Higher grade iron-ore pellets coming from Iron Range producer

Two of Cliffs Natural Resources taconite facilities in Minnesota have produced a new kind of low-silica iron ore pellet, a development which could broaden the market for the company's Iron Range taconite.

Cliffs CEO Joseph Carrabba told investors that both United Taconite near Eveleth and Northshore Mining in Silver Bay have produced test runs of the pellets, which could then be sold to companies that produce direct reduced iron, or DRI, a more pure form of iron that's used in electric arc furnaces to make steel.

"We are putting the wheels in motion to capitalize on this new opportunity."

The Iron Range's largest taconite facilities produce pellets that are about 65 percent iron. They are shipped mainly to steel mills around the Great Lakes that use traditional blast furnaces.

Direct reduced iron contains more than 90 percent iron, and is used in electric arc furnaces, or mini-mills. Mesabi Nugget, a small company in Hoyt Lakes, Minn., is the only company in the U.S. producing DRI nuggets, a product that's 97% iron.

Historically the U.S. has produced very little DRI, because the process requires large quantities of natural gas. But the declining cost of natural gas has made the economics more attractive. DRI can also be a financially attractive alternative to high-grade scrap in mini-mills.

"We're pretty enthusiastic that two of our facilities, through test runs and trials and scoping studies, have the ability to produce [the] pellets," Carrabba said. "With that we continue on with our engineering studies."

Earlier this week Essar Steel also announced it would produce direct reduced iron grade pellets at the new plant it's building in Nashwauk, near Hibbing.

Editor's note: This story has been revised from the original to reflect a follow-up clarification provided by Cliffs Natural Resources that the pellets are not DRI, as the company CEO had referred to them, but low-silica pellets that would be sold to a separate company that would use them to make DRI pellets.

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