The Minnesota Court of Appeals has upheld a previous district court decision that affirmed a Minnesota Department of Natural Resources (DNR) decision to terminate Mesabi Metallic's mineral leases on state land at the site of the Mesabi Metallics project near Nashwauk. 

Mesabi Metallics in a statement said it has consistently argued that termination of the leases was premature and that the original decision of the district court did not allow for all relevant facts and circumstances to be properly investigated.

Mesabi Metallics in a statement said it respects the Court of Appeals decision, but is examining a possible appeal to the Minnesota Supreme Court. “As we have only received the judgment, we will be reviewing the determination and discussing the same with our legal advisers including a possible appear to the Minnesota Supreme Court,” Larry Sutherland, Mesabi Metallics president and chief operating officer, said in statement. “Notwithstanding today's developments, Mesabi Metallics remains absolutely committed to the Nashwauk mine and pellet facility.”

Mesabi Metallics said it owns or effectively leases the remaining 61 percent of mineral resources that form part of the Nashwauk pellet plant project. In recent months, the company has engaged local contractors with a goal of letting key construction projects in late 2022, Sutherland said. Mesabi Metallics is also working to raise additional financing for the project, Sutherland said.

The DNR in a statement said the court concluded that the DNR was fully within its rights to terminate the Mesabi Metallics leases. “Today';s decision by the Minnesota Court of Appeals moves the DNR one step closer to finding a credible miner to develop the state ore that was formerly held by Mesabi Metallics,” Jess Richards, DNR Division of Lands and Minerals assistant director said. “Once the Court of Appeals has entered an official judgment, the DNR will carefully evaluate options for future development of the state ore to bring royalty revenues to the local communities and other beneficiaries. The state minerals near Nashwauk remain some of the most valuable iron ore resources in Minnesota. The DNR is committed to finding the best path forward for development of these resources.”

The 31-page appeals court ruling said Mesabi Metallics' failure to satisfy conditions of a 2020 master lease agreement amendment gave the DNR the right to terminate the leases.

Because Mesabi Metallics failed to satisfy a condition in the master lease amendment that required the company to have $200 million advanced and deposited in its corporate bank account for the project by May 1, 2021, the amendment did not become effective and the DNR was authorized to terminate the leases, the court said.

The appeals court also said Mesabi Metallics' allegations that the DNR failed to satisfy its obligations under the 2020 amendment are without merit given the language of the amendment. The appeals court said the district court properly granted judgment on the pleadings for all DNR claims. The DNR in March terminated Mesabi Metallics mineral leases on state land at the site, saying Mesabi Metallics had failed to meet the terms of the 2020 master lease agreement amendment.

What happens next with the minerals leases on 2,664.34 acres of state land remains unclear. The state land holds some of the highest-quality iron ore remaining on Minnesota's Iron Range. With nearby Hibbing Taconite Co. running out of crude ore, Hibbing Taconite majority owner Cleveland-Cliffs has expressed interest in the leases. Cliffs already holds about 3,800 acres in leases at the project site.

United States Steel Corp.'s Keetac taconite plant in Keewatin is also nearby. United States Steel Corp. is minority owner of Hibbing Taconite.