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Minnesota Steel to be bought by Indian company

A Minnesota Steel plan to build a $1.6 billion steel mill on the Iron Range got a major boost Wednesday with India-based Essar Global Ltd.'s announcement that it is buying the company.

A Minnesota Steel plan to build a $1.6 billion steel mill on the Iron Range got a major boost Wednesday with India-based Essar Global Ltd.'s announcement that it is buying the company.

Essar Global said it plans to begin construction of the facility later this year.

Essar's subsidiary, Essar Steel Holdings Ltd., is an emerging multinational steel firm and calls itself one of the lowest-cost producers of steel in the world.

Terms of the sale were not disclosed in the announcement.

The sale is expected to be the cornerstone of Essar's North American steel business. The facility will include everything from taconite mining through initial production of up to 1.5 million tons of thick steel slab annually. It will be the first complete iron-to-steel operation in North America. It is expected to be completed in 2009 and employ 700 workers. An estimated 2,100 spin-off jobs would be created.

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Construction is expected to require 2,000 workers. It will be built near Nashwauk at the former Butler Taconite site.

"Essar has a track record of building projects of this scale in India," Minnesota Steel Chairman Joseph Bennett said in a prepared statement. "In addition, the company is very environmentally aware. Their commitment to be good stewards of the environment echoes our own."

Gov. Tim Pawlenty called the deal "a tremendous milestone, not only for the company but also for the state. It moves us much closer to the goal of making steel on the Iron Range."

A 45-day public comment on the project's environmental impact statement ended recently and, after the EIS is finalized, the state and federal government can issue permits. That is expected this summer, with construction beginning shortly afterward.

"The project is a go if we can deliver the environmental permits," said John Elmore, Minnesota Steel president. "They [Essar] have built these types of plants in India and other places. They're a tremendous company."

The process for making the steel is called direct-reduced iron and will use an electric arc furnace. In November, Minnesota Steel locked in low-cost natural gas that will fuel the furnace.

At full capacity, the plant would produce about 2.5 million tons of steel a year using iron ore from one of the Iron Range's highest-quality reserves. The slabs would be used by domestic steelmakers.

It would be the nation's first steel slab plant.

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Essar has been on a buying spree this week. The company paid $1.6 billion for Algoma Steel, a steelmaker in Sault Ste. Marie, Ontario. Together, Minnesota Steel and Algoma are expected to be the basis for Essar's North American plans.

Essar Steel produces about 4.6 million tons of steel a year in India. The company also has steel facilities in Indonesia and Vietnam and has plans for steel plants in Trinidad and Tobago.

Minnesota Steel is an effort of the Longyear and Bennett families, who have held iron ore properties on the Iron Range for decades.

Iron ore reserves of more than 1.4 billion tons are controlled by Minnesota Steel.

"It can't be anything but good for Northern Minnesota," Nashwauk Mayor Bill Hendricks said. "We've been hoping something like this would happen."

The project has received a $6 million loan from Iron Range Resources. A $23 million allocation to Itasca County from the state's 2006 bonding bill would help pay for infrastructure. Iron Range lawmakers are hoping to secure $30 million in a 2007 bonding bill, said Sen. Tom Saxhaug, DFL-Grand Rapids.

"This takes it down the road to where they will be pushing dirt by the end of the year," Saxhaug said of the Essar deal.

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