Magnetation startup could come this summer
The long-awaited restart of the former Magentiaton operations just outside Grand Rapids could happen as soon as the summer, with more than 100 people back to work, months earlier than previously expected.
New owner Tom Clarke said this week that he now has engineering plans ready and financing in place to complete an estimated $20 million in retrofitting work to the former Magnetation pellet plant in Reynolds, Ind.
Clarke said his ERP Iron Ore LLC, which now owns the former Magnetation operations, also will need to spend about $2 million to get the Grand Rapids concentrating and mining operations, idled for more than a year, back on track.
"I think we can have Grand Rapids up and producing concentrate late in the second quarter and shipping it down to Indiana, we have room to stockpile a lot down there, and then have Reynolds going by the third quarter to make pellets," Clarke told the News Tribune this week.
The pellets made in Indiana are destined to make pig iron at a plant in Lorain, Ohio.
"The goal is to be making iron by the end of this year," Clarke said.
The rebirth of the former Magnetation Plant 4 outside Grand Rapids has been on hold for months pending a reworking of the Reynolds plant to meet federal Clean Air Act standards.
Clarke's ERP Iron Ore won the bankruptcy rights to Magnetation one year ago and had hoped to be producing iron ore concentrate at Plant 4 by now, with most of the operation's 130 employees back on the job.
But, as first reported in the News Tribune in August, ERP has been thwarted by two violation notices filed by the federal Environmental Protection Agency in 2016 against the Indiana plant, alleging the former Magnetation owners didn't have proper pollution control equipment in several areas of operation. The EPA has an effective hold an any restart of the operations until the new equipment is installed, said Rob Bigelow, ERP's managing director.
ERP found out late last year that it will cost at least $20 million to retrofit the plant and any fix was thought to be many months away. The company late last year said it could be the end of 2018 before the Grand Rapids operations restarted, but now has moved that target far forward.
Buyers unaware of severity of violations
Clarke said ERP acquired the bankrupt Magnetation without knowing the extent of the problem in Indiana, noting the EPA was still conducting its investigation. He said the plant apparently never met permit standards.
"I'll take the blame for it. Maybe we didn't do all of our due diligence. ... But it wasn't something that was easy to find," Clarke said, adding that the Reynolds plant was violating at 14 of 18 different potential emissions locations. "I likely would still have acquired the (Magnetation) assets if I had known. I just wouldn't have paid as much."
Bigelow said ERP is working with the EPA and Indiana Department of Environmental Management to resolve the issue.
Documents obtained by the News Tribune through a federal records request show that the EPA found the Indiana plant in violation of emissions limits for fluoride, sulfur dioxide, nitrogen oxide and particulate matter — basic pollutants that are often the cause of urban smog and haze that the EPA says can cause health problems. Some of the tests found emissions between two and five times permit levels.
There are allegations that Mag Pellet LLC used devices to intentionally hide emissions from state and federal regulators.
'A very big deal'
The Grand Rapids plant uses proprietary technology to separate valuable iron ore from old mine waste and turn it into iron ore concentrate. That concentrate is moved by rail to Indiana to be made into pellets used in steel mills. The same technology can be used to process virgin taconite ore from recently mined rock.
Once the Grand Rapids and Indiana plants are operating, ERP plans to sell those pellets made from Minnesota iron ore to an all-new pig iron plant in Lorain, Ohio. That iron could be used in electric-arc furnaces — a market until now unavailable for Minnesota ore.
Clarke also has acquired the the former Essar Steel project in Nashwauk and hopes to "blend" both operations to become among the major players in the U.S. iron ore industry, supplying both traditional blast furnace steel mills as well as electric arc mini-mills that now control nearly two-thirds of domestic steel production.
"We're going to be producing about 10 million tons" of processed iron ore annually, Bigelow said, making the combined Magnetation-Mesabi Metallics operations among the largest U.S iron ore producers. "This is going to be a very big deal. It just takes time to get there."
Magnetation LLC was founded in 2006 as a joint venture between Grand Rapids-based Magnetation Inc. and an affiliate of steelmaker AK Steel. The company was hit hard when the price of iron ore plummeted through 2014 and 2015, and filed for Chapter 11 bankruptcy reorganization in May 2015. The company slowly closed all four of its Minnesota operations, the last of which was Plant 4, which was idled in late 2016.