Cliffs CEO Lourenco Goncalves
By Ron Brochu
Cliffs Natural Resources wants to produce iron briquettes on the Mesabi Range, but it needs high-quality ore from the former Butler mine in Nashwauk, the company’s top executive said last Thursday.
Unfortunately, said President, CEO and Chairman Lourenco Goncalves, Minnesota officials are divided on who should develop that site – a question that is tied up in bankruptcy court. With the matter in limbo, the corporation might build its first hot briquette iron (HBI) plant elsewhere on the Great Lakes.
“We’re going to do it with those who want it to be done,” the colorful executive said at the company’s annual Iron Range briefing, which this year was held in Chisholm. “Let me tell you loud and clear: We are going to have HBI production. Trust me on that,” he said. “With a little help from Minnesota, I would have already started here.”
Last year, Gov. Mark Dayton took action to deny an extension of mineral rights to Essar Steel Minnesota, which had halted construction on its Nashwauk taconite processing plant. Anticipating Dayton’s move, Essar declared bankruptcy, shifting the mineral decision to a federal judge. Later, Goncalves met with Dayton, U.S. Rep. Rick Nolan and representatives from the Minnesota Legislature. He outlined Cliffs’ desire to obtain the Nashwauk ore and build an HBI processing plant. Initially, that plan was received well, Goncalves noted, but some participants later asked the bankruptcy court to support Mesabi Metallics, an Essar Steel Minnesota successor company that wants to complete the Essar facility. Those lawmakers, he said, changed position to support companies that were not paid for their work by Essar.
Both Goncalves and Dayton have said Mesabi Metallics lacks financing to complete the Nashwauk plant. Labeling the existing owners “fly by nights,” Goncalves contends Mesabi Metallics lacks a taconite buyer and, therefore, won’t be able to attract investors.
“We’ve been here 170 years. We’re not here to take money and send it abroad. We are here to stay. We like to be here,” he told mining and public sector representatives who attended Thursday’s session at Minnesota Discovery Center.
Today’s taconite market is healthy, he said, but long-term supply agreements already exist between mining companies and domestic steelmakers. There’s not a market for new supply, Goncalves argued, so building a new taconite plant would only create new jobs at the expense of existing ones.
Market growth, he added, will be led by iron briquettes. Domestic steelmaking will gradually move away from blast furnaces, which consume traditional taconite pellets. It already is shifting to electric arc furnaces, which use scrap steel and iron briquettes as feed stock. A new blast furnace has not been built since the 1970s, Goncalves explained, but several have been shuttered. Moving forward, Cliffs will put a greater focus on briquettes, which have the higher iron content needed in electric arc furnaces.
“If I don’t have this (Nashwauk) ore, I’ll have other ore. If I’m continued to be denied access…I’m not going to wait for the communities to understand what I’m trying to do. I’m going to do this someplace else,” he said. High-grade ore is available from North American sites besides Nashwauk, but Goncalves declined to name potential sources.
Cliffs will be willing to negotiate with Minnesota officials to build its second or the third plant, Goncalves said, but that will delay an Iron Range development until an unknown time.
Addressing finances, he revealed Cliffs has vastly increased its leverage and is able to independently develop an HBI plant. The improved financial picture came through difficult asset sales, cost reduction and debt restructuring, Goncalves said, but was absolutely necessary to keep the business viable.
“We are extremely happy with everything we’ve accomplished,” he said.