Essar Steel wants lease extension for long-delayed Iron Range mine and plant

Essar Steel Minnesota, which has already missed several deadlines in its decade-long quest to build a new taconite mine and pellet plant on the Iron Range, is asking Minnesota for a nine-month extension of the state's right to terminate mineral leases at the mine site.

The state's mineral leases for the project near Nashwauk on the western side of northeastern Minnesota's Iron Range were subject to termination on July 1.

Neither the state nor Essar have commented on the request, but both the Itasca County Board of Commissioners and the Nashwauk City Council submitted a letter to the state in the last two weeks supporting the company's request for a nine-month "forbearance" of the state's right to terminate Essar's mineral leases.

The letter noted that the company is working with a new equity investor "willing to infuse a significant amount of new capital into the company," but added that financing is contingent on the state of Minnesota providing "a nine-month forbearance of the state's right to terminate" Essar's state mineral leases.

"We want to see the project succeed ... and provide good high-paying quality jobs for Itasca County utilizing our valuable natural resources," said Itasca County Commission Chair Rusty Eichorn.

"It may not be Essar that takes this thing to the finish line," he added. "It may be a new equity partner or somebody else. But ultimately we want to see it be completed and up and running."

In April, Gov. Mark Dayton said if Essar wanted the mineral leases extended, the company must demonstrate by July 1 that it has secured necessary financing to repay the state, resume constructing the plant, and pay contractors it still owes for work performed at the site.

"If Essar Steel fails to fulfill in full its commitments to the State and its vendors by that deadline, the company should not expect the leases to be renewed," Dayton said at the time.

State Rep. Jason Metsa, DFL-Virginia, said contractors and vendors in Minnesota are owed an estimated $50 million.

"The entire time I've been in office, it's been promises made, promises broken with this company," he said. "I'd like to see the businesses in my district and elsewhere around the state get paid."

The letter from the Itasca County Board and Nashwauk City Council noted that Essar is securing investment that would include "bridge" financing to allow the company to get "payments flowing again to the local project contractors and vendors."

Essar also still owes the state $66 million for new infrastructure built at the mine site. The company missed a March 31 deadline to make its first payment of $10 million.

Construction ground to a halt on the massive $1.8 billion project last fall.

Essar subsequently agreed to a plan to repay the state and contractors, but so far has failed to meet its deadlines.

Ten years ago the Essar Steel Project was touted as a game-changer on the Iron Range, proposing to build the state's first-ever steel mill at the mouth of an iron ore mine.

But the project has been dogged by financing struggles and then a sharp decline in the American steel industry, forcing the company to drop plans for a steel mill and instead focus on opening a taconite mine and pellet plant.

While not what the state had originally banked on, Dayton has called the project "tremendously important to the Iron Range," with its promise of 350 permanent jobs.

Dayton's office has said it expects to have an announcement regarding Essar sometime this week.