The Mesabi Nugget Story - Itasca County, Minnesota

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NUGGET
A now ago of Iron.
The Mesabi Nugget Story
Minnesota iron ore played a key role in the industrialization of the United States,
providing an important resource that made modern American society possible. For
generations, iron ore mined in Minnesota has become the raw-material feedstock for huge
blast furnaces that produce steel found in automobiles, appliances, skyscrapers, railroads,
and battleships.
When deposits of easily mined, high-quality red iron ore were depleted in the 1950s,
Minnesotans began mining taconite deposits and developed new technologies to allow
processing of the lower quality ore into iron ore pellets—a product that has been the
mainstay of Minnesota mining for more than 50 years.
While these Minnesota taconite pellets continue to meet the needs of the blast furnaces of
the integrated steel mills, they cannot be used by the fastest growing segment of the
domestic steel industry Electric Arc Furnace (EAF) steelmakers also known as mini
mills. These EAF steelmakers now produce more than half the nation’s steel, using a
combination of scrap metal and clean iron units.
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The EAF steel industry is the largest recycler in the country, re-using more than 70
million tons of scrap steel annually. A key difference between the traditional integrated
steel producers and the mini-mill producers is that EAFs cannot use taconite pellets
because the pellets are only 65-percent iron and the iron contained in the pellet is not
in a metallic form. Consequently, the EAF mills have typically obtained the cleaner iron
they require by melting imported pig iron. Because this material is imported from South
America, or other parts of the world, Minnesota’s iron ore operations have been unable to
participate in this exciting new steelmaking technology.
Until now!
New technology employed by the Mesabi Nugget operation now produces the world’s
first and only iron nuggets that are pure enough to supplant imported pig iron in mini-mill
steel production. Mesabi Nugget uses Minnesota iron ore to produce 97-percent pure,
metallic iron nuggets that are perfectly suitedfor use in EAFs—ushering in a New Age
of Iron for Minnesota’s Iron Range.
Mesabi Nugget’s technology combines the work of the pellet plant, sinter plant, and blast
furnace, as well as eliminating the need for coke ovens, the process is more
environmentally friendly than traditional methods, reducing pollution while generating 40
percent less emissions of carbon dioxide and other gases. The Mesabi Nugget production
process also offers overall lower capital costs and lower operating costs than traditional
ironmaking. In addition, mini-mill steel production is 30-percent more energy efficient
than traditional blast furnaces that make steel from taconite pellets.
Producing these value-added iron nuggets on the Range has the potential of generating
significant long-term economic benefits for the region: providing new stable, high-paying
jobs, stimulating the growth of related industries, supporting local businesses, and
generating additional tax revenues for schools and local communities.
History
Mesabi Nugget illustrates the ongoing technological progress that has characterized
continued mining developments on the lion Range.
In the 1 950s, new technology allowed the Range to transition from mining high-quality
red ore to mining taconite. Fifty years later, the new technology now allows Minnesota
ore to expand from producing feedstock for blast furnaces to producing feedstock for the
new generation of EAF steelmaking.
The transition didn’t happen overnight. In 2001, a group of companies—including Steel
Dynamics, Kobe Steel, Cliffs Natural Resources, and Ferrometrics—formed a partnership
that led to a pilot demonstration plant using Kobe’ s lTmk3® process for making iron
nuggets. Three years later, the pilot plant demonstrated that the process worked—
producing nearly 10,000 tons of nuggets in 231 days.
The iron nuggets from the pilot plant were transported to Steel Dynamics’ Flat Roll
Division in Indiana, where they were melted in the steelmaking process They proved to
be an excellent feedstock of clean iron units to supplement the scrap metal melted in
electric-arc furnaces.
The time was right to proceed to build a commercial-size demonstration plant to confirm
the producibility of Mesabi Nuggets on a large scale. The decision was made to build the
world’s first Mesabi Nugget plant on the lion Range, near the needed iron ore resources.
Steel Dynamics owns 81 percent of Mesabi Nugget; Kobe Steel of Japan owns 19
percent.
Site preparation near Hoyt Lakes began in the fall of 2007. Over the course of two years,
more than 2,000 construction workers worked through the harsh Minnesota winters,
putting in more than a million man-hours of effort to complete the $300-million-plus
project. It was a bright spot for the lion Range during the prolonged economic slowdown.
The heart of the nugget production process is the rotary hearth furnace that converts
pellets containing iron ore concentrate, pulverized coal, and binders into iron nuggets. In
fact, the Mesabi furnace is the largest of its kind in the world. The 60-meter-diameter
rotary hearth furnace produced its first iron nuggets on January 12, 2010.
