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Land deal clears way for new iron ore mine in Iron Range

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Land deal clears way for new iron ore mine in Iron Range
Farmington Minnesota P.O. Box 192 / 312 Oak St. 55024

Steel Dynamics and Cleveland-Cliffs announced a land deal Monday that would lead to the opening of a new mine to provide raw material for the world's first commercial iron nugget plant.

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The mine and plant together would employ about 200 to 300 workers, compared with 50 for the nugget plant alone, said Steel Dynamics chairman and CEO Keith Busse.

The Mesabi Nugget plant is planned for the former LTV Steel Mining Co. site near Aurora and Hoyt Lakes.

"This is excellent news," Hoyt Lakes Mayor Marlene Pospeck said. "Everything is moving ahead, very much so. I'm very impressed with the progress that's being made in construction in the first phase of the project."

Under the $18 million deal, Steel Dynamics Inc. will acquire about 6,000 acres at the former LTV Steel Mining Co. site and assume some environmental and reclamation liabilities that had been Cleveland-Cliffs' responsibility.

It also will acquire mineral rights to about 133 million tons of iron ore reserves beneath the ground at the former taconite plant, according to Pete Clevenstine, state Department of Natural Resources Lands and Minerals manager of engineering and mineral development.

Steel Dynamics officials in September said there are enough iron ore reserves at the site to operate four iron nugget modules for 100 years.

An initial 500,000-metric-ton-per-year iron nugget module is projected to cost about $235 million.

To feed the plant, Steel Dynamics and partner Kobe Steel plan to design and build a $165 million mine. The mine would be owned and operated by Mesabi Mining LLC, a new corporation formed by Mesabi Nugget and Kobe Steel.

Nuggets produced at the plant would provide Steel Dynamics with a virgin iron product far more cheaply than the current $450-per-ton costs of buying pig iron from Brazil, Busse said.

"If we are going to continue to grow as a steelmaker and have a world-class, globally competitive cost structure, it [the iron nugget plant] plays a strategic role in our growth," Busse said,

About 50 construction workers are building a foundation for the nugget plant's rotary hearth furnace, said Pospeck, who recently visited the site.

The nugget plant is scheduled to begin operating in mid-2009.

Early estimates were that about 50 permanent workers would be needed to operate the nugget plant, Pospeck said. However, with development of a mine, the entire project could employ about 200 to 300 workers, Busse said.

"Every step is a landmark," Pospeck said. "With all the ups and downs there have been, this is wonderful."

Before a mine is developed, Mesabi Mining would need to design and obtain permits, Clevenstine said.

Permitting, which would include removing water from some abandoned mine pits, could take 18 to 24 months, Busse said.

Steel Dynamics officials said they hope to have the mine open in late 2009 or early 2010.

Because the nugget plant is likely to be operating before the mine opens, Steel Dynamics may have to buy iron ore concentrate on the open market to feed the plant until the mine is operational.

Cleveland-Cliffs Inc. had been a partner in the project but pulled out in November 2006 when an agreement on business terms couldn't be reached.

The iron nugget process was proven on a pilot scale at Cliffs' Northshore Mining Co. in Silver Bay.

Cleveland-Cliffs will record a gain on the sale of the land during the fourth quarter, according to a Cleveland-Cliffs news release.

Iron Range Resources and the state Department of Employment and Economic Development are supporting construction of the commercial nugget plant with $26.5 million in financial assistance.

Nuggets produced at the plant would be about 97 percent iron. That compares to the 65 percent iron contained in taconite pellets currently produced at Iron Range taconite plants.

Because nuggets have a higher iron content, they would be worth more.

The nuggets would be used as an additive to make steel in the electric arc furnaces of mini-mill steel producers and at foundries.

Steel Dynamics, which owns and operates a mini mill in Butler, Ind., would consume most of the 500,000 metric tons produced each year at the nugget plant.

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