Cliffs Natural Resources Inc. (NYSE:CLF) has selected a site in Toledo, Ohio, to develop its first hot briquetted iron (HBI) production plant, the company announced Thursday.

CEO, President and Chairman Lourenco Goncalves has said many times that he had hoped to build the corporation's first HBI plant on the Iron Range using ore from a Nashwauk mine as feedstock. Those hopes were dashed earlier this week when that ore body and production site were awarded by a federal judge to Chippewa Capital Partners, which submitted a successful plan to bring the former Essar Steel Minnesota operation out of Chapter 11 bankruptcy.

"We congratulate Cliffs Natural Resources on today’s announcement and for being the first U.S. iron ore mining company with a solid plan to enter the Electric Arc Furnace (EAF) market," said Iron Mining Association President Kelsey Johnson. "The Iron Mining Association looks forward to learning more about Cliffs’ plan and if there is potential benefit for the mining industry in Minnesota."

Midrex Technologies was selected to design, engineer and procure equipment for the new plant, which will have the capacity to produce 1.6 million tons of HBI per year.

“Today’s announcement marks a very important strategic milestone for Cliffs as we begin to implement our plans to be the sole producer of high-quality HBI for the EAF steel market in the Great Lakes region. We look forward to the strong margin and earnings potential this new product will generate for Cliffs shareholders,” Goncalves said.

Throughout the bankruptcy proceedings, Goncalves has reiterated his preference to build in Minnesota but warned he would build elsewhere on the Great Lakes if the mineral resources in Nashwauk did not become available. Cliffs submitted a bid to bring the entity out of bankruptcy, but its offer had a lower value than the one submitted by Chippewa and was withdrawn before the court made its final decision. 

“We thank Gov. John Kasich, JobsOhio and a number of local partners in the Toledo community for their efforts to help advance this project, including an offer of approximately $30 million in grants and other financial incentives. We will continue to work closely with the State of Ohio through the environmental permitting process, and are excited to bring a significant number of high-paying jobs to Ohio,” Goncalves said.

“This is great news for Toledo, and we’re pleased that Cliffs chose Ohio for their new investment,” Kasich said in a prepared statement. “In addition to our strategic location and strong business climate, our low-cost natural gas resources give job creators in this industry a competitive advantage, something Cliffs recognized when considering sites for this new technology.”

The estimated investment will be approximately $700 million, and Cliffs is currently in discussions with several passive financial partners, the company said in its announcement. Cliffs anticipates breaking ground for the construction of the HBI production plant in early 2018, with the production of commercial tonnage of HBI beginning in mid-2020. Cliffs considers the brownfield site at the Port of Toledo a premier location for development due to its relative proximity to several future customers, as well as its logistics advantages, including affordable gas availability and access by multiple rail carriers.

Goncalves believes HBI is critical to the future of mining and steelmaking in the United States. It can be used as feedstock for electric arc furnaces, which also use scrap steel as a key ingredient in producing new steel. Electric arc furnaces are gradually replacing much-more-expensive blast furnaces, which consume taconite. A new blast furnace has not been constructed for several decades in the United States.

JobsOhio President and Chief Investment Officer John Minor said he was thrilled Cliffs chose Ohio for this investment.

“The Toledo Ironville Terminal site is a great location for this first direct reduced iron project in the Great Lakes Region,” said Minor. “JobsOhio, along with our regional partner RGP, the Toledo-Lucas County Port Authority and the City of Toledo are looking forward to supporting Cliffs as they construct this landmark facility that will create 130 permanent jobs and more than 1,200 construction jobs over the next two years."