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Building a business in Mag-time
Photo: The $155 million construction of Magnetation’s Plant Four is to be completed by January 2015, employing about 200 workers and generating an anticipated impact of $250 million on the Itasca-area economy. Photo courtesy of Magnetation, LLC
When it comes to company growth rates, one business on the Iron Range has set a new standard: Mag-Time.
That’s the pace that managers at Magnetation LLC refer to when they discuss the timelines in which they get their projects and investments done. In the last five years, the company has initiated the construction of five processing facilities and two rail terminals, most of the projects going from construction to production in under a year.
Magnetation’s start was modest. In 2008, Larry Lehtinen, CEO and then the principal owner, expected to employ 19 people upon receiving a start-up loan from the Iron Range Resources and Rehabilitation Board, with the intention to produce iron ore concentrate from previously abandoned waste stockpiles and tailings basins. He planned to use the 1970s technology of the Ferrous Wheel®, which employs magnetic separation technology to capture iron ore particles.
With that loan, the company built its first facility, Plant One, near Keewatin. This 400,000-metric-ton plant produced and shipped concentrate to northern Minnesota customers within nine months.
One year later, in-house engineers developed a new technology, the Rev3™ Separator, which allowed more iron ore concentrate to be reclaimed in less time, helping the company realize its strategic growth plan. It replaced the old technology by April 2010.
Then, 2011 proved to be a path-breaking year for Magnetation. After breaking ground for their second facility, the 1.1 million-metric-ton-per-year Plant Two in Bovey, Magnetation entered two joint ventures. One came in August, with Steel Dynamics, Inc., to construct and operate a 1 million-metric-ton-per-year plant, Mining Resources, LLC, near Chisholm, internally referred to as Plant Three (80 percent ownership by Steel Dynamics and 20 percent by Magnetation, Inc.)
The second joint venture was put into effect in October with AK Steel to form Magnetation, LLC. The two parties currently are constructing a 3 million-metric-ton pellet plant in Reynolds, Ind., which will commence operations at the end of 2014. The facility will house the newest pelletizing technology and employ 100 people to supply AK Steel’s blast furnace operations in Middletown, Ohio, and Ashland, Ky.
And finally, in November 2011, Magnetation completed construction on its rail-terminal near Grand Rapids, the Jessie Load-Out facility, which provides access to national logistic systems.
Once again, the race is on for Magnetation, which now has 367 employees on its payroll, as they construct what is meant to be their flagship operation for reclaiming and processing various tailings and waste materials – Plant Four near Grand Rapids.
The $155 million construction project, for which Magnetation congruently functions as general contractor, is anticipated to commence operations early in January 2015. The undertaking is financed through a combination of high-yield bond offerings and equity contributions from AK Steel, Magnetation’s partner.
“Our biggest challenge is time. Winter is fast approaching, and our pellet plant in Indiana is expected to start up in the next few months. When it does, the demand for iron ore concentrate that we produce in Northern Minnesota will be quite large. It will be a race against time to complete Plant Four as fast as possible so that we can satisfy the hunger for iron ore concentrate by our other plants,” says Matt Lehtinen, president and COO.
Expected to generate up to 200 jobs, Plant Four is going to be about double the size of Plant Two, with an expected capacity of 2.2 million metric tons per year. Workforce recruitment is currently underway with the majority of the positions to be filled later in the summer and fall.
Mark Zimmerman, president of the Itasca Economic Development Corp., expects that for every one of these jobs created directly by Magnetation, which moved its headquarters to Grand Rapids in 2012, three will be generated indirectly.
“The Magnetation Plant Four project has been a driver of growth in the community, not to discount the other employment that’s been created by having their headquarters in Grand Rapids. It has had a positive effect on housing investment as well as retail investment,” says Rob Mattei, Grand Rapids Community Development Director.
Magnetation estimates its near term economic impact to be $200-$250 million dollars per year for the area economy, on top of the initial capital investment and potential subsequent investments for expansion.
Looking ahead, Magnetation managers intend to capture more market share and progress along the value chain with the strategic goal to advance from its current status as a four-million-ton iron ore producer into one that makes eight million metric tons. This progress would require that the company re-commences mining, a possibility that Matt Lehtinen sees in a potential Plant Five, which could be erected in Calumet.
He sums up what assisted Magnetation to become a stabilizing force in the area.
“Primarily, it’s our low cost and our very productive and skilled workforce. We hire the most talented people, we minimize any creation of bureaucracy and maximize the empowerment of our employees to move fast and make decisions quickly.”
There is the speed factor again – ‘Mag-Time’ speed, which Lehtinen states has been “the biggest differentiator and contributor to our success.”Previous Construction Articles:
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