Cleveland-Cliffs says no thanks to Walz's U.S. Steel partnership idea

The parent company of Hibbing Taconite on the Iron Range said it has found its own solution to the mine nearing the end of its mining life and will not partner with U.S. Steel, a move suggested by Gov. Tim Walz in letters to both companies last week.

Cleveland-Cliffs CEO Lourenco Goncalves said in a statement that he informed Walz on Monday that "Cleveland-Cliffs has identified a solution to extend HibTac's life of mine, using land already under the control of Cleveland-Cliffs. With this solution, no land swap with other companies will be necessary to extend the life of HibTac."

The statement spurned Walz's suggestion that Cliffs partner with U.S. Steel (which also operates in Minnesota) to find a remedy for HibTac's iron ore shortage woes.

Goncalves declined to elaborate beyond his statement.

A Cliffs spokeswoman said the solutions being considered for HibTac were in Minnesota but declined to specify. She noted that details will come later. Cliffs newly owns the ArcelorMittal Minorca mine near Virginia, Minn., and a patchwork of land parcels in Nashwauk. It also owns United Taconite in Eveleth/Forbes, Northshore Mining in Silver Bay/Babbitt and the bulk of HibTac in Hibbing.

Concerns about HibTac have recently intensified as the employer of 750 people is expected to run out of minable ore space by 2024. Expanding the mine is not possible because of surrounding cities, highways and other businesses.

In his Feb. 1 letter, Walz noted that while U.S. Steel — which owns Keetac in Keewatin and Minntac in Mountain Iron, Minn. — had enough ore for now, it had "expressed interest in securing leases for additional high quality ore that would solidify the long-term options for the mine."

Walz also noted that both companies were located near minable land owned by third parties and that if they worked together they might be able to ensure "the future success of both" of their taconite operations.

In a Feb. 2 letter to Walz, Goncalves seemed agreeable to Walz's idea, welcomed the state's involvement but warned there were obstacles.

Goncalves wrote that U.S. Steel and Cleveland-Cliffs had previously tried to negotiate regarding select "Carmi-Campbell" ore leases but that no agreement was reached — despite years working together as the co-owners of HibTac.

U.S. Steel owns nearly 15% of HibTac and managed it for years. Today Cleveland-Cliffs manages it and owns the rest of HibTac, after buying out ArcelorMittal USA in December.

"Regardless of which party was acting as the manager [of HibTac], a commercially viable solution has failed to materialize" over new mining leases that might have solved HibTac's ore problem, Goncalves wrote last week. "The unsuccessful negotiations with U.S. Steel were a very important part of our decision to acquire land in Nashwauk, in order to provide us with the mine life extension we need at Hibbing Taconite."

Goncalves added that if Cleveland-Cliffs were allowed to mine its own Nashwauk land, plus adjacent land owned by Mesabi Metallics, "not only Hibbing Taconite will be saved, but we would also have the opportunity to build a 'direct reduction' [iron processing] plant on the site, creating the basis for a future steel mill in Nashwauk" that would use locally supplied hot briquetted iron bricks made from the direct-reduced iron.

It was not clear Monday if Cleveland-Cliffs' remedy for HibTac's mining woes involved the land in Nashwauk that Cliffs bought or leased in December 2017. A judge awarded Cliffs the mining rights to that land in July 2018.

The Nashwauk property has been tricky, because a large chunk of the area is already owned by Mesabi Metallics, the entity that took over the failed Essar Steel Minnesota that filed for bankruptcy in 2016, owing nearly $1 billion.

Essar left a half-built ore-processing plant on the site. Recent court and state actions have given Mesabi Metallics until May to get finances and construction agreements in place so construction can resume at the site.

Mesabi Metallics has said it plans to finish building a taconite pelletizing plant at the site.

While Goncalves declined to discuss Nashwauk, he thanked Walz for being willing to help solve the HibTac problem.

"Gov. Walz stated his commitment to direct his agencies to take all legally possible actions to support Cliffs' initiative," he said.

Separately Monday, Cleveland-Cliffs offered to sell 60 million common shares of company stock to the public, including about 40 million shares offered by its newly purchased subsidiary ArcelorMittal North America Holdings LLC USA.

Dee DePass • 612-673-7725