Mesabi Metallics plans to be producing iron ore pellets at its project site near Nashwauk beginning in the first quarter of 2026, according to company officials.
“We have the ability and capacity to complete this and we are going ahead,” Rakesh Kankanala, Essar Global Fund LTD managing director of Infrastructure and Strategy for Essar Capital said in an exclusive interview. “We are keeping this project alive. We are keeping this site alive. We will continue to build.”
The company plans to invest about $800 million to finish the $2.3 billion project, Kankanala said.
As it stands today, the project is about 52 percent complete, he said.
“The most difficult part of the project is the concentrator building,” Kankanala said. “I think the key is to get that building in place.”
About $500 million in equipment has been on-site for about seven years, he said.
“What is really left is about $550 million in costs to go in the ground,” Kankanala said. “Out of that is roughly $200 million in procurement and I would say close to $325 million is what we would pay the building trades to complete the manpower costs. Of the $200 million in procurement is mostly going to be steel made in the United States.”
Engineering and site maintenance costs would boost the total remaining investment to $800 million, he said.
Construction of the facility remains one of the largest proposed projects in the state.
But the project suffered a major setback in May when the Minnesota Executive Council awarded mineral leases on 2,664.45 acres of state land that Mesabi Metallics had held to Cleveland-Cliffs Inc.
However, Mesabi Metallics said loss of the state mineral leases is not stopping the project.
“It took us a couple of days to recover for sure, but we have put $1.5 billion in the ground already and we should not let this moment slip,” Kankanala said. “We have maintained the work on the critical building, which is the concentrator, there has been 60 contractors on the site and I would say we have spent roughly $25 million since May 25th.”
Larry Sutherland, Mesabi Metallics president and chief operating officer, said the project is moving ahead faster than ever.
“I’m very optimistic about the direction we are heading,” Sutherland said. “Our owners are here to move the project forward.”
Sutherland, who has 49 years experience in the iron ore and steel business, about half of it as a union millwright at the former Butler Taconite plant, said he wants to see citizens, trades workers, union labor, communities, and the state benefit from construction of the facility.
“We haven’t seen a taconite plant built since the 1970s and I look forward to bringing this to fruition,” Sutherland said. “I want our product and green steel to be made in Minnesota to benefit the citizens and taxpayers, trades workers, and the union workers who will work in this plant.”
A key for the project is pumping water out of Pit No. 5, Kankanala said.
The former mine pit will serve as the initial primary source of crude ore for the project, Kankanala said.
It will take about 30 months to de-water the pit, he said.
“We do have the necessary to go ahead, but the main challenge is how many years of ore we have,” Kankanala said. “Once we establish operations, we will have eight years and in those eight years we need to find a solution for more ore.”
What it could mean is the company would have to search for ore from a distance and truck it to the plant, Kankanala said.
But he said the company is confident in moving ahead.
In early October, Mesabi Metallics said it terminated leases to Cleveland-Cliffs Inc., on land held by Mesabi Metallics at Nashwauk.
With termination of the leases, Mesabi Metallics says it is the largest landowner in Nashwauk with 1.2 billion tons of owned taconite reserves.
Without continuing, state, county, local governments and others that would benefit from taxes and other revenue from the project, would all lose, Kankanala said.
“If you look at the return over the next eight years, we should be okay,” Kankanala said. “The group has the will to not even consider an option of walking away. We are here to stay.”
One change is planned.
As the domestic steel industry transitions to more mini mill steel production, the company plans to produce 6.5 million tons per-year of DR-grade iron ore pellets at the Nashwauk site, Kankanala said.
That’s a change from the original plans to produce five million tons-per-year of blast furnace grade pellets and two million tons-per year of DR-grade pellets.
DR-grade pellets are used to make feed for electric arc furnaces.
The DR-grade pellet production portion of the facility would cost about $100 million, Kankanala said.
DR-grade pellets made at the plant could feed a hot-briquetted iron (HBI) facility at Mesabi Metallics, Sutherland said.
HBI produced at the plant could then be fed into an EAF at Nashwauk to make steel.
A $500 million green steel mini mill-type manufacturing facility with an electric arc furnace (EAF), is on the drawing board, Kankanla said.
It would be the greenest steelmaking facility in the United States, Kankanala said.
“We are excited about green steel production in northern Minnesota if we can pull it through,” Kankanala said.
Kankanala said the project continues to receive strong support from local governments in the Nashwauk area and Itasca County.
“There’s a lot of history,” Kankanala said of the project. “It took time for me to appreciate where everyone is coming from. But I’ve never seen any regional location more closely involved and more passionate about development in the region.”
But he also realizes the company also needs to rebuild its reputation.
The project dates to 2003 under the ownership of Minnesota Steel Industries.
Essar Steel acquired the project in 2008.
Since then, there’s been a 2016 bankruptcy, a change of ownership under Chippewa Capital Partners, a return of ownership to Essar, and a series of starts and stops, leaving the project partially finished.
The starts, stops and promises of completion, has led to criticism and mistrust from some.
To help show its intention to complete the project, Mesabi Metallics has hosted site tours with a number of state legislators, city and township officials, and others, Ben DeNucci, Mesabi Metallics head of Public Relations and Government Affairs said.
“When they see the project, it’s huge,” DeNucci said. “It’s tremendous. They have 60 ironworkers out there putting structural steel up being lifted up by the cranes and when they come back from the tour, they’re changed. You can just see the light switch go on. We’re been doing a lot of outreach there and building relationships.”
Mesabi Metallics says it has paid all its taxes and contractors, Kankanala said.
The Nashwauk project remains fully permitted, he said.
The company at one time had looked for potential partners for the project, but is currently not engaged in discussions with anyone, Kankanala said.
“We did have conversations with some large names in the industry who were looking at it,” Kankanala said. “Right now, we will not be actively look for anybody. As we near completion of the pellet plant, we could certainly look at partners to take this further for DRI and steel. But in looking at the pellet plant, we are looking at investing for ourselves.”
As winter arrives, Kankanala said construction work will continue as cold weather and wind permits.
Daily decisions on cold weather and wind impacting construction will be left up to contractors, he said.
