Ahh, to be a miner in the Marquette Iron Range. I have been employed with Cliffs Natural Resources for over eight years now and have seen a lot of the ups and downs in the industry. Luckily I have been able to avoid every layoff that has occurred during my employment, but all it would take is one major downturn and all of us miners would be laid off. That is how volatile the iron industry can get. Ten years ago, I was a summer student at the Empire Mine, the same facility I am employed at today. There was a major flooding event that year that ended up closing a nearby power plant that supplied the energy needed to run the mines in the Marquette Range. I missed out of a month's worth of employment that summer. When the mine resumed production, I remember being at a meeting with a room-full of other hourly employees, discussing the future of the Empire facility. In 2003, it was discussed that the mine would probably only run another three or four more years and then close. Ten years later, the facility still operates. But how much longer will it keep going?
Back in March of this year, the former President and CEO of Cliffs Natural Resources, Joseph Carrabba, spoke at a meeting of business and economic leaders in the Marquette area to discuss the state of the company and specifically, business interests in the Marquette Iron Range. It was stated at that meeting that the Empire mine would be slowing down and would cease production at the end of 2014. So far the company maintains that stance and nothing else has been released officially stating otherwise. ArcelorMittal, a prominent steel-making company in the United States and world-wide, owns a percentage of the Empire Mine and has a contract to take a portion of the pellets that the Empire produces, a contract set to expire at the end of 2014. Earlier this year, ArcelorMittal signed a new ten-year contract with a different supplier, Essar Steel in Minnesota. They are set to produce the exact same type of pellet that the Empire mine produced for years. However, there is a significant problem with that mine in Minnesota; it's not even built yet and far from producing any sort of iron ore pellets.
The Essar Steel plant is a completely new facility that is trying to get itself off the ground but has faced various problems in getting things up and running. Supposedly one of the contractor's building the facility poured some of the footings for the main processing facility wrong, and that contractor went into bankruptcy. So a new contractor had to be brought in to rip the old footings out and prepare new ones. I am not going to get too in depth with the problems occurring with this facility in Minnesota, because I am unsure what is the truth and what is just hearsay. What I will say is that there are many challenges that remain for the Minnesota facility in getting things up and running. Initially they were hoping to begin production at the end of 2014, when they were supposed to take over our pellet contract. Now that seems to be delayed much further. That is one of the factors involved in potentially keeping the Empire going a little longer. But there are other issues that remain in shuttering the facility for good.
The big issue that exists in keeping the Empire running is the lack of ore reserves. The facility first opened in the 1960's and has been producing magnetite ore since. After over 50 years of production, one can understand how a mine such as ours is starting to run out of ore to produce. Supposedly there's still three years of exposed ore that we can process. Which, if ArcelorMittal can't get any pellets from their new partner, the Empire could get an extension on its existing contract until the new mine is ready to ship pellets. Some are speculating that it could end up being a two to four year extension. Beyond that, the future of the Empire definitely looks bleak. Don't get me wrong, there is still ore out there to mine. However, it would take a lot of digging and stripping to get at, meaning it wouldn't end up being very cost effective for Cliffs to do on their own, unless another partner stepped up and put the money up front needed to retrieve that good magnetite ore. There would be a ton more of blasting needed to loosen up the material, then the equipment would have to travel farther to get to it, resulting in higher energy and fuel costs. If the iron industry is in fantastic shape and there is a huge demand for ore, then by all means it could happen. However I don't think the demand is quite at that point, although it does appear to be rebounding somewhat from earlier this year.
So as you can imagine, a lot of speculation and rumors are being spread across the Marquette Iron Range about the future of the Empire Mine. The end of mine life is a real distinct possibility as ever before. But as I discussed earlier, that end of life could be extended a little bit longer if the circumstances end up being favorable for the venerable facility. Me personally, I hope the Empire keeps going for a little while longer yet. There are a lot of good people I work with who could be negatively affected by a long-term layoff if the Empire closes. The longer they can work, the longer they can save up their earnings and prepare for the eventual outcome. It's simply not a matter of if the Empire closes, but when now. Like I have been talking with a few people out there, the remaining year is going to be an interesting one for everybody involved. It's just part of the ups and downs of working in the Marquette Iron Range, and has been that way for years. Certainly never a dull moment.
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