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Cliffs backs away from CEO's threat to close Iron Range mine

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Mining giant Cliffs Natural Resources has backed away from a threat by its CEO to close one of its taconite plants on Minnesota's Iron Range when a competitor opens its own plant.

The company's CEO Lourenco Goncalves referred to Essar Steel Minnesota's $1.9 billion taconite production plant, which is currently under construction in Nashwauk, when he issued the threat.

“If they go online, I will shut down a plant up there the same day,” Goncalves said in an interview with the Mesabi Daily News Thursday. “We have fully planned for the worst case scenario.”

On Monday, the company released a statement to clarify that "it does not have any current plans to permanently idle or close any of its Minnesota mines."

Goncalves is a long-time critic of the Essar project, and said its coming online will result in an oversupply of taconite that will depress prices.

Essar said its new plant will be up and running in about a year.

Essar under scrutiny

Essar's plant has been in the works for nearly nine years, MPR News notes. It was originally meant to be a combination taconite mine and steel plant – the first steel mill on the Iron Range.

The company received more than $70 million in public money to build transportation and electrical infrastructure for the plant.

But then Essar dropped the steel mill portion of the project, at least for the near future. Some critics say the company should pay back the public money it received, according to MPR News.

Count Cliffs among those critics. In its statement, the company said Essar should be required to repay the subsidy immediately because it "unilaterally [changed] the scope of its project."

"The original intention of the State of Minnesota's loans ... to Essar was not to subsidize iron ore pellet overcapacity in the U.S., but to support the construction of a new steel mill in the Great Lakes region," Cliffs said. "The Essar Minnesota project, if it were to come online, would create iron ore pellet overcapacity in the U.S."

According to the Star Tribune, officials from Essar and the state of Minnesota met last week and are negotiating details of a repayment plan.

Cliffs also said it's skeptical of Essar's claim that the new plant will be producing taconite by mid-2016, calling the timeline "substantially overstated."

A down market

The mining industry is facing challenges as demand for U.S.-produced iron ore dwindles in the face of competition from foreign suppliers.

For example, Cliffs idled one of its three Minnesota operations, United Taconite, in late July and laid off most of the plant’s 420 workers. The company said at the time it wasn’t sure how long the plant would be shut down.

And two other production plants shut down in May for two full years, putting 200 people out of work.

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