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Brian Bakst
St. Paul

Dayton warns Essar Steel to fix finances or risk losing leases

Ore storage area
A construction crane continued to piece together the area where ore was to be stored at the Essar Steel site on March 19, 2015 near Nashwauk, Minn.
Derek Montgomery for MPR News 2015

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Updated 4:35 p.m. | Posted 2:25 p.m.

Gov. Mark Dayton said Thursday the company involved in a long delayed steel project in northern Minnesota has until July 1 to get its finances in order or it will risk losing state mineral leases.

A week after saying he was very concerned about Essar Steel Minnesota after the company didn't deliver on a promised $10 million state payment, Dayton upped the pressure.

In a statement, he warned the state's mineral leases for the project are "subject to termination on July 1. If Essar Steel wants those leases to be extended, the company must demonstrate within the next two months that it has secured all of the necessary financing."

If Essar fails to completely fulfill its commitments to Minnesota by then, "the company should not expect the leases to be renewed," Dayton said.

Essar responded late Thursday saying it had invested $1.8 billion in the project already and remained "steadfastly committed to completing this project."

Efforts continue to bring a new investor and "substantial new capital into the project," Mitch Brunfelt, Essar Steel Minnesota's assistant general counsel, said late Thursday.

The company, he added, is "confident that, in the near term, the necessary funding will be in place to resume construction and complete the project."

Minnesota agreed in 2004 to fund infrastructure — mainly a rail line and electric substation at Essar's mine site in Nashwauk, Minn. — for what was supposed to be the state's first integrated iron ore mine and steel mill. Essar, however, ultimately dropped its plans to build the steel plant, triggering the state's effort to recoup $66 million in state incentives for the Iron Range taconite project.

Dayton thought he had a deal with Essar back in December on repaying the $66 million. He slammed the company as untrustworthy last week after Essar missed the first payment.

The governor met privately this week with legislators from the Iron Range to assess options on how to proceed. Dayton said the hope is that Essar will secure money to move forward with the iron ore operation that began construction in 2008 and was supposed to be completed five years ago.

Essar officials, he added, have informed the administration they have been working to secure money to meet immediate obligations.

An offshoot of an India-based company, Essar Steel Minnesota has also struggled to pay contractors at the site amid a major global downturn in the steel and iron ore industries. In November, Dayton threatened to call the loan unless Essar paid its Minnesota contractors and other vendors in full. The company complied.