Troubled Essar Steel Minnesota lays off workers on the Iron Range

Beleaguered Essar Steel Minnesota confirmed Friday that it laid off workers in Nashwauk as it scrambles to secure badly needed financing to finish construction of its much-delayed $1.8 billion taconite plant there.

The company declined to say how many people were affected. Essar has roughly 100 full-time employees in Minnesota.

"We have implemented some reductions in our workforce necessitated by challenges facing the iron ore sector and, as a result, the Essar Steel Minnesota project," said Essar Assistant General Counsel Mitch Brunfelt in an e-mail to the Star Tribune Friday. "We expect that this reduction is temporary, but our ability to recall employees will depend on several factors over the coming weeks."

The layoff news follows weeks of high drama on an Iron Range project that once was much anticipated by state officials and local residents who celebrated the 350 permanent jobs, as well as hundreds of construction jobs, that the project promised.

However, the project has sputtered on and off since 2008 due to financing woes and more recently a severe downturn in the iron ore industry that has made it harder to secure another round of capital. It was scaled back from a full steel facility to a taconite plants, and renegotiated deadlines were note met.

The state started talking to the company about paying back $66 million in state subsidies, and when Essar was so late in paying its bills that Minnesota contractors started laying off their construction workers on the project, Gov. Mark Dayton threatened to immediately demand the subsidies back.

Essar quickly made several partial payments to contractors and has worked out a long-term payback schedule but still owes several construction firms and vendors money. Brunfelt did not return calls or e-mails seeking more details about Essar's financial situation.

Dayton issued a statement last month saying that Essar was working to secure agreements with overseas banks that would allow the construction project to resume at full tilt.

The company said last month the project is about 75 percent completed and should be operating by the end of this year.

The governor declined to comment Friday regarding the news of Essar's layoffs.

Dee DePass • 612-673-7725