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Chippewa submits $900M financial plan to state

NASHWAUK, Minn. — Chippewa Capital Partners said Friday, June 29, that it submitted a financial agreement worth $900 million to cover the debt and equity financing to complete the former Essar Steel Minnesota pellet plant in Nashwauk.

Tom Clarke, who is leading Chippewa's efforts, said he expects construction to begin as soon as the state signs off on the agreement and reinstates mineral leases. Minnesota Gov. Mark Dayton, the Minnesota Department of Natural Resources and Chippewa agreed to a series of deadlines concerning the project, including a binding pellet contract, construction agreement and proof of funding to complete the plant after the group emerged from the Essar bankruptcy in December 2017.

A spokesperson for the DNR confirmed receipt of the documents, but said the agency was not in a position to comment further until it reviews the filing in the coming days.

A spokesperson for Dayton's office said that an internal review of the Chippewa submission would occur Monday, July 2. If the financial documents are accepted, state-owned mineral leases would revert to the control of Chippewa, allowing it to move forward on the project without restrictions set by the court or state.

"Mesabi is going great, everything has come together," Clarke said in a phone interview Friday. "We're going to make pig iron in Minnesota."

Still unresolved through the courts is a land battle between Chippewa and Cleveland-Cliffs. Cliffs purchased mineral leases from Glacier Park Iron Ore Properties earlier this year, accounting for the majority of mineral acreage that included the former Butler Taconite mine pit.

A hearing on the land dispute was rescheduled from this week to Sept. 27.

But Clarke's dealings with ERP Iron Ore remain in the Minnesota Bankruptcy Court after a filing Wednesday looked to keep an involuntary bankruptcy attempt alive.

Liquidity Solutions Inc., a New Jersey-based firm specializing in bankruptcy claims and assets, filed an objection to ERP's motion to dismiss the forced Chapter 7. LSI said it had secured claims with ERP that have not been paid in full and dismissing the case would put repayment in jeopardy.

In late May, four businesses including Minnesota Power filed a petition to force bankruptcy, citing a lack of payment from ERP. Minnesota Power claimed more than $4 million in unpaid bills. Those creditors joined ERP in supporting the motion to dismiss, but LSI said ERP could not "cherrypick" which lenders to pay.

According to the motion to dismiss filed by ERP and Clarke on June 12, ERP and Mesabi Metallics, the operating name for Chippewa, would be merged under one company after Mesabi received its financing in full. It added that if ERP were to fail, it would put the Mesabi financing in limbo.

"ERP will not be able to satisfy these obligations if it is in a Chapter 7 bankruptcy and in turn, Reorganized Mesabi will then have unnecessary difficulty meeting its Indenture requirements," the company wrote. "As such, a Chapter 7 liquidation will destroy ERP's value and impair the ability to perform the Mesabi Plan since ERP and its assets would be in the hands of a trustee."

LSI claimed it was purposefully misled by Clarke about ERP's intent to pay in order to avoid LSI from "taking action that could potentially jeopardize consummation of the Mesabi Financing."

Clarke said Friday that ERP was "not a good situation," citing costs to the former Magnetation assets, particularly involving EPA litigation at the Reynolds, Ind. plant, that were unknown at the time of purchase. He added they were working with the creditors to reach a solution, but ERP's troubles would not impact the Nashwauk project.

"I'm fighting for it. It's a problem but a separate problem," Clarke said. "Everybody knows exactly what's going on — my lenders understand. The state understands."

Both of Clarke's assets have evolved into long-running sagas on the Iron Range mining scene. He closed on the Magnetation bankruptcy with ERP in late January 2017. Then in December of that year, emerged from the $1.1 billion Essar bankruptcy with the Chippewa group.

Since that point, Chippewa has gone back and forth in court numerous times with Cliffs accusing Clarke of shady business practices and Clarke saying Cliffs was trying to sabotage the project. The federal Racketeer Influenced and Corrupt Organizations Act (RICO) charges lobbied against Clarke and his business associates by Cliffs remains pending in court.

"Mr. Clarke has now exhausted any further requests to delay responding to these claims," said Pat Persico, director of corporate communication for Cliffs. "Cleveland-Cliffs has been a responsible employer in Minnesota Iron Range for more than 100 years and we continue to have the best interest for the people of Minnesota."

Cliffs has long sought the Nashwauk property dating back to Essar's ownership. The company said it planned to use the minerals it acquired in Nashwauk to continue life at Hibbing Taconite and build a hot-briquetted iron facility. Cliffs is in the process of building an HBI site in Toledo, Ohio and wants a second plant in the Midwest.

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