ERP execs suffer setbacks, unveil plans

Pictured is an interior view of the former Magnetation Plant 4 property when it was still under construction.

 

BusinessNorth file photo.

When one purchases a used car, there are always a few surprises under the hood, Robb Bigelow, former manager of Magnetation’s Plant 4 and ERP managing director, told Itasca County Commissioners last month.

ERP Iron Ore is the new owner of the former Magnetation assets. Here, executives report that acquisition was no different. The biggest of those “surprises” was the need for a $10 to $20 million retrofit of the Reynolds, Indiana pellet plant. After meeting with federal Environmental Protection Agency officials, ERP executives learned that the plant was out of compliance with air emissions standards, which would require both time and money to remedy.

The Reynolds plant is part of an integrated ERP plan, which would produce iron ore feedstock in Grand Rapids, then be manufactured into pellets in Indiana and ultimately shipped to Lorain, Ohio to be converted to pig iron. ERP and Republic Steel, the owner of the Lorain plant, announced the joint venture partnership in August of this year.

Bigelow noted that the discovery of deficiencies in Indiana did impact restart dates on the West Range. He told Itasca County Commissioners that it likely would be 12 months before hiring began at the Grand Rapids Plant 4 facility. While Bigelow characterized the news as “disappointing” he added, “We need to be a good steward and a good neighbor to those folks in Indiana.” Company executives are working with federal and state regulators in Indiana to bring the plant there in compliance with air emission standards.

In addition to the need for investment in Reynolds, Bigelow also noted that the investment also was needed in Ohio and at Plant 4, which he described as having been heavily utilized in the final days Magnetation was operational.

The former Magnetation assets also include a processing plant in Bovey and a small iron ore recovery operation in Keewatin, Minn. The fate of those two plants remain uncertain. Executives had previously publicly stated that while the Bovey plant could possibly again operate, the Keewatin plant, which was a pilot project, is less likely to reopen. 

ERP is led by Virginia businessman Tom Clarke, whose career background includes nursing home ownership.  More recently, Clarke has ventured into commodities. He purchased a number of troubled North American coal mines in recent years as well as iron ore properties. Clarke has said in interviews with national media that his hope was to continue to produce those commodities while reducing the environmental impact.

Nashwauk property

Affiliates of ERP are also in control of the assets of Mesabi Metallics near Nashwauk, formerly known as Essar Steel Minnesota. Here, Bigelow reported that the immediate goal was to get the project out of bankruptcy, which he anticipates will happen in the coming three to four weeks. Executives hope to achieve financial closure on the needed capital to resume construction by year’s end.

Once those goals are met, construction plans will be solidified with a plan to ramp up again in March. 

In a separate public meeting last month, Mitch Brunfelt, Mesabi Metallics spokesperson, told Nashwauk city officials that company personnel had been moved from offices in Hibbing to Nashwauk. He added that some construction work had taken place even as the company remains in bankruptcy. Currently, Brunfelt estimated that about 30 construction workers are active on the site.

The financial investment needed in Nashwauk is significant. The project involves two developments – a 2.4 million/annual ton capacity pellet plant and the a 1.8 million/annual ton capacity HBI production facility, or briquetted iron. The projects collectively require a $1.5 billion investment, Bigelow said.

While the financial needs are substantial, Bigelow said that the good news is there’s enormous appetite in Asia for northern Minnesota pellets. Significant pollution problems have led China to search for cleaner burning sources of iron, such as pellets. Executives with Mesabi Metallics are working on forging agreements that would see 4.5 million tons of pellets shipped and marketed in Asia, he added. 

Meanwhile delayed restart may have been a disappointment locally, but Bigelow pointed to the investments already made in Itasca County as evidence that things were progressing. He said, to date, the new owners have invested a total of $85 million in Minnesota between the two sites.