IRON RANGE — Mesabi Metallics has not made a $12 million payment to the state of Minnesota, putting the much-maligned iron ore project in Nashwauk further behind on deadlines.
The payment was due on Monday, but with the federal holiday, state officials could not initially determine if the money was paid until Tuesday. Jess Richards, assistant commissioner of the Minnesota Department of Natural Resources, said in an email Tuesday afternoon that the payment had not been received.
The lack of payment marks yet another strike for Mesabi Metallics, whose majority owner is the Ruia family of Essar Global that drove the project into bankruptcy in 2016, and has missed critical deadlines related to the state mineral leases in recent months.
Key among those was a Dec. 31, 2019, deadline to finish construction of the half-built pellet plant. Mesabi Metallics and Essar officials signaled throughout the year that they would not finish construction last year, publicly — but never formally — asking for an 18-month extension from the state.
By missing that deadline, according to the lease agreement with the DNR, the state can now opt to pull the mineral leases from Mesabi Metallics anytime in 2020. The $12 million owed to the state this week would have distributed funds to the Permanent University Fund, county and local governments, local school districts near the project and the School Trust Fund.
Mesabi Metallics and Essar officials could not be reached for comment on the missed payment.
“Governor Walz continues to support the Nashwauk project and wants to see it succeed. For that to happen, he believes there needs to be a credible party in control of the project. He does not view Essar as credible,” said governor’s office spokesperson Teddy Tschann, over email Tuesday night. “He is disappointed that Mesabi Metallics failed to make its required payments to the state. The Governor’s Office will continue to work with the DNR to discuss the project with businesses, community leaders, and workers as the state determines the best course of action to move the project forward.”
The pattern of missed payments and failed construction deadlines is reminiscent of Essar’s previous ownership term, which missed a $10 million payment to the state in April 2016 before filing a $1.1 billion bankruptcy claim that July, with $74 million owed to local contractors.
Essar re-emerged as the principal owner of Mesabi Metallics in January 2019 by gobbling up the company’s debt, and immediately sought to form a project team with Stelco and Mercuria to complete the pellet plant. Led by its subsidiary, Essar Capital Americas and former Essar Steel Minnesota CEO Madhu Vuppuluri, the India-based conglomerate failed to raise nearly $800 million from investors to restart construction on the once-promising project that offered 700 construction jobs and 350 permanent jobs.
State officials moved last year to debar the company from doing business in Minnesota, meaning they could only be a financial part of the project and not play a role in operations. DNR officials and Walz have met with Stelco and Mercuria about the project, saying they want it to move forward without Essar’s direct involvement in the construction or operation.
A “credible partner” for the state has yet to emerge and members of the Iron Range Delegation have since taken a stronger stance against Essar, calling for one or all of the “big three” mining companies — Cleveland-Cliffs, ArcelorMittal and U.S. Steel — to step up and take control. Cliffs already controls more than 3,700 acres of land and minerals in the project area.
Meanwhile, the project has also fallen behind on payments to Itasca County and owes a substantial sum in delinquent second-half property taxes from 2019.
As of press time, Itasca County Auditor and Treasurer Jeff Walker did not respond to an email seeking a total of how much Essar and Mesabi Metallics owed the county in back taxes. Still, a review of the 15 highest-taxed parcels in the county show more than $418,000 owed in delinquent taxes. Between the two companies, they have about 500 parcels of land.