Gogebic Taconite ready to drill test holes in northern Wisconsin

One of the largest private investments in Wisconsin history — and the largest new taconite iron ore plant in the U.S. in more than 40 years — would transform the region’s economy.

That’s the finding of a newly released economic impact study funded by Gogebic Taconite LLC on its proposed $1.5 billion taconite mine and processing plant proposed for a remote area along the border of Ashland and Iron counties.

The plant, which would employ 700 people, with hundreds more transportation and spinoff jobs, would be the first iron mining operation in northern Wisconsin since natural iron ore mines closed in the 1960s.

The new plant, producing 8 million tons of finished taconite pellets annually, would rival Hibbing Taconite, the second-largest of Minnesota’s six operating plants.

The study estimates Gogebic would pump $604 million annually into Wisconsin’s economy, with some $17 million in state taxes and jobs that pay $83,000 in combined wages and benefits — all in an area with high unemployment and dwindling opportunities in the forest products

industry.

The study, by Madison-based NorthStar Economics, found that 2,834 jobs would be created in the area once the project is up and running, which would make it by far the largest employer and largest job generator in the area.

The impact would be felt in more than 12 counties, boosting business for engineering firms and mining suppliers in Duluth and Superior and jobs for unemployed workers in Michigan’s Upper Peninsula, Gogebic’s promoters say.

“This is a game-changer for the region’s economy,” said David Ward, chief officer of NorthStar.

The open-pit mine would stretch roughly along four miles of the Penokee Hills, on private land, about 30 miles southeast of Ashland, between the small towns of Mellen and Upson.

The company said it has options to ship taconite by rail to Escanaba, Mich., to be shipped on Lake Michigan, or to Superior’s Burlington Northern ore dock, or even directly by rail to Chicago-area steel mills. Company officials also are considering refurbishing the long-idled Ashland ore dock.

Gogebic is a newly formed company, wholly owned by the Cline Group, which has headquarters in Palm Beach Gardens, Fla. The company, privately owned by Christopher Cline, is involved in mining operations in West Virginia, Ohio, Kentucky, Illinois and Tennessee.

Gogebic mining operations would cover about 22,000 acres on private land where mineral rights are held by La Pointe Iron Co. of Hibbing and RGGS Land & Minerals Ltd. of Houston.

It was RGGS, which also owns mineral rights where Cline mines for coal, which lured Cline officials to Wisconsin to look at its taconite reserves in 2009. Cline officials liked the chance to diversify from coal and cash in what has become a globally lucrative taconite market.

Gogebic officials said the company will design the plant so production could be easily doubled in the future, which would make it the largest taconite producer in the world. They also said an iron-making plant might be considered at the site in the future to refine taconite pellets into a product that Wisconsin mills could use for steelmaking. A similar operation, Mesabi Nugget, already is operating near Hoyt Lakes.

Drill permits ‘any day’

The company expects to receive permits from the Wisconsin Department of Natural Resources “any day now” to drill eight test borings at key sites across the proposed mine area. Company officials are figuring it will take two to seven years for environmental impact statements and permit review. They’re hoping for the low end of that scale so they can break ground in 2014 and produce taconite by 2016.

“We realize that’s an ambitious schedule,” said Matt Fifield, managing director of the Cline Group.

The test borings, which will pull a cylindrical sample of ore from below, will confirm what geologists for U.S. Steel and other companies found decades ago — that there’s a huge formation of readily accessible taconite not far under the surface. The company estimates it has access to 2 billion tons of high-quality taconite. That’s more than 35 years of taconite readily available — more if the company expands the mine farther along the mineral formation.

Bill Williams, Gogebic’s president and a former Minnesota and Michigan taconite industry executive, said U.S. Steel was close to building a plant on the same site in the 1960s.

“They decided on Minntac instead of Wistac, probably because they already had a big presence” on the Minnesota Iron Range, Williams said. “But we hear it was a toss-up. That’s how good this deposit is.”

Gogebic company officials say they will thrive in the market, with their state-of-the-art facility and its 21st century technology and pollution controls going up against taconite plants in Minnesota and Michigan built a half century ago.

Simply having the plant adjacent to the mine will be a major transportation savings over Minnesota plants that are miles from their open pits.

Company officials say it’s certainly not their goal to put existing taconite operations out of business, “but we plan to be the lowest-cost producer,” Fifield said. “We feel our efficiencies will make us more competitive than any other producer” in North America.

But less than two years after all eight U.S. taconite plants virtually shut down, with zero demand for their ore, does the U.S. steel industry really need another 8 million tons of taconite capacity? Peter Kakela, iron mining expert at Michigan State University, said a better question is whether the global steel industry can use that much more taconite. Kakela isn’t sure, but he wouldn’t bet against it.

The demand for iron ore is “off the charts” and growing 8 percent to 10 percent a year in China, with India close behind.

Minnesota and Michigan taconite now is being sent by ship to China and by train to Mexico, something considered unheard of just a few years ago. Kakela said taconite is selling for up to $200 per ton now and costs about $50 per ton to produce. That profit margin has re-written the books on how the industry operates, he said.

“That’s a huge investment, $1.5 billion, and it’s a huge size for production to jump right into at 8 million tons,” Kakela said. “I’m smiling right now because I don’t know the answer. But I wouldn’t write it off.”

Big footprint, uncertain impact

The Gogebic proposal has spurred concerns about the disturbance to the land as well as air and water pollution that big mining projects can bring. That includes new roads, truck traffic and trains. Taconite plants also use large amounts of electricity and natural gas.

The Gogebic plant also will use millions of gallons of groundwater for its processing system, raising fears by some neighbors that a lowered groundwater table could affect wells as well as lakes and streams that depend on springs from underground.

The taconite plant’s water eventually would carry waste rock into a giant tailings basin, from which water would flow into local streams and, eventually, into the Bad River and Lake Superior.

Gogebic officials are quick to point out that taconite comes from far different rock than copper and nickel, with far lower sulfur levels, and that acidic runoff would not be an issue. They say water leaving the site would be treated.

Iron mining “has been done on both sides of us, in Minnesota and Michigan, for more than a century, without the kind of problems some people are concerned about,” Williams said.

Still, Minnesota’s taconite plants are the second-largest source of airborne mercury pollution in the region, trailing only coal-fired power plants. The mercury is released from the rock when furnaces are used to cure taconite pellets. And iron ore operations, old and current, are a major source of sulfate into local streams in Northeastern Minnesota. Sulfate at high levels can cripple wild rice beds.

Last week in Madison, Bad River Ojibwe Chairman Mike Wiggins Jr. and other tribal leaders, accompanied by a drum group and procession in the Capitol, urged state lawmakers to strongly consider the impact of a proposed mining project in northern Wisconsin.

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