce taconite in Nashwauk, ship it across the Great Lakes to Quebec City and transfer it to saltwater ships to move to China "and still have a $30 per ton (profit) margin."

"We aren't going to compete with any other Minnesota taconite. We aren't going to be harming Hibbing or Eveleth or whatever. ... That's the best part of what we're doing — it's all new markets for Minnesota products," Clarke said.

State Rep. Jason Metsa, DFL-Virginia, who had lunch with Clarke in Virginia on Monday, said Chippewa is acting in good faith by paying $39 million this week to mostly local companies leftover from Essar's debts. He's also happy to see Minnesota products potentially heading overseas and that the Nashwauk ore wouldn't simply displace Minnesota existing taconite producers.

"Any time we can export both taconite and directly reduced iron from the Iron Range to China, that's a good thing for our future, for our jobs," Metsa said.

State Rep. Sandy Layman, R-Cohasset, agreed.

"The fact Tom Clarke is paying off some of those contractors this week really shows his good faith," Layman said. "I think all of us on the Iron Range believe they (Chippewa) are our best option going forward. ... If you talk to anyone about iron ore these days the conversation quickly turns global. Tom Clarke has the global connections to make this work."

The hot-briquette iron made at the new plant will be sold to electric-arc mini mills, which mostly use scrap steel to make new steel but need high-grade virgin iron to beef up the quality, long considered a critical step for the Iron Range taconite industry to remain viable into the future.

Clarke said he hopes to make peace with Cleveland-Cliffs CEO Lourenco Goncalves and even hopes "that we can work together" on Iron Range projects. Chippewa has accused Cliffs officials of working against Chippewa by threatening vendors and contractors and have asked for a federal judge to enjoin Cliffs from sabotaging their efforts to restart the Essar project.

Cliffs hasn't commented on those allegations.