On the same day that Minnesota Gov. Mark Dayton met with Iron Range mayors and other local stakeholders to discuss the status of the Nashwauk’s Mesabi Metallics mining and processing project, its current owner, Chippewa Capital Partners, was brokering a deal to secure financing for its further development.
While a capital infusion from global energy and commodities company Mercuria might be welcome news, the acquisition also would bring former owner Essar, which led the project into bankruptcy after several years of missed deadlines and failed development plans, into the mix as a minority shareholder. It is unclear, at this point, whether Essar has connection to Nubai Global Investment Ltd., which currently has majority, and perhaps sole, ownership of Chippewa, or would be coming in as a new investor.
According to a statement released Tuesday by Mercuria, the company would acquire a majority ownership stake upon closing, which is anticipated to take place in the fourth quarter of this year.
Tuesday, Dayton and other state officials conducted meetings in Nashwauk to answer questions and allay concerns about the project’s development. In recent months, the project has been besieged by numerous lawsuits and internal leadership battles. In early August, former CEO Tom Clarke, who had been the public face of the company and the project, was ousted by Nubai in favor of interim CEO Gary Heasley.
The nearly constant stream of news regarding lawsuits and internal strife has rattled the nerves of local stakeholders anxious to see the project come to fruition. Some local officials had recently called for the state to revoke mineral leases awarded to Mesabi Metallics.
In his public remarks to the press on Tuesday, Dayton acknowledged the concern of local officials, many of whom have backed public dollar outlays to bring the project to fruition. He added, however, that the current ownership still appeared to be the best path forward – having already invested $200 million in the project. A lawsuit by former executives at the plant, however, contends that existing construction has numerous flaws. It also argues that funding obtained for the plant was redirected away from Essar Steel Minnesota into other Essar ventures.
State officials have been told by the company that construction is expected to fully resume in March of 2019. The project is obligated by agreements with the state to complete a pellet plant by December of next year. In the past, however, the state grant Essar numerous extensions when it failed to meet deadlines.
“I wish there were more answers to the questions we have, but it is where it is,” said Dayton.
At a city council meeting on Tuesday, Nashwauk Mayor Greg Heyblom expressed a similar sentiment. “Obviously things aren’t progressing as we’d hoped, but they are slowly progressing behind the scenes.”
BusinessNorth and its sister newspaper, Scenic Range NewsForum, were not informed the topic would be discussed at the meeting, nor that Dayton was in Nashwauk to discuss the topic.
Written remarks released Tuesday by state Rep. Sandy Layman noted the project’s value to the region – regardless of the developer.
“Today’s meeting between all the interested parties and the Dayton Administration was an encouraging step toward opening communication between the Governor’s office and local stakeholders regarding the granting of mineral leases and mining permits at the Mesabi Metallics mine project. As residents of Itasca County, our main goal is to make sure this project moves forward, bringing good paying jobs to our area and, ultimately, producing both taconite and value added iron onsite. While the challenges have been daunting, I believe the state has put sufficient safeguards and conditions in place to protect the project assets for future development. Whether the developer is Mesabi Metallics or another entity remains to be seen.”
Similar safeguards, however, were not fully enforced before Essar Steel Minnesota declared bankruptcy, leaving a variety of vendors unpaid and triggering lawsuits.
Ironically, Essar is entering the picture at the same time as Essar Steel is being offered for sale as part of a bankruptcy resolution process overseas.