Magnetation, an iron ore concentrate and pellet producer, announced it will file for Chapter 11 bankruptcy protection while it undergoes reorganization. The company has received a commitment for $135 million in debtor-in-possession financing from certain holders of Senior Secured Notes that will support the business while it reorganizes.
Magnetation said it will continue to pay its employees, suppliers and vendors and “expects its mining and pelletizing operations and customer shipments to continue in the ordinary course throughout the reorganization.”
“The significant decrease in global iron ore prices along with our existing capital structure has created a challenging business environment in the short term,” said Magnetation CEO Larry Lehtinen. “The reorganization process will create a more competitive and successful Company.”
Recently AK Steel, which holds 49.9 percent equity interest in Magnetation and is a major customer, made it clear that it would not provide any securities or cash to the troubled operation. AK Steel recorded a $256 million non-cash impairment charge on its investment in Magnetation in first quarter 2015.
Magnetation recently was forced to indefinitely idle its Plant 1 iron ore concentrate operation in Keewatin, Minn., as a cost reduction measure in reaction to declining iron ore pricing.
Magnetation LLC is a joint venture between Magnetation, Inc. (50.1% owner) and AK Iron Resources, LLC, an affiliate of AK Steel Corporation (49.9% owner). Magnetation LLC recovers high-quality iron ore concentrate from previously abandoned iron ore waste stockpiles and tailings basins. Magnetation LLC owns iron ore concentrate plants located in Keewatin, MN, Bovey, MN and Grand Rapids, MN, and an iron ore pellet plant in Reynolds, IN.
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