Mesabi Metallics could have a new lease on its partially-built project in Nashwauk if the state’s Executive Council approves the terms Wednesday, nearly one year after the company failed to meet pellet plant construction terms set in the original agreement.
The amendment has financial guarantees by Mesabi Metallics, due Tuesday, including more than $24.5 million into escrow to benefit the state Department of Natural Resources, Department of Employment and Economic Development and Itasca County. Another $11.5 million is due Tuesday for all 2019 rents and royalties owed under the leases.
These payments were already past due and owed by the company.
The amended agreement also sets new construction goals including finishing the primary crusher for the pellet plant by Dec. 31, 2021, and the entire plant must be ready for commissioning by June 30, 2024.
It also says that Mesabi Metallics, by May 1, 2021, has to secure $850 million in commitments and at least $450 million of debt financing from lenders not associated with the projects equity holders, which include Mesabi Metallics, MHL and HBI Newco. At least $200,000 million of the financing needs to be advanced to Mesabi Metallics and “immediately available funds in a corporate bank account held in the United States in the name of Mesabi.”
The agreement also stipulates that the company has to sign a binding offtake agreement for pellets of at least 4 million metric tons annually also by May 1, 2021.
Terms for a hot-briquetted iron operation were added to the amended agreement, headed by HBI Newco. “No entity may own or operate a facility producing Value Added Iron or Steel Products at the Nashwauk Project Site unless it agrees to join this Agreement, become the HBI Constructor, and substitute for HBI Newco as guarantor to the same extent as HBI Newco,” the agreement states.
DNR officials will detail the amended agreement Wednesday to the Executive Council, which consists of Gov. Tim Walz, Lt. Gov. Peggy Flanagan, Secretary of State Steve Simon, Auditor Julie Blaha and Attorney General Keith Ellison.
Iron Range lawmakers have increasingly soured on the current status of the project after Mesabi Metallics missed a Dec. 31, 2019, construction deadline on the pellet plant and missed millions of dollars in payments to the state and Itasca County.
They were also unhappy with the emergence of Essar Global, the parent company of Essar Steel Minnesota, who originally led the project into a bankruptcy in 2016. The state has moved to debar Essar from doing businesses in the state, but has said the company can remain a financial stakeholder in the project, so long as it’s not involved in operations. Essar co-founder Ravi Ruia and former Essar Steel Minnesota CEO Madhu Vuppuluri have visited the region on multiple occasions in the past few years.
Iron Range Delegation members were briefed last week on the proposal by the DNR. The agency was scheduled to meet with United Steelworkers officials Monday on the project.
“It’s hard to understand how anyone who has followed or been directly affected by the aftermath left behind of years of empty promises could or would support more of the same,” said State Rep. Dave Lislegard, DFL-Aurora, noting the millions already owed by the company. “When making a decision of this magnitude, the track record of repeated patterns of deception and failed commitments to our communities and state must be taken into account.”
State Rep. Julie Sandstede, DFL-Hibbing, told WDIO she was skeptical of the project.
"Nothing is in there that hasn't already been court-ordered,” she said. “To me, nothing has changed. This is what they were supposed to have paid. I don't know what new we're getting out of this. I am skeptical this will move forward," she said.