Cleveland-Cliffs to idle Northshore taconite mine this spring

Northshore Mining operations in Silver Bay and Babbitt will be idled this spring at least through the fall, Cleveland-Cliffs chief executive Lourenco Goncalves said Friday.

Goncalves is making good on a previous pledge to avoid royalty payments to Mesabi Trust for the iron ore that supplies Northshore.

"No production, no shipments, no royalty payments," Goncalves told investors. "We will be idling all production at Northshore Mining starting this spring, carrying through to the fall period and maybe beyond."

Northshore, a subsidiary of Cleveland-Cliffs Inc., operates the taconite mine in Babbitt and the processing plant in Silver Bay. Mesabi is a publicly traded royalty trust, deriving nearly all its income from the Peter Mitchell Mine near Babbitt.

Last fall, Goncalves blasted "absurdly high" royalty payments to Mesabi Trust, which owns and leases the land Cliffs mines for its Northshore operations.

Cliffs paid Mesabi Trust $20.9 million in royalty payments for the fourth quarter of 2021.

More than 500 employees work at Northshore's two facilities, which Cliffs spent $100 million upgrading in 2019 to produce the grade of iron it needs for modern steelmaking. That supply is now being sourced from the Minorca mine near Virginia, Goncalves said.

"Our iron ore needs are not as high as before," Goncalves said, as Cliffs shifts away from selling iron ore to other steel companies.

Cliffs also acquired a scrap steel firm last fall, which can supply its steelmaking operations in place of some iron ore.

"We are no longer (just) an iron ore company," Goncalves continued, as the purchase of ArcelorMittal USA and its Minorca mine in 2020 made Cliffs the largest producer of flat-rolled steel in North America. Flat-rolled steel is commonly used for making vehicles, machinery, heavy equipment and appliances.

Cliffs remains the largest mining company on the Iron Range and controls four of the six taconite operations there. Any pause in operations and the resulting layoffs can have far-reaching effects for the area's economy. In lieu of property taxes, mining companies pay a per-ton production tax that contributes to local schools and governments.

"It really is unfortunate to put not only the employees in this situation but the entire swath of towns between Babbitt and Silver Bay," said Babbitt Mayor Andrea Zupancich. "These are good-paying, steady jobs. You never know when something like this is going to happen."

Zupancich said she hopes Mesabi Trust and Cliffs can work out a solution to keep the mine open.

On Friday, Cliffs reported a record $3 billion profit on $20.4 billion in revenue in 2021, which Goncalves called an "absolute success" of a year.

For Mesabi Trust, the Northshore idling could "offset, or even eliminate, royalties or royalty income," according to a Securities and Exchange Commission filing the trust submitted earlier this month.

The trust's stock price plunged nearly 30% Friday. A phone message left with the corporate trustee was not returned.