Cliffs CEO issues warning about Nashwauk ore


EVELETH, Minn. — Lourenco Goncalves played up his company's contributions to the Iron Range during Cleveland-Cliffs' annual "state of the company" luncheon on Thursday, Feb. 1, but he also issued a warning: Minnesota needs to play ball with his team, or he may turn to Michigan for future production expansion.

Goncalves told more than 100 vendors, suppliers and Iron Range civic leaders that he needs the highly-disputed iron ore near Nashwauk, Minn., for his operations at Hibbing Taconite, which could run out of iron ore within about seven years.

That's why Cliffs purchased rights to much of the Nashwauk ore where Mesabi Metallics wants to build an all-new taconite plant and iron plant. Goncalves is trying to stop that project from being built to thwart future competition and keep the ore for Cliffs' own operations.

"It's up to you," he told attendees at the event. "I can only mine where there is ore. ... Nashwauk or Michigan."

He said he moved in 2017 to acquire 100 percent ownership of Cliffs' two Michigan properties "just in case you guys don't allow me to expand in the state of Minnesota."

The future of the Nashwauk property remains in doubt. Mesabi Metallics wants to finish the project, mine and process taconite iron ore, and turn much of it into pig iron, employing 350 people at the $3.7 billion operation.

Goncalves is laying claim to about half the ore at the site; the state of Minnesota owns much of the other half. Goncalves said he has applied this week to obtain mineral leases for state land, as well — leases that Minnesota Gov. Mark Dayton is holding for Mesabi Metallics because of the promise of new jobs and the all-new pig iron plant.

On Thursday, Goncalves reiterated that he has no intention of ever producing taconite at the Nashwauk site or finishing the half-built production plant there that Mesabi Metallics is working to revive. He only wants the iron ore.

But Goncalves said he would work with Mesabi Metallics in one way — namely selling them finished taconite pellets for a new pig iron plant in Nashwauk, if that's all that Mesabi Metallics built.

Meanwhile, a federal bankruptcy judge in Delaware is still deciding whether Cliffs' December acquisition of the Nashwauk mineral rights is legitimate and, if so, whether Cliffs may be obliged to sell Mesabi Metallics the ore under previous agreements in the bankruptcy settlement that gave health-care billionaire Tom Clarke the reins of the Mesabi Metallics project.

Clarke, owner of Chippewa Capital Partners, which won the bankruptcy bid for the Nashwauk site and dubbed it Mesabi Metallics, has said he is willing to share the iron ore at the site with Cliffs but that he is committed to finishing the former Essar Steel Minnesota project to create jobs and a new Iron Range product in pig iron.

Cleveland-based Cliffs owns and operates United Taconite in Eveleth/Forbes and Northshore Mining in Silver Bay/Babbitt, and it is operator and part-owner of Hibbing Taconite. It also owns and operates the Tilden mine and processing center in Michigan's Upper Peninsula. Cliffs has 1,745 employees in Minnesota and last year paid $42 million in taxes here.

The company last week said it is moving forward with an added-value, direct-reduced iron product that can be used in the electric arc mini-mills that produce nearly two-thirds of U.S.-made steel. Cliffs will spend $250 million in 2018 to build its hot briquetted iron plant in Toledo, Ohio, and $50 million to refurbish Northshore Mining's pellet operations in Silver Bay, Minn., in 2018 to make the type of taconite pellet needed for the Toledo plant.

Goncalves said groundbreaking will occur on the Toledo plant in April, and that the plant will be producing iron in mid-2020 at a total cost of $700 million.

The Northshore investment follows a $75 million upgrade to Cliffs' United Taconite processing plant in Forbes, Minn., finished last spring, where Cliffs is making a specialty taconite pellet for ArcelorMittal's Furnace No. 7 at Indiana Harbor in East Chicago, Ind., the largest blast furnace steel mill in the U.S.

Cliffs says it will produce about 20 million tons of U.S. taconite iron ore pellets in 2018, full capacity for its four operations. The company said its revenue will range up to $102 per ton, including pellet premiums paid by Asian steelmakers for North American pellets. The company said its cost to produce a ton of taconite will range between $58 and $63 per ton.