Empire Mine reopening isn’t happening just yet

Pump the brakes, you unemployed miners — at least for now. Last week’s headline that Cleveland-Cliffs Inc. isn’t ready to reopen the Empire Mine probably wasn’t the news folks wanted to hear, but there is some hope on the horizon.

Cliffs CEO Lourenco Goncalves made the announcement March 7 during the company’s annual breakfast at the Holiday Inn in Marquette.

Though many of us would have relished the announcement of Empire’s reopening, it sounds like we’ll have to wait a while for that piece of good news. But from the mining company’s standpoint, it’s not so much a question of if Cliffs is going to restart the Empire Mine, it’s more a matter of when. At least that’s what some of Goncalves’ comments at the event seem to indicate.

Take this one, for example: “If Empire is brought back — not if, when Empire is brought back — we will be producing something like 3.2 (million) or 3.3 million metric tons of pellets per year,” Goncalves said.

Of course, business leaders and CEOs have been known to change their minds in the past, so what’s to stop Goncalves from doing the same? Nothing, really. But what it comes down to is a matter of economics and business strategy, and a recent disaster in Brazil.

In January, a mining company-owned dam broke at Brumadinho, which is in the state of Minas Gerais in Brazil, where Vale SA has an iron ore operation. Aside from killing at least 165 people and raising some questions over a lack of oversight, the incident significantly curtailed Vale’s mining efforts.

Goncalves said there already was a shortage of iron ore pellets in the market and that the situation was made worse when the tragedy struck Brazil. Meanwhile, some of the iron ore Cliffs has been extracting is going to stockpile resources at the company’s new hot-briquetted iron plant in Toledo, Ohio, further straining the market’s iron ore supplies.

To make up for that market gap in the short-term, Goncalves said reopening the Empire is a solution.

But at the same time, a major part of the discussion is whether Goncalves and Cliffs want to invest money in reopening the Empire Mine or put money toward starting up a mining operation in Nashwauk, Minnesota.

Cliffs has a few obstacles in the Minnesota venture, like securing mineral rights and permits, hiring employees and getting other resources lined up, but the start-up — or restart — of Empire would be much easier.

“Anything we do in Nashwauk, from engineering to acquiring permits and hiring people, it will take a lot more time than here at Empire,” Goncalves said. “Empire is — three years of digging and we’re good. In three years we can hire, we can do everything. We have the permits in place, we have the great support of the local officials, so we are good to go. So Empire is smaller, but it is a lot more (viable) in the short-term than Nashwauk.”

However, Goncalves also said part of the delay in reopening the Empire is because he’s waiting for steel producers to get on board and commit to a long-term agreement with Cliffs.

From where we sit, the fate of the Empire Mine seems to depend on whether these companies actually decide to play ball with Cliffs. They could look elsewhere for their product, but Goncalves sounds confident they’ll come around to Cliffs.

“(The clients) will realize that the shortage of pellets is a mess and they have to commit to the long-term contract with Cliffs, and that will be the last thing, the last piece of the puzzle to enable us to restart Empire. It’s a matter of time.”

The importance of mining here in the Upper Peninsula can’t be understated. Its roots go back to the founding of this region, and the industry is a part of our communities and culture in many ways.

We’ll keep an eye on the markets and steel companies to see how this situation plays out. Hopefully, Empire and the central U.P. will be on the winning side.

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