DNR recommends Cleveland-Cliffs get much sought after mineral rights in Nashwauk

Cleveland-Cliffs is the likely winner of a high-stakes bid for state iron ore leases near Nashwauk, a victory that would ensure the future of Hibbing Taconite, one of the Iron Range's largest mining operations.

The Minnesota Department of Natural Resources (DNR) on Thursday announced that it will recommend that Cliffs gets the leases once held by the ill-starred Mesabi Metallics taconite project. The DNR, in negotiating new leases, chose Cliffs over its rival U.S. Steel.

The DNR's recommendation goes to the Minnesota Executive Council, which is made up of Gov. Tim Walz and four other top state elected officials. The council is likely to approve the Cliffs agreements when it meets later this month.

"After careful consideration of multiple requests to lease the state ore near Nashwauk, the DNR has concluded that it is in the best interest of the state to enter into leases with Cleveland-Cliffs," the DNR said in a statement. "Cleveland-Cliffs has a proven record of bringing mining projects into operation and currently holds a significant land position adjacent to the state ore in the [Nashwauk] area."

Cleveland-Cliffs CEO Lourenco Goncalves has said that without the Nashwauk leases, Hibbing Taconite — which employs about 750 people — would close after it runs out of taconite in the mid-2020s. Cliffs owns 85% of Hibbing Taconite; U.S. Steel owns the rest.

"When approved by the MN Executive Council, the leases will be used to provide a long-term extension of Hibbing Taconite's mine life, securing the future of Hibbing Taconite and the good-paying, union jobs at HibTac, our flagship operation in Minnesota," Goncalves said in a statement.

Goncalves also thanked Walz for his support.

The DNR said that Cliffs would "immediately begin the work needed to bring the [Nashwauk] ore into production."

Cleveland-based Cliffs fully owns three of the Iron Range's six big taconite operations; Pittsburgh-based U.S. Steel owns two, including Keewatin Taconite, which is near the Nashwauk ore leases.

Like Cliffs, U.S. Steel formally asked the DNR to negotiate lease agreements for the Nashwauk ore.

"We will continue to seek out opportunities that will support our strategy," U.S. Steel said in a statement. The company said it would focus on existing operations, noting that its $150 million project at Keewatin Taconite "remains on time and on budget."

U.S. Steel is expanding Keetac so that it can produce a higher-grade iron ore pellet.

Cleveland-Cliffs has long sought the former Mesabi Metallics leases, while U.S. Steel first expressed interest two years ago. As of early March, Cliffs and U.S. Steel were the only two major mining companies that had formally asked the DNR for the Nashwauk leases.

Two smaller companies — Hibbing's Scranton Holdings and Chagrin Falls, Ohio-based Ironton Enterprises — made bids for just some of the Nashwauk leases.

The DNR said details of the Cliffs lease agreement will be released later this month.

Last year, the DNR terminated Mesabi Metallics' leases for state-owned ore, which covered around 2,600 acres. The Minnesota Supreme Court upheld the termination in January, paving the way for the DNR to reallocate the leases.

Mesabi Metallics' leases were canceled after the company missed a 2021 deadline for a $200 million down payment to complete a half-built taconite plant. A predecessor company, Essar Steel Minnesota, started the project in 2011, but it went bankrupt in 2016.

The erstwhile Essar venture was reconstituted under new ownership, which went by the name of Mesabi Metallics. But by early 2019, an Essar-related company was effectively in control of Mesabi Metallics.

One factor remained constant: The project was plagued by delays.