The plant, which consists of more than a dozen interconnected structures, has a capacity
to produce 500,000 metric tons of nuggets per year—most of which will be supplied to
Steel Dynamics. They will provide pure iron units for the production of such products as
flat-rolled steel, engineered bar products, and rail. In turn, the new steel is employed in a
variety of products, ranging from consumer products, like autos, appliances, and steel
garage doors, to industrial and transportation products like mining and earthmoving
equipment, trucks, and railcars.
Currently employing more than 90 people, Mesabi Nugget plans to increase employment
as its production rate expands. Mesabi employees are self-motivated, hard-charging, and
enthusiastic about embracing innovative technology that offers such promise for future
economic growth..
The Mesabi Nugget facility is configured in a way that two additional modules could be
added, with each module capable of producing an additional 500,000 metric tons of
nuggets annually. Future employment would increase accordingly.
Currently, the iron ore concentrate used to produce the pellets comes from other mining
operations, but Mesabi Nugget is seeking permits to develop an iron ore mine nearby on
the ore body originally mined by LTV Steel Mining Company.
A New Age
Mesabi Nugget truly represents a New Age of Iron—driven by innovative technology and
the same entrepreneurial spirit that catapulted its parent company, Steel Dynamics, in just
15 years to become the fifth-largest American-owned steel producer.
To develop and utilize state-of-the art technology, Steel Dynamics attracts creative and
committed people who are given the challenge and freedom to solve problems and make
improvements—and they are rewarded well for success. Steel Dynamics has created a
sustainable business model with a unique approach to rewarding employees and is wellpositioned to succeed throughout market cycles.
Mesabi Nugget’s employees benefit from SDI’s entrepreneurial culture and incentive
compensation programs that offer significant bonus opportunities over base pay, as well
as competitive benefits. Besides good pay, employees also report tremendous satisfaction
in being rewarded for initiative and creativity.
Welcome to
esa6i Wugget
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SteelDynamics, mc:
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erican Bu mess Success Stor
Founded by three entrepreneurs in 1993
Produced first steel in January 1996
Went public November 1996 (NASDAQ: STLD)
ortun 500 in 2010
No. 368— Net sales of $6.3 billion in 2010
Shipped 5.3 million tons of steel and 5.2 million gross
tons of recycled ferrous materials in 2010
Fifth largest carbon steel producer in the U.S.
Over 6,000 employees nationwide
Dynamics, mc:
Hsto yofSDI
April 2006
Acquired
Roanoke Electric:
2 long products
steel mills and 3
fabrication plants
Mid 2008
Acquired
Recycled
South
July 2007
Acquired
The Techs
Oct 2007
Acquired
OmniSource
Jan 2000
First
fabrication
plant
1996
Sheet steel
mill
operatlo al
startup
2011 / 2012
Copper
Wire Mill
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Resources
2010
Rail initlat ye
Mar 2003
Acquired 3rd
galvanizing
facility
Nov 2003
1~ Paint line
addition
Mid 2002
Structural
steel mill
startup
2010
Mesabi
Nugget
startup
2006 Combined Revenues
Dec 2003
SBQ steel
mill startup
(Sept 2002
Qualitech
Acquisition)
Steel
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Iron
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2010 CombIned Revenues
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sabi Nugget
Commercialization of Iron Nugget
Manufacturing Plant using ITmk3®
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97%-pure
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Produced 75,000 Metric Tons in 2010
Produced 103,000 Metric Tons as of YTD 9/30/2011
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~ Estimated annual plant capacity 500,000 metric tons
Environmentally sou d technology
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M sabi Nugg t—Potential Iron Ore Concentrate Supply
esabi Mining
Plan to mine and concentrate Taconite onsite
SDI owns more than 6,000 acres
Mineral rights for 15,000 acres
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Mining 100% SDI owned
~ Environmental permit is pending
Best case Q1 2013
Once permitted
$100M capital investment
70 ne jobs
Dynamics, mc:
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abi Nugget—Potential Iron Ore Concentrate Supply
ining Resources
New venture to provide alternate supply of iron ore
concentrate, complements future direct mining project
~ 80% SDI, 20% Magnetation
Reclaims hematite from tailings basins, using innovative
magnetic technology
~ Environmentally beneficial project
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~ Plan to build a ne $50M plant near Hibbing, MN
Plan to produce 1M tonnes of iron concentrate per year, 800K
available to Mesabi
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