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Deal gives new hope to Iron Range ore project

There's new hope for a next-generation ore project on the Iron Range after state leaders consented Monday to a set of mineral leases critical to the venture.

The Executive Council -- made up of the governor, attorney general, secretary of state and state auditor -- approved the lease agreement with Chippewa Capital Partners. The Roanoke, Virginia-based company intends to complete construction on a Nashwauk pellet plant and another facility to produce high-grade iron ore.

Department of Natural Resources Commissioner Tom Landwehr, whose agency negotiated the lease, said there are short-term opportunities for construction workers and long-term promise in what will be produced once it's up and running.

“We believe this is a very proactive and positive outcome for the state of Minnesota. We will get the ore deposit developed," Landwehr said. "We will get good royalty payments. We will get some assurance about an additional taconite plant as well as an additional value-added iron product plant.”

The deal gives Chippewa and its investors until Aug. 31 to secure at least $850 million in financing. If it defaults, the state could cash in a $4 million line of credit.

Work on a pellet processing plant must start before this October and be done by December 2019. A separate production facility would be built beginning in 2018 and complete by the end of 2022.

The move breathes new life into a project that stopped when Essar Steel Minnesota went bankrupt.

In 2008, India-based Essar Steel broke ground on what was supposed to be the first new taconite mine and pellet plant built in Minnesota in decades. The company also promised to build the state’s first-ever steel mill at the mouth of the mine, a step long sought after on the Iron Range to add more value to the ore mined in northeast Minnesota.

But Essar struggled to raise the nearly $2 billion needed to build the facility. Construction stalled first in 2012 and 2013. The company put on hold plans for a steel mill. Work resumed in late 2015, but then stopped again a year later, with Essar unable to pay millions of dollars it owed contractors who had worked on the half-built site, and $66 million it was due to owe the state for grants to build infrastructure.

Essar declared bankruptcy on July 8, 2016, just before Dayton attempted to terminate the state’s mineral lease agreements with Essar and transfer them to rival Cliffs Natural Resources.

Chippewa bid on the Essar assets during the bankruptcy proceedings.

MPR News reporter Dan Kraker contributed from Duluth.