Clarke scraps ERP Iron Ore plans
ERP Iron Ore owner Tom Clarke said he’s scrapping the ERP Iron Ore project near Grand Rapids — literally.
Hours after ERP filed for Chapter 11 bankruptcy Tuesday, Clarke said mining would be too expensive at the site and Plants 1, 2 and 4 at the former Magnetation site are likely to be dismantled.
“We’re not going to be mining there,” Clarke said.
Clarke still plans to use ERP’s pellet plant in Reynolds, Ind. to process concentrate from his other venture — Mesabi Metallics, which is planning to finish a taconite mine and processing center and also build an iron plant on the Nashwauk site that Essar Steel Minnesota left several years ago. Mesabi Metallics just earned back key mineral leases from the state last week.
“We’ve decided we really won’t be able to proceed with mining in Minnesota, but what we’ll do is use concentrate — ideally coming from Nashwauk once we can produce concentrate — and we’ll send that down to Indiana to make pellets,” Clarke said.
Clarke said only a handful of people currently work at the ERP site and expects they’ll be transferred to Mesabi Metallics.
ERP had been trying to revive the bankrupt Magnetation operations since purchasing it in January 2017. The company wanted to restart pellet productions soon after closing on the sale, but ERP was held back by two violation notices filed by the 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. Clarke said he’s spending $25 million to get air pollution control systems up to standards.
Clarke maintains Magnetation withheld that information from them before the purchase.
“It’s a realization of the facts that we didn’t know when we bought it,” Clarke said.
ERP faces over $46 million in secured debt and an additional “millions” owed to railroad companies, according to Clarke.
The bankruptcy case converted to Chapter 11 on Tuesday began in May as a Chapter 7 bankruptcy petition by four companies claiming ERP owed them unpaid debts — including $4.4 million for electricity and service to Minnesota Power. ERP paid back the smaller amounts owed to creditors but still owed Minnesota Power over $4 million as of Monday.
On July 12, the Department of Natural Resources sent a notice of termination to ERP after the company fell $34,200 behind in quarterly payments for five mineral leases near the Plant 4 site.
Clarke said missing that payment was an “oversight” and that he had just sent a check to the DNR Tuesday.
DNR assistant commissioner Barb Naramore said in an email to the News Tribune that as of Tuesday afternoon, they had not yet received a payment, but Clarke had told them he intended to pay it.
“This afternoon, Mr. Clarke did indicate verbally that he would be seeking to make the lease rental payment,” Naramore said.
ERP has until July 27 — 15 days after the July 12 notice — to repay the DNR, but if ERP doesn't make that payment, the leases will revert back to the state on September 10, 60 days after the original notice.
Cleveland-Cliffs pushes back on Clarke claims
A section in a news release sent by Clarke on Tuesday morning outlining frequently asked questions about Mesabi Metallics drew the ire of Cleveland-Cliffs.
The release claimed Mesabi Metallics had promised to provide crude ore to Hibbing Taconite, a magnetite mine partially owned and operated by Cleveland-Cliffs.
“Tom Clarke has personally reached out to Cleveland-Cliffs Inc. CEO Lourenco Goncalves to provide crude ore to Hibbing Taconite,” the release said.
Cliffs responded sharply in a news release of their own Tuesday afternoon: “Neither Cliffs nor the Hibbing Taconite joint venture has any iron ore agreement with Mesabi Metallics or any other entity owned or operated by Tom Clarke. Additionally, contrary to the Mesabi Metallics’ public statement, there have been no discussions, conversations or any other type of communication between Lourenco Goncalves, Chairman, President and CEO of Cliffs, and Tom Clarke.”
Mesabi Metallics and Cleveland-Cliffs are fighting over disputed mineral leases at the Nashwauk site in a federal bankruptcy court in Delaware. The two are waiting for a federal judge to decide if Glacier Park Iron Ore Properties had the right to pull its mineral rights at the site out of a bankruptcy agreement and sell them to Cleveland-Cliffs.