Minnesota Mesabi Range Providing Sustainable Iron Ore to the North American Steel Industry

Transcription

1 Minnesota Mesabi Range Providing Sustainable Iron Ore to the North American Steel Industry By: Peter Clevenstine, P.E. Manager of Engineering & Mineral Development Minnesota Mesabi Range Providing Iron Ore to the North American Steel Industry every year - Since 1892 Hibbing 1

2 Mesabi Range Iron Ore Production (Natural Ore and Pellets) Million Gross Tons Source: MN Department of Revenue USA Metal Consumption Steel Aluminum Copper Lead Titanium Zinc Manganese Chromium Nickel Magnesium Other 2

3 USA Consumption Metric Tons 120,000, ,000,000 80,000,000 60,000,000 40,000,000 20,000, Steel Scrap Iron Ore Aluminum Division of Lands and Minerals Promoting and Regulating Mining in Minnesota 3

4 State Iron Ore Royalties (Fiscal Year Revenue in Millions) $35 $30 $25 $20 $15 $10 $5 $0 Taconite and Iron Ore MinelandReclamation Rules 4

5 Mesabi Range Active Mining Areas Hibtac Minntac Minorca Northshore United Keetac Laurentian Vision Large Scale Projects 5

6 Will the resource continue to support this higher level of activity? And what are the implications for local communities? Minnesota Iron Ore Trifecta 6

7 Minnesota Iron Ore Trifecta 1. World Demand World Iron Ore Production Million Metric Tonnes Source: USGS Annual Iron Ore Commodity Summary. 7

8 World Price for Standard Sinter Feed US$ per Metric Tonne $180 $160 $140 $120 $100 $80 $60 $40 $20 $ Source: WORLD STEEL DYNAMICS estimate of Vale (CVRD) fines FOB Brazil. World Iron Ore Production Sinter Feed Pellets Source: USGS Annual Iron Ore Commodity Summary. 8

9 USA and Canada Iron Ore Production Sinter Feed Pellets Source: USGS Annual Iron Ore Commodity Summary. World Iron Ore US$ per Metric Tonne $200 $180 $160 $140 $120 $100 $80 Pellets Sinter Feed $60 $40 $20 $ Source: WORLD STEEL DYNAMICS estimate of iron ore prices FOB Brazil. 9

10 Cost and Price of Iron Ore Pellets MN Cost MN Value World Price Minnesota Iron Ore Trifecta 1. World Demand 2. Industry Consolidation 10

11 United States and Canadian Pig Iron Production by Company Source: AIST 2011 Blast Furnace Roundup. Minnesota Iron Ore Capacity Ownership

12 US Steel Pellet Demand and Equity Supply Blast Furnaces Braddock, PA Ecorse, MI Fairfield, AL Gary, IN Granite City, IL Nanticoke, ON Hamilton, ON Equity Mines Minntac Keewatin Hibtac Tilden US Steel Pellet Demand and Equity Supply Blast Furnaces Braddock, PA Ecorse, MI Fairfield, AL Gary, IN Granite City, IL Nanticoke, ON Hamilton, ON Equity Mines Minntac Keewatin Hibtac Tilden

13 Arcelor Mittal Pellet Demand and Equity Supply Blast Furnaces Burns Harbor, IN Cleveland, OH East Chicago, IN Weirton, WV Hamilton, ON Equity Mines Mines Canada Hibtac Minorca Other Blast Furnaces Pellet Demand Blast Furnaces Ashland, KY Middletown, OH Sault St. Marie, ON Loraine, OH SparowsPoint.MD Dearborn,MI Warren, OH Steubenville, OH

14 Cliffs Natural Resources Equity Ownership of Pellet Supply Short-termterm Empire Long-term Tilden Northshore Hibtac Wabush United Taconite Total 30.7 Minnesota Iron Ore Trifecta 1. World Demand 2. Industry Consolidation 3. Competitive Advantages 14

