Idled since May, iron ore operation in Babbitt and Silver Bay set to reopen

A Minnesota state senator said mine operator Cleveland-Cliffs plans to reopen Northshore Mining in early April, nearly a year after shutting down and laying off 450 workers.

State Sen. Grant Hauschild, DFL-Hermantown, said Monday a Cliffs corporate official told him of the company's plans. "The information I got is that they are in the process of calling back workers for reopening in April."

Hauschild, whose district includes Northshore's taconite mine and processing plant, said it is his understanding that the operation would fully reopen.

Cleveland-based Cliffs, in an email to the Star Tribune, acknowledged it's calling back some workers. "We will provide more details when we decide when and at what capacity this operation will be brought back online."

Northshore mines taconite in Babbitt and ships it by rail to Silver Bay, where it is then fashioned into marble-sized balls of more than 60% iron. Cleveland-Cliffs, the Iron Range's largest taconite mine operator, idled Northshore on May 1, a big blow to Babbitt and Silver Bay.

The closure stemmed from a long-running dispute between Cliffs and Mesabi Trust, which receives royalties for ore it owns near Babbitt.

"The point made to me [by Cliffs] was that conversations with Mesabi Trust were moving in the right direction," Hauschild said, "and that they were confident to start calling back workers."

Cliffs' CEO Lourenco Goncalves has previously described the royalties as "absurdly high."

Goncalves said last fall he's had difficulty even negotiating with Mesabi Trust given its minimal corporate structure because it has no CEO or executive committee. Mesabi Trust, in a federal regulatory filing last year, said Cliffs has failed to engage in meaningful negotiations.

Mesabi Trust, a publicly traded New York company, gets nearly all of its revenue from iron ore Cliffs extracts at the Peter Mitchell Mine. With Northshore idled, Mesabi Trust's revenues fell to zero last year.

The current royalty agreement dates to 1989, when Cyprus Minerals bought and resurrected the shuttered Babbitt and Silver Bay assets of Reserve Mining. Cliffs purchased Cyprus Northshore in 1994 and assumed the royalty agreement.

Over three years ago, publicly traded Cliffs invested $100 million in Northshore to produce "direct-reduced" taconite pellets, seen as critical for the Iron Range's future.

The new pellet has more iron and less silica than traditional pellets, making it ideal for use in direct-reduced iron (DRI) furnaces. Cliffs owns a DRI plant in Ohio, which churns out 95 % metallic iron that's used in steelmaking.

But through acquisitions in the past two years, Cliffs has gone from being an iron merchant to a fully integrated steelmaker. And one of those deals gave it ownership of the Minorca taconite mine near Virginia, Minn., which can also make direct-reduced pellets.

Cliffs has said it has relied on Minorca instead of Northshore for the new pellets.

Northshore is the largest employer in both Babbitt and Silver Bay, and it produces myriad secondary economic benefits, Hauschild said. Payroll is spent everywhere from grocery stores to auto shops.

Unemployment benefits for Northshore's workers ran out in December. Legislation, which Hauschild sponsored and Gov. Tim Walz signed last month, will provide about $10 million for both retroactive unemployment benefits and ongoing benefits through April, when the mine operation should restart.