Mesabi Metallics seeks injunction to stop state from awarding leases to Cleveland-Cliffs

The embattled Nashwauk mining project wants a federal bankruptcy judge to step in before Gov. Tim Walz and others vote on the future of the leases Thursday.

NASHWAUK — Mesabi Metallics is making several last-ditch efforts to win back state mineral leases it lost two years ago. It’s getting a letter of support from the Itasca County Board of Commissioners; running TV commercials urging viewers to write letters; and filing a motion for a preliminary injunction in federal bankruptcy to try to stop the state from awarding the mineral leases to Cleveland-Cliffs later this week.

Judge Craig Goldblatt will consider the motion at a hearing in U.S. Bankruptcy Court in Delaware on Tuesday, May 23, two days before the Minnesota Executive Council is set to vote on granting the leases to Cliffs, which intends on using the ore to keep its Hibbing Taconite facility open.

“Mesabi will suffer irreparable harm if it does not obtain a preliminary injunction before May 25, 2023 to enjoin (Cliffs) from entering into certain mineral leases,” attorneys for Mesabi wrote in a May 12 filing requesting the court expedite its motion for an injunction.

The injunction was filed as part of a lawsuit dating back to September 2017. In the lawsuit, Mesabi claimed Cliffs committed “tortious interference with plaintiff’s contractual and business relations in violation of Minnesota law, violation of antitrust laws” under the Sherman Act and alleged that Cliffs is guilty of “civil conspiracy” against its business efforts.

In a May 15 letter to Judge Goldblatt, Kristin Morrison, an attorney representing Cliffs, questioned the timing of the motion.

“Mesabi’s motion appears timed to cast doubt on the state of Minnesota’s clear rights to enter into leases for the state-held mineral properties in Nashwauk, Minnesota with any party other than Mesabi when the State Executive Councils meets on May 25, 2023,” Morrison wrote.

Earlier this month, the Minnesota Department of Natural Resources recommended the Minnesota Executive Council award all of the leases to Cliffs, saying it would be in the state’s best interest and that the company has a proven track record of completing projects. The council is chaired Gov. Tim Walz and made up of the state’s constitutional officers.

Itasca County’s letter asks the Minnesota Executive Council to split the leases between Mesabi and Hibtac so both operations have enough ore.

Mesabi once held the leases, but the DNR terminated them in May 2021 after the company failed to meet a last-chance requirement set by the state after years of missed lease requirements and deadlines.

Despite appeals by Mesabi, the agency’s lease termination was upheld by a judge in State District Court in St. Paul, the Minnesota Court of Appeals and the Minnesota Supreme Court.

Since 2007, iterations of Mesabi — the former Essar Steel Minnesota project that has had multiple owners, managers and names — has floundered through construction stoppages, bankruptcies, missed deadlines, late payments and other legal battles. The project sits half-finished.

Mesabi maintains it could complete its direct-reduced iron pellet plant by 2026, but it will likely need some of the state leases in Nashwauk to make the project work. Both Mesabi and Cliffs have private mineral leases adjacent to the state leases.

While Essar walked away from the bankrupt project in 2015, leaving behind $1 billion in debt, the company reentered the picture after settling some $260 million of debt and is now Mesabi’s parent company.

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