15 Reserves Minnesota s Competitive Advantages Location,, Location, Location Mesabi Range Iron Ore Reserves 15

16 US Steel Minntac Keetac Permit to Mine Areas Cliffs Natural Resources Hibtac Northshore United Arcelor Mittal Minorca MN Iron Ore Reserves Gross Pellet Tons (millions) Capacity Reserves Mine Life Hibtac years Minorca years Keetac years Minntac years Northshore years United Tac years ,278 16

17 Advanced Resource Areas EssarSteel Minnesota Mesabi Mining Advanced Resource Areas Gross Pellet Tons (millions) Capacity Estimated Reserves Mine Life Essar Steel MN years Mesabi Mining years

18 Additional Resource Areas Former Butler not Essar Steel MN Sherman Buhl Kinney Former LTV not Mesabi Nugget McKinley Additional Resource Areas Gross Pellet Tons (millions) Major Resource Areas Resource Former Butler 356 Sherman 62 Buhl-Kinney 400 McKinley 100 Former LTV 292 Other open pit > 500 Total 2,000 18

19 Mesabi Iron Range Range Cities Babbitt Virginia Aurora Hibbing Eveleth Grand Rapids Nashwauk Current pits Beyond 2050 Auxiliary lands Chisholm Keewatin Hibbing Nashwauk Calumet 19

20 Example Resource Area Sherman Exploration Drilling 20

21 NA MagFe WtRec Thickness LC5B MagFe WtRec Thickness RK RK IBC IBC RK5B RK5B DRAFT 12/2006 DJS C:\djs\CHS_CIRI Cross-Section 1 Cross-Section Sherman Pit Fraser Pit Hartley/Burt-Forester Pit State of Minn. Copyright 2006 DRAFT LC5B XS Looking West MagFe Composit +15%/30Ft. Min. Depth ORE Resource

22 Subject Area Minnesota s Iron Resources Gross Pellet Tons (millions) Current Reserves 1,300 Advanced Resources 200 Additional Resources 2,000 3,500 22

23 North American Market Chicago Lake Erie Inland Major Sea Borne Trade of Iron Ore 23

24 North American Market Chicago Lake Erie Inland North American Market Chicago and Lake Erie Lake Ontario Inland 24

25 Minnesota Iron Ore Trifecta 1. World Demand 2. Industry Consolidation 3. Competitive Advantages Implications for Local Communities 100+ year history of iron ore mining Strong companies heavily invested in Minnesota Vast resources available Paradigm shift in iron ore economics 25

26 NA MagFe WtRec Thickness LC5B MagFe WtRec Thickness RK RK IBC IBC RK5B RK5B DRAFT 12/2006 DJS C:\djs\CHS_CIRI Next Steps? q Delineate the resource with available data and preliminary economics. q Identify additional drilling and/or analysis that would help further define this resource. q Create mining plans q Auxiliary lands necessary to extract the resource. Cross-Section Sherman Pit Fraser Pit Hartley/Burt-Forester Pit State of Minn. Copyright 2006 DRAFT LC5B XS Looking West MagFe Composit +15%/30Ft. Min. Depth ORE Resource

27 NA MagFe WtRec Thickness LC5B MagFe WtRec Thickness RK RK IBC IBC RK5B RK5B DRAFT 12/2006 DJS C:\djs\CHS_CIRI Resource Modeling 2000 Sherman Pit Fraser Pit Hartley/Burt-Forester Pit State of Minn. Copyright 2006 DRAFT LC5B XS Looking West MagFe Composit +15%/30Ft. Min. Depth ORE Resource Focus Area Thickness ORE Resource MagFe WtRec Thickness MagFe WtRec Thickness RK RK IBC IBC RK5B RK5B Hartley/Burt-Forester Pit MagFe WtRec Thickness

28 Focus Area Thickness ORE Resource RK IBC RK5B RK IBC RK5B Hartley/Burt-Forester Pit MagFe WtRec Thickness Block Model Section View 28

29 Surface Topography Thickness ORE Resource RK IBC RK5B RK IBC RK5B Hartley/Burt-Forester Pit MagFe WtRec