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Iron Range may get new taconite plant

Duluth News Tribune

Magnetation Inc. on Tuesday sealed a $297 million deal with Ohio-based steelmaker AK Steel to expand operations on the Iron Range, including a potential new taconite production plant in Itasca County.

Under the joint venture, Magnetation Inc., based in Nashwauk, will own 50.1 percent of a new company, called Magnetation LLC, with AK Steel owning 49.9 percent.

Magnetation employs about 100 people on the Range. The partnership could boost that anywhere from 200 to 400 people, said Matt Lehtinen, Magnetation Inc.'s vice president.

Magnetation has a relatively small iron ore concentrate plant in operation in Keewatin that makes high-grade concentrate from waste products left by old natural ore mines. Using iron ore tailings eliminates the need for traditional drilling, blasting and excavating, cutting costs. The process also recycles what had been considered waste rock.

A second waste recovery concentration plant is under construction in Taconite. Another Magnetation effort near Chisholm supplies Mesabi Nugget with the concentrate it needs to make iron nuggets. And two additional waste ore recovery plants, in Coleraine and Calumet, are planned using the AK Steel investment. The expansion could boost the number of Magnetation employees from 100 to 200 by the end of 2012, Lehtinen said.

But the new company already has plans to process all that concentrate into taconite pellets at a newly constructed taconite plant between Coleraine and Grand Rapids, Lehtinen said. That plant would employ at least 200 additional people, with all the pellets headed to AK Steel's two blast furnaces in Middletown, Ohio, and Ashland, Ky.

AK Steel officials said in a statement that the new plant would "satisfy about 50 percent of AK Steel's current iron ore pellet requirements, at a cost substantially below the current world market price."

At 3 million tons annual capacity, the new plant would be about the same size as the Minorca Mine operation in Virginia, Lehtinen said.

"This is a huge development for our company and for the Iron Range," Lehtinen said. His father, Larry Lehtinen, is considered the driving force behind Magnetation's growth and success.

But Magnetation LLC hasn't decided to build the plant in Minnesota, Lehtinen said, and is considering Ohio and other Midwest areas. Lehitnen said the decision will be based on available locations, cost and how fast permits can be approved.

Under the deal, AK will invest $100 million immediately in Magnetation efforts, nearly $50 million next year and another $150 million between 2013 and 2016.

Craig Pagel, president of the Iron Mining Association of Minnesota, said the announcement is another example of the continued growth in Minnesota's mining industry thanks to strong global demand. Taconite prices remain at their highest ever, production is strong, six existing plants are operating at capacity and Minnesota taconite is being sold and shipped to Mexico and China. Meanwhile a new taconite plant is under construction in Nashwauk by India's Essar Steel.

"We have at least 200 years of supply of iron ore here in Northeastern Minnesota, that we know of, so supply is not an issue," Pagel said. "This (announcement) shows how the Iron Range is now tied to this global world" of steel production.

AK Steel also announced an investment Tuesday in a Pennsylvania mining operation that produces the coal used in steelmaking.

"These investments represent significant steps in AK Steel's top strategic initiative to further vertically integrate through increased ownership of steelmaking raw materials," said James L. Wainscott, chairman of AK Steel, in a statement. "They give AK Steel a clear plan for increasing raw material self-sufficiency, and will provide us with both a financial hedge against global market price increases and low-cost steelmaking inputs for our own consumption."

The company will hold a news conference on the deal today.

Magnetation Inc. earlier this year announced a joint venture with Cargill to market Magnetation's ore recovery technology on a global basis.