Gov. Mark Dayton has given the order to terminate Essar Steel Minnesota's lucrative mineral leases on the Iron Range, prompting Essar to file for bankruptcy protection Friday.
The company was told that if it did not repay $66 million in infrastructure costs to the state and also pay its overdue contractor bills that the leases would be terminated.
"The company has not done so, and has provided no reliable assurances that it will be able to do so in the foreseeable future," Dayton said in a statement. "The company has been told for the past nine months that the state would not extend those leases beyond July 1, 2016, unless it paid the full amounts it owed."
Much to the delight of frustrated Iron Rangers who were tired of Essar's financial woes, delays and broken promises, Dayton made good on the ultimatum he delivered in April.
Essar's bankruptcy filing was expected should Dayton rule to terminate the leases. It also opens up the doors for another entity to take over the unfinished $1.9 billion iron ore mining project in Nashwauk, legislators said.
In a press conference Friday, Tom Landwehr, commissioner of the Minnesota Department of Natural Resources, said that the state issued Essar a letter terminating its mineral lease rights at 12:01 p.m. About an hour later, Essar filed for bankruptcy protection. Technically, Essar has 20 days before the lease termination becomes official.
Essar, which is owned by the Mumbai-based Essar Global steel, power plant and coal conglomerate, broke ground on the Iron Range project in Nashwauk in 2008.
But the project was immediately plagued with stops and starts driven by problems with imported iron and steel that were not built to specifications, repeated financing woes and an industry downturn that caused contractors to walk off the job site on several occasions.
Landwehr noted that Essar owes Minnesota vendors about $49 million and out of state vendors another $25 million.
Rep. Tom Anzelc, DFL-Balsam Township, who chairs the legislature's Iron Range delegation, said that going forward the hope is that Cliffs Natural Resources will take over the mineral leases and complete the project. Cliffs, which runs Hibbing Taconite, United Taconite and Northshore Mining on the Iron Range "has the right of first refusal on those mineral leases."
Big questions remain about how Essar's global bond holders, vendors, and its Minnesota buildings, equipment and other assets might be dealt with in bankruptcy court, Anzelc said.
Regarding the state's mineral leases, Landwehr said that the state's termination letter is likely to remove the mineral leases from bankruptcy proceedings at a fast rate and therefore should allow the lease question to be put to bed. Bankruptcy proceedings regarding Essar's buildings and equipment is likely to be a "very long drawn out process," Landwehr said.
Dayton said Friday that he already met with Cliffs CEO Lourenco Goncalves, who expressed "his strong desire" to finish the taconite processing facility that Essar was building in Nashwauk. "Mr. Goncalves and I will travel to the Range on Tuesday to discuss his plans in greater detail."
Back in 2007, Essar originally promised to build a taconite pellet plant plus a full steel mill. But the company has since scaled back the project, which is still only about 50 percent completed. The long awaited project had promised thousands of construction jobs and 350 permanent jobs on the Iron Range.
But that didn't happen.
The project won a cash injection last year and up to 650 workers returned to the job site. Financial problems and the slowdown in the steel industry caused new problems. By October and November, large steel, erection and concrete contractors were once again pulling their workers from the construction site because they were owed millions of dollars. Several have sued Essar, which owes about a $1 billion on the project.
Landwehr said that Essar told the state that it had a last minute investor who might be able to repay the contractors. Landwehr said Dayton and the state gave Essar a week to finalize its money, but that no payments were made, so the state issued the letter terminating the mineral leases.
Nashwauk Mayor Ben DeNucci told the Star Tribune that there is still hope for the project. If another party takes it over, that would be "good for our economy and put hundred of people from the area back to work. People who are laid off currently would benefit from that," DeNucci said. "It would help our businesses out. My sense from the public up here is that they were very frustrated with Essar."
Dayton said that he is committed to seeing the area get a better deal. "I remain dedicated to assuring that these state [mineral] leases are utilized by a responsible entity to mine and process their resources, and to create more jobs and further economic growth on the Iron Range," Dayton said.
In a statement, Goncalves said: "I am pleased that Minnesota Gov. Mark Dayton has moved to terminate the state's existing agreement for the iron ore mineral leases at the Nashwauk mine site. This is the first step in a long-term development process that we believe holds tremendous potential for job creation on the Iron Range. Cliffs looks forward to the opportunity."
The hope is that the iron ore mined from the site will be turned into a higher grade of taconite pellet than what Essar had planned.
Cliffs new type of pellet, called Direct Reduced Iron (DRI), is a "value added iron product," Goncalves said. It is processed differently and so is lower in silica. As a result, the DRI product would be able to be processed into steel using a more advanced "electric arc" furnace.
In contrast, Essar would have produced a traditional pellet that can only be processed in the increasingly out-of-style blast furnaces that are being closed around the nation.
Source :http://www.startribune.com/
Out Of Topic Show Konversi KodeHide Konversi Kode Show EmoticonHide Emoticon