Cleveland Cliffs Heads Ambitious Effort to Develop Minnesota Iron Range Projects

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The following is an advisory by Industrialinfo.com (Industrial Information Resources Inc.; Houston, Texas). Despite severe market conditions in North America for iron ore, the continent's leading iron ore supplier, Cleveland Cliffs Incorporated (NYSE:CLF) (Cleveland Ohio), is involved in several ambitious projects to develop Minnesota's rich iron ore reserves and is seeking alternatives for mining development.

Iron ore mining and processing has been much maligned of late, due to the slumping North American steel industry. Iron ore mines located in Minnesota produce the majority of the iron ore used to feed North America's steel industry. But many of the operations have closed or scaled back production due to slumping steel mill output. Domestic steel mills are currently operating at around 70% capacity. Iron ore is the prime feedstock for steel mill blast furnaces, but it has lost significant market share as scrap producers and foreign competition have reduced its demand.

Nevertheless, iron ore demand should stabilize at current levels and could increase in the long term if certain technologies prove viable. One of the technologies being developed, which could help boost iron ore usage in the future, is the ITmk3 process technology (Kobe Steel/Midrex). Cleveland Cliffs along with Kobe Steel, Midrex, and other steel makers have recently committed funds to develop the Mesabi Nugget pilot study. The Mesabi Nugget project will demonstrate the viability of the ITmk3 process on a pilot scale. The ITmk3 product can be used as supplemental or alternative feedstock in conjunction with pig iron or scrap in both blast and electric arc furnaces. This versatility may help prove it successful and open up its potential market.

Cleveland Cliffs had been studying the possibility of building a DRI (Direct Reduced Iron) project at its iron ore mine in Silver Bay, Minnesota since 1993. DRI has been developed as an alternative or supplement to traditionally produced blast furnace produced pig iron. So far the economics have not worked out at the site, but as the demand for alternative pig iron product increases and technology improves, these products will start seeing increased demand.

Cleveland Cliffs also recently purchased bankrupted LTV Steel's Hoyt Lakes operations, which includes Taconite (Iron Ore) mining, concentrating, pelletizing operations, 74 miles of railroad, a 225 mega-watt power plant, and shipping terminal operations. Cleveland Cliffs is currently in the process of selling off the mobile mining equipment and railroad assets associated with the site. It is also involved in studies with a Canadian mining company to utilize existing infrastructure and concentrating facilities to develop a new mining and hydrometallurgical processing plant.