Cliffs CEO warns Iron Range lawmakers over aid deal for Essar Steel Duluth News Tribune - By John Myers on Jan 12, 2015 The head of Cliffs Natural Resources met with Iron Range state lawmakers Monday evening in St. Paul, warning the state’s ongoing help for Essar Steel may impact his company’s operations in Minnesota. In his first ever meeting with the Range delegation, Cliffs CEO Lourenco Goncalves told lawmakers that Essar’s entry into the U.S. taconite iron ore market may upset what has been a well-balanced supply-and-demand chain. “It was a very friendly meeting. Not confrontational at all. But he made it clear that giving Essar Steel any additional state subsidy may have a detrimental impact on Cliffs down the road,’’ state Rep. Carly Melin, DFL-Hibbing, told the News Tribune. Goncalves has headed the Cleveland-based company since August, after Cliffs’ previous management team was ousted in a hostile takeover by the New York hedge fund Casablanca Capital. Cliffs says Essar will become a direct competitor for its taconite iron ore operations – including NorthShore Mining, United Taconite and Hibbing Taconite in Minnesota. Cliffs has some 1,850 employees at the three Minnesota plants, with a payroll of over $250 million annually. Essar Steel needs help from the Minnesota Legislature in 2015 to forestall repayment of a $67 million state subsidy – first approved in 2007 – used to help build its new taconite plant in Nashwauk. Essar officials recently told Range lawmakers that they won’t make the October, 2015 deadline to make not just taconite iron ore pellets but also finished steel at the facility that remains under construction, nearly eight years after the project began. They have suggested an extension to 2022, and removal of language that requires a steel mill be built. Essar officials now say the steel mill – the crux of the state’s original investment – is unlikely ever to be built in Nashwauk. That leaves Minnesota subsidizing a new taconite plant to compete with existing operations. Cliffs’ Goncalves “made it clear that they don’t want us to give Essar that extension,’’ Melin said. “They think Essar should have to abide by the original legislation…And to be honest Cliffs isnt the only one saying that. A lot of people on the Iron Range have concerns about Essar.” Continues: The 2007 legislation that gave Essar $67 million to build infrastructure into and at the site was tied to the company not just mining and concentrating taconite iron ore into pellets, but also using those pellets to make directly reduced iron and also finished steel at the same location, the much sought after added-value product and added jobs Iron Rangers have sought for a century. The state money, funneled through Itasca County, paid for roads, railroads and gas, water, sewer and electrical lines to the plant. The taconite plant was expected to employ 300 people. The steel-producing facility would have added another 100 jobs. Its not clear what would happen if the Legislature does not act and the state seeks to recall the $67 million from Essar in October. Range lawmakers said Goncalves made it clear that the company’s U.S. operations are its strongest assets and that it plans a long-term commitment to its Minnesota mines even as it sells off its other mining operations globally to help pay off debt. The company has been hard hit by a halving of global iron ore prices in the past year. Cliffs has watched it stock value dive to about $7 per share, down from nearly $100 in 2011. Found here: duluthnewstribune/business/mining/3653898-cliffs-ceo-warns-iron-range-lawmakers-over-aid-deal-essar-steel
Posted on: Tue, 13 Jan 2015 20:51:14 +0000