By Eric Berger
BABBITT, Minn. — The hard-working EMD locomotives that haul taconite ore on Minnesota’s Northshore Mining Railroad may get a rest beginning May 1, the result of a plan by parent company Cleveland-Cliffs to shut down the Peter Mitchell Mine in Babbitt and the processing plant in Silver Bay which the 47-mile private railroad connects.
The news came during a February 11 investor call with Cleveland-Cliffs Chief Executive Officer Lourenco Goncalves, who said the shutdown would last into fall and possibly longer.
It is bad news for the local economy, as roughly 410 employees are to be laid off during the shutdown, a company representative said. It was also bad news for Mesabi Trust, which gets most of its revenue from royalties derived from its ownership of the land and mineral rights at the Peter Mitchell Mine. Payments are based on production in accordance with a 1989 royalty agreement. The company’s stock price dropped about 30 percent in the wake of Goncalves’s comments, as it did when he made similar comments in October. Mesabi responded by filing a formal complaint with the Securities and Exchange Commission on February 15. It alleges that Cleveland-Cliffs has been incommunicative and has “historically failed to engage in meaningful negotiations requested by Mesabi Trust.”
Cleveland-Cliffs is the largest taconite producer in the Mesabi Iron Range, owning four of the six active mines in the area. It is also the continent’s largest producer of flat-rolled steel since its acquisition of ArcelorMittal USA and AK Steel in 2020. The company plans to phase out the sale of ore to other steel companies, reducing the amount it will need from its mines. It has also begun reprocessing scrap steel, further reducing internal demand for taconite. At the same time, its supply of ore increased as the ArcelorMittal deal gave it the Minorca Mine, another taconite mine in Virginia, Minn.. That mine will replace production from the Babbitt mine during the shutdown.
While the reduced need for ore makes it possible for the company to save money by idling Northshore operations, Goncalves said the shutdown decision is “mainly due to the ridiculous royalty structure we have in place with the Mesabi Trust.”
“No production, no shipments, no royalty payments,” Goncalves said.
The company has not commented on the SEC complaint.
The railroad has had an all EMD roster since it was built by former owner Reserve Mining in 1955, with six-axle models dominating. That began with a fleet of SD9s, later joined by rare SD18s and even rarer SD28s. The SD38-2, SD40-2 and SD40-3 all preceded the arrival of the six SD70ACe units that currently handle the heavy lifting. At least one of those SD18s remains on the property but is stored in the inaccessible mine area along with most of the power when idle.
