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There's optimism on mining's future
By late 2008 and into early 2009, the iron mining industry ground to a halt in Minnesota. But during the last two years, production has rebounded.
The year 2011 was one that saw mining companies up and running at full capacity – with the exception of scheduled shutdowns for maintenance, said Craig Pagel, president of the Iron Mining Association.
While iron ore spot market prices have been up and down this year – from about $200 per ton this spring to a current level of about $174 per ton – mining operations here are somewhat shielded from market volatility by vertical integration and long-term contracts.
“The economy of the region seems to have rebounded for the mines and companies that sell products to mining companies,” Pagel said.
Demand that increased following emergence from worldwide recession contributed to a better year for the mining industry. There were other significant developments, which are cause for cautious optimism in the future.
2011 bright spots:
This year’s streamlined environmental review and permitting laws in Minnesota were widely heralded by those in the industry. Not long after Gov. Mark Dayton took office in January, he issued an executive order telling state agencies to move “at the speed of commerce” when approving permits. HF 1 - legislation that allows project proposers to draft their own environmental impact statements, although still subject to state review - reinforced Dayton’s actions about one month later.
Later in the year, more attempts were made to streamline environmental review and permitting. In September, just days after an Iron Range jobs summit, Dayton created a mining coordinator position and re-launched a state mining sub-cabinet. Both are charged with the task of coordinating efforts among federal and state agencies to expedite the review and permitting processes.
Mesabi Nugget, which produces 96 to 97 percent pure iron nuggets, enjoyed a full year of production, with the exception of a scheduled shutdown in September to install equipment. The company began production in mid-January at its facilities near Hoyt Lakes. Its highly pure nuggets are used in conjunction with recycled materials in electric arc furnaces.
The company had its upstart challenges, however. In late June, company executives acknowledged in interviews with BusinessNorth that it faced hurdles last year with its new technology and inexperienced workforce.
Those issues have since been resolved, company executives said. And, in more good news, Mesabi Nugget majority owner Steel Dynamics saw its net income rise sharply in the third quarter of this year – to $43 million compared with $19 million during the same period of 2010.
Magnetation made a number of important announcements in 2011. In October, the scram mining operation, which extracts iron ore from previously mined tailings basins, announced a joint venture with AK Steel. The new entity, Magnetation LLC, will own and operate Plant 1 operations in Keewatin, Plant 2 operations in Taconite (currently under construction) and two more plants proposed for the Western Mesabi Iron Range. The joint venture also plans to construct a 3 million annual metric ton pelletizing plant.
The move marks a re-entry into integrated operations for Ohio-based AK Steel, which until 2003 owned a 40 percent stake in EVTAC. Iron ore prices, which have soared over the course of the last decade, have made integrated operations much more attractive to steel makers.
Earlier this year, Magnetation announced another joint venture, this one with Mesabi Nugget, to construct an iron ore concentrate producing plant near Chisholm to supply its iron nugget plant.
Michigan State University iron ore analyst Peter Kakela told BusinessNorth in a late October interview that both Magnetation and Mesabi Nugget were “exciting” developments, reflective of the industry’s future.
Construction also got underway in earnest this year on Essar Steel Minnesota’s mining- to steel-making facilities at the former Butler plant near Nashwauk. The under-construction project is owned by India-based steelmaker.
Current company timelines call for taconite production by the end of 2012. Steel making capabilities won’t be in place until 2015.
The combination of current and pending developments, said Rep. Tom Anzelc, DFL – Balsam, bodes well for the future of the region. “We’re going to have 750 to 2,000 jobs in mining (as a result). These are jobs that we didn’t have last year or the year before. This is going to allow a whole generation to stay here and work here.”
Meanwhile, developers in Wisconsin got plenty of ink (and controversy) this past year over their proposed Gogebic Taconite, LLC, development, which aims to mine iron ore in southern Ashland and northern Iron counties. New core testing began, and Wisconsin lawmakers soon will debate whether to streamline the state’s permit-issuing process. The Gogebic project, if it advances, could directly employ 700 persons.
Proposed nonferrous projects inched forward:
In Ely, there was an August outpouring of support for non-ferrous mining when Twin Metals Minnesota hosted an open house at its 8,800 square foot area field headquarters in the city’s industrial park.
The company and the city of Ely talked for more than one year before the development was made possible. In tandem with those talks, Twin Metals expanded its precious metals holdings, acquiring Franconia Minerals Corp.
PolyMet, which is furthest along in the quest to mine copper, nickel and other precious metals in the Duluth Complex, spent much of 2011 preparing a supplemental draft environmental impact statement. It could clear a major review hurdle in the second quarter of 2012 when the SDEIS is submitted.
“Twenty-twelve is shaping up to be an exciting year for mineral development in Minnesota, with the much-anticipated SDEIS for PolyMet” due to be released, said Frank Ongaro, executive director of Mining Minnesota, which supports mining development in the state.
While this past year was generally positive for the mining sector, there still is cause for caution as worldwide economic conditions seem on shaky ground. Europe’s sovereign debt crisis brings with it the threat of worldwide recession. Recent reports also suggest China’s growth is slowing.
Pagel notes that iron produced on Minnesota’s Iron Range is used domestically rather than abroad. Nonetheless, worldwide recession would certainly have an impact on domestic iron and steel consumption. Still, Pagel is optimistic.
“Right now, the expectation is that production will continue at its current level,” he said.
“All indications now are that demand will stay strong globally as well as domestically,” Ongaro added.
“I think for the next three to five years, the price (for iron ore) is going to stay high,” Kakela said.Previous Construction Articles:
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