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Cleveland Cliffs Acquires Acreage and Lease Rights in Minnesota

December 11, 2017

Cleveland Cliffs has acquired 553 acres and the lease to 3,215 additional acres from Glacier Park Iron Ore Properties, LLC. The real estate includes mineral and surface leases in the Biwabik Iron Formation. The iron ore reserves are west of Nashwauk and were formerly leased by Essar Steel Minnesota, now called Mesabi Metallics.

“We are enthused about the acquisition of this property, which came into play after Chippewa failed to follow through on its obligation to obtain financing and a bankruptcy exit for Mesabi Metallics by Oct. 31,” said Cliffs CEO Lourenco Goncalves.

The Mesabi Metallics lease terminated when Chippewa Capital Partners failed to secure financing to purchase the site. Cliffs seized the opportunity to acquire the acreage when it went back on the market. The mineral leases secured in the transaction are not the disputed ones associated with the bankruptcy of Essar Steel Minnesota. Governor Mark Dayton had begun discussions to give those mineral lease rights to Cleveland Cliffs before the state approved an acquisition plan for Essar Minnesota by Chippewa Capital.

Essar Steel Minnesota filed for bankruptcy in 2016, leaving a half-finished taconite operation at the site. Chippewa Capital won the bidding for the site in June and expects to secure the final funding needed to get Mesabi out of bankruptcy within the next several weeks. An estimated $1.3 billion will be needed to finish the taconite project. An additional $650 million will be required to construct the proposed hot-briquetted iron (HBI) plant. When finished, the Mesabi plant is expected to produce seven million tons of taconite pellets annually.

Chippewa Capital is a joint venture of London-based GFG Alliance and billionaire Tom Clarke. Clarke also purchased Magnetation, now called ERP Iron Ore.

Cleveland Cliffs has sought ownership of the Nashwauk site and has expressed doubt that Chippewa will be able to fulfill its promise to finish the projects at Mesabi Metallics. Cliffs plans to develop a financially sustainable plan for the site that will be implemented as other iron ore resources deplete.

“Despite several botched attempts by others, it is now the time for Cleveland-Cliffs to sit at the table with other responsible parties and develop a realistic solution for this site,” said Goncalves.

He added, “As the new owner of this real estate, we know our responsibilities and will not disappoint the people of Minnesota.”

According to the Minnesota Department of Revenue Mineral Tax office, Northeastern Minnesota iron ore pellet production currently totals 36.6 million tons and is expected to reach 36.8 million tons by the end of the year.