Mesabi Metallics files appeal of DNR decision on Nashwauk leases

Mesabi Metallics has asked the Minnesota Court of Appeals to review the state’s decision in May to award mineral leases to Cleveland-Cliffs, drawing up potentially one last Hail Mary shot at salvaging its Nashwauk taconite project.

The appeal was filed June 23 and argued, in part, that the Minnesota Department of Natural Resources misread state statute that allowed the agency to directly negotiate lease terms with Cliffs, rather than go through a broader auction process.

Mesabi Metallics lost the state mineral leases last year after failing to meet terms of its agreement with the DNR. The Minnesota Supreme Court declined to take up the company’s case and the state announced lease terms with Cliffs on March 2, which were subsequently approved by the Executive Council on May 25.

Now, the company has returned to the court with the hopes of retaining some cut , if not all, of the 30 state mineral leases awarded to Cliffs.

Questions over adjacent land access, a pending anti-trust lawsuit in Delaware between the companies and the potential for other companies to mine the property form the gist of Mesabi Metallics’ appeal, which noted similar arguments were made in front of the Executive Council last month to no avail.

“Unless the legal challenge to the status of the disputed parcels is resolved in Cliffs’ favor in Delaware, Cliffs will not have property rights that support such mining, and thus will be incapable of mining the state Leases,” wrote Jessica Nelson, an attorney for the company. “Moreover, it is simply incorrect that mining the state parcels would be impracticable except in conjunction with Cliffs’ adjacent ore. Even if Cliffs had undisputed rights to the adjacent ore, there are other parties situated to practicably mine the state parcels.”

No immediate action was taken by the appellate court as of Wednesday, and barring a judicial stay on the lease agreement, Cliffs would be able to continue moving ahead with its plans in Nashwauk.

Cliffs has said it will use the former Butler Taconite site to extend the life of mine for Hibbing Taconite, which will run of ore by 2026, according to the company’s most optimistic projections. To do so Cliffs would have to work through some permitting and railroad line build-out to transport ore from Nashwauk to the Hibbing processing plant, creating an extremely narrow margin to avoid a temporary shutdown of the facility.

“The Minnesota DNR is responsible for acting in the best interests of the state and may only award mineral leases to a credible miner,” the agency said through a statement. “The DNR is confident that the mineral leases recently issued to Cleveland Cliffs for the state ore body near Nashwauk are in the best interest of the state and meet all requirements of state law.”

As for Mesabi Metallics, the fate of the company and its project have largely rested on the courts in recent years. In losing the leases it lost a significant supply of ore to mine and process at the former Butler Taconite site, which the company and its majority owner, Essar Group, have controlled and tried to build since 2008.

A 2017 anti-trust filing against Cliffs in Delaware bankruptcy court has more recently loomed over the project and the state’s leases, but it isn’t set to be resolved until at least May 2024, when summary judgement is expected to be issued by the Hon. Craig T. Goldblatt. From there, a district court would handle the jury trial portion of the suit.

Officials at Mesabi Metallics and Essar have claimed the lack of state mineral leases spell the end of the once-promising project in Nashwauk, and company leaders told the Executive Council it would likely have to file for bankruptcy if it wasn’t provided a lifeline of ore by the state, which is asked for through a split of the leases.

Instead, Mesabi Metallics has publicly straddled a line of an impending bankruptcy filing and saying it’s trying to save the project, including a last-ditch public petition and media ad buy ahead of the Executive Council hearing.

“The project may be dead,” said Martin Toto, an attorney for the company during a Zoom hearing Wednesday in the anti-trust case. “It’s likely to be dead, but Mesabi Metallics is trying to save it.”

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