Cleveland Cliffs Inc. CEO Lourenco Goncalves speaks during a press conference after the company’s annual breakfast at the Holiday Inn of Marquette on Thursday. Goncalves did not make an announcement about the fate of the Empire Mine during the event. If the mine were reopened, it would require a $600 million investment by the company, Goncalves said. (Journal photo by Lisa Bowers)

MARQUETTE — Cleveland Cliffs Inc. President and CEO Lourenco Goncalves said the state is “doing all the right things” to pave the way for the Empire Mine to reopen during his annual breakfast presentation on Thursday.

The CEO said he was confident that the mine, which was indefinitely idled in August 2016 resulting in the loss of hundreds of high-paying jobs, would reopen if Cliffs could forge at least one long-term partnership with one of four steelmaking companies in the Northern Hemisphere.

He predicted an iron ore pellet shortage, in part due to a catastrophe at an iron mine in Brazil owned by Vale — the world’s largest producer of iron ore — in January.

A massive mine-tailings dam in Vale’s operations in Brumadinhom, a town north of Rio de Janeiro, collapsed, causing mudslides that killed over 300 people and put the company’s future into question.

“What I believe is that pellets in the Great Lakes were in shortage before the Vale catastrophe,” Goncalves said. “After the Vale catastrophe it’s even worse. So now we have shortages everywhere, not just in the Great Lakes. So if someone believes that they could get pellets from outside the Great Lakes and they could survive importing pellets from the outside, this option is no longer available after Vale. For how long? Years. It’s not months, it’s not weeks, it’s years. I don’t know if it’s three years or five years, but we are talking years. Long enough for a company that is in need of pellets to go out of business. In that case, Empire becomes the only possibility for a solution to this.”

Another reason for the predicted pellet shortage is Cliffs’ expansion to the newer and environmentally friendly hot briquetted iron, or HBI.

The company is investing nearly $1 billion in the effort, and broke ground on an HBI plant in Toledo, Ohio, in April. An additional investment was made at Cliffs’ Northshore Mining pellet operation in Silver Bay, Minnesota, to produce direct reduced iron, or DRI pellets.

A portion of the 22 million tons of pellets currently produced annually by Cliffs would be rerouted to Toledo and to the market for DRI-grade pellets.

“As soon as we start building inventory, and that will start not next year, but this year. We are starting to produce DR grade pellets to be able to start the plant in 2020. As soon as we start to do that, the shortage of blast furnace pellets will start to be felt. Empire would come to supply the gap that you are creating by feeding our own plant in Toledo,” Goncalves said. “If Empire is brought back — not if — when Empire is brought back, we will be producing something like 3.2 or 3.3 million metric tons of pellets per year. We will be using 2.8 million metric tons to supply our DR and we can go up to 3.5 million metric tons of DR-grade pellets in North Shore. So between 2.8 (million) and 3.5 million metric tons will be rerouted to Toledo and to the market for DR-grade pellets.”

The DRI and HBI pellets are used in electric arc furnaces, in which material is charged by means of an electric arc, as opposed to the traditional iron ore pellet used to make steel in blast furnaces in which coke and limestone are combined with iron ore and dumped into the top of a chamber and preheated air is blown or blasted into the bottom of the chamber.

Electric arc furnaces produce about two-thirds of the steel in the U.S.

Cliffs expects to be the sole producer of HBI in the Great Lakes region by 2020, Goncalves said.

Goncalves also spoke to the perceived “choice” the company has between investing $600 million to restart mining operations at the Empire Mine, and a proposed mining operation in Nashwauk, Minnesota.

“Look, these are two different place(s),” Goncalves said. “Anything we do in Nashwauk, from engineering to acquiring permits and hiring people, it will take a lot more time than here at Empire. 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.”

The company has been in a protracted legal battle over the former Essar Steel site since it purchased surface and mineral rights to numerous parcels at Nashwauk from Glacier Park Iron Ore Properties, which a federal bankruptcy judge in Delaware ruled on July 23 was legal, according to an Aug. 30 Duluth News Tribune article.

Cliffs filed a lawsuit in August challenging the Minnesota Department of Natural Resources refusal to modify Mesabi Metallics’ mining permits in a way that would prohibit them from conducting mining operations on properties owned or controlled by Cliffs.

It’s a question of when, not if, Cliffs will be able to mine the site in Nashwauk, Goncalves said, which he expects will happen in the next 10 to 20 years.

“Nashwauk is a lot more long-term. We don’t have permits, we don’t have engineering, we don’t have anything yet because we don’t have control of the land,” Goncalves said. “We started drilling recently in the land that we have acquired, but it is only a portion — more or less 50 percent of the land. Now we have good geological information of the ore and what we are going to encounter when we start to mine. Beyond that, we don’t have anything else.”

Cliff’s reception in Minnesota seems starkly different to that of its counterparts in Michigan. Since the Empire ceased operations in August 2016, lawmakers and local business and municipal leaders have worked together in a unified showing of support for the company and its efforts to reopen the mine.

“I can’t thank the local officials enough for the great support. I really appreciate everything that they have been doing,” Goncalves said. “Now, we just need clients to cooperate and then we have everything done. They 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. I do believe they should be there by now, but the fact that they are not there yet doesn’t mean that they will never be there. I think that at least one of the four companies will move in the right direction for me to (move forward) and then we will be in good shape for me to announce the restart of Empire.”

Lisa Bowers can be reached at 906-228-2500, ext. 242. Her email address is lbowers@miningjournal.net.