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From Site Selection magazine, November 2009

Iron in the Fire

Minnesota’s mining industry fuels a surge in economic expansion.

A joint venture of Steel Dynamics and Kobe Steel is constructing a new plant that will produce iron nuggets that are 97-percent pure.
Photo courtesy of Iron Range Resources

The Mesabi Nugget operation, which is a $265-million state-of-the-art iron-processing facility, will commence production in the fourth quarter of 2009.
The Mesabi Nugget operation, which is a $265-million state-of-the-art iron-processing facility, will commence production in the fourth quarter of 2009.

esurgence in the Northern Minnesota mining industry is forging a lasting footprint on the economy of the entire region and state.

After a period of dormancy, the industry has been re-energized by a series of large-scale capital investments that are putting Minnesotans back to work and giving new life to a once-beleaguered sector.

With US$6.4 billion in expansion projects either planned or under way on Minnesota's Mesabi Iron Range, the northeast region of the state is being revived by the creation of 6,400 construction jobs, 2,500 permanent jobs, thousands of spin-off jobs and tens of millions of dollars in new revenue for local, state and federal coffers.

"It was a very rough time for the mining industry last year in Northern Minnesota," says Craig Pagel, president of the Iron Mining Association of Minnesota. "For the first time ever, all the taconite facilities were down this past winter as they reacted to market forces. But as the steel utilization rate increases due to drawdowns of steel reserves, all but one of the mines are operational now."

The result is an unprecedented binge in corporate facility expansions throughout the region. Essar Steel Minnesota LLC continues work on a $1.65-billion, 700-job project in Nashwauk. Duluth Metals moves forward with its $916-million, 1,000-job copper and nickel mine expansion in Ely. U.S. Steel plans a $300-million, 75-job expansion of its taconite operation in Keewatin.

And then there's the high-tech jewel of the bunch — Mesabi Nugget's $265-million iron nugget plant — the first commercial-scale iron nugget facility in the world, nearing completion in Hoyt Lakes.

A joint venture of Steel Dynamics Inc. of Fort Wayne, Ind., and Kobe Steel Ltd. of Japan, Mesabi Nugget Delaware LLC is building its new plant on more than 6,000 acres (2,428 hectares) for the mining of iron ore and production of pure iron nuggets. The iron resources will be used to lower the cost of steel production at Steel Dynamics' electric-arc-furnace mini mills.

The plant uses the breakthrough ITmk3 process developed by Kobe Steel — a process that reduces emissions by more than 40 percent and uses 30 percent less energy than integrated steelmaking. The plant will produce up to 500 metric tons of 97-percent-pure iron nuggets.

David Bednarz, vice president of iron resources for Steel Dynamics in Butler, Ind., told Site Selection in early October that "we have been in the commissioning phase of the plant for about two months now. We are getting equipment started. We are expecting to be in production before the end of the year."

During peak construction, about 800 contractors were working on building the plant, noted Bednarz. "The workers ranged from electricians and refractory specialists to iron workers and other industrial tradesmen," he says. "About 60 to 65 Steel Dynamics people will be employed here upon full production."

Mesabi Plant Makes Big Impact

Bednarz says his company chose the site on the Mesabi Range "because it is a brownfield site. It was owned by Cleveland Cliffs. There is a large ore reserve there that will ultimately provide the raw material for the plant. It is a logical place. From there, we will ship the end product to our facilities in Indiana."

Steel Dynamics completed the purchase of the iron mine in December 2007 from Cleveland Cliffs Inc. The State of Minnesota is providing $26.5 million in non-recourse financing.

Steve Rutherford, engineering and project manager for Steel Dynamics, says, "As a former employee of Inland Steel Mining, Minorca Mine, I am very familiar with integrated steel and iron-making technologies. From an economic and environmental viewpoint, the efficiency of electric arc furnaces and an iron nugget process over traditional steel/iron-making technology is similar to comparing a hybrid to a Model T."

Rutherford says the success of the new plant could pave the way for others. "Minnesota is blessed with an abundance of iron ore reserves that are now used to produce taconite pellets for feed to a blast furnace," he noted. "In the future, Iron Range taconite plants could be modified to produce a value-added iron nugget product to protect and/or increase jobs locally and market share domestically and globally."

The impact of this plant and others in the region will be dramatic.

"At the current point in time, the steel industry as a whole has been in one of the worst markets since the Depression," says Bednarz. "This is a strategic, critical project that could be revolutionary. We will be on the cutting edge of technology. We have provided badly needed jobs in one of the worst times in the history of the Iron Range. These will be great-paying jobs in a new facet of the industry."

Pagel concurs. "Iron ore mining is considered to be a very old industry, but we keep reinventing ourselves," he says. "The existing taconite companies at the six mines here in Minnesota account for 75 percent of the iron ore used in U.S. steel-making. Under full production, they have a capacity of 40 million metric tons a year combined at all facilities."

Even without the new construction under way at the various plant sites, the iron mining industry accounts for about $3.1 billion of Northeast Minnesota's gross regional product. "During construction of these new projects on the Iron Range, we could contribute $10 billion to the state economy over the next six years," Pagel adds, noting that the average annual wage of a mining worker exceeds $65,000.

"U.S. Steel is working on an environmental impact statement on an expansion in Keewatin," he notes. "Magnetation, a pretty small operation on the west end of the range, would supply iron concentrate to Mesabi and others. Iron mining represents about 34 percent of the economy in this region, in both direct and indirect impacts."

APEX, MP Support Firms' Growth

Energizing this economic growth is Minnesota Power, which supplies electricity to every major mining operation in the region. About 50 percent of the electrical output produced by Minnesota Power is consumed by mining and related activities, according to Nancy Aronson Norr, manager of regional development for MP.

"Minnesota has a tremendous natural resource base, and we are seeing major investments into our core industries right now," says Norr.

Facilitating much of that activity is APEX, the Duluth-based economic development organization that serves the region. "We are very excited about the investments being made in the non-ferrous mining industry," says Rob West, CEO of APEX. "We are looking at $6 billion in private investment being added to our local economy."

West notes that for every job created in the mining industry, another 2.5 jobs are generated in the surrounding area. "In wind energy and bio-fuels, two sectors we are growing right now, the multiplier effect is even higher."

With the renewed interest in alternative energy and non-ferrous mining, West says the demand for skilled workers is higher than ever.

"More folks are interested in skilled labor, logistics and dealing with supply-chain support, technology and fiber optics," he says. "Just throwing money at a prospect doesn't build the business case anymore. Today, site selectors and corporate executives are more interested in transportation, logistics, work force, research and education."

As a result, he notes, "our deal sheet is very robust."

A case in point is the new Enbridge Energy pipeline project that will carry Canadian crude oil some 326 miles (525 km.) across the state to Superior. The $1.2-billion project has begun construction and will employ 3,000 workers at peak.

Story in Pictures

The Mesabi Nugget operation, which is a $265-million state-of-the-art iron-processing facility, will commence production in the fourth quarter of 2009.
© Dave Witt/
Click for a larger view.
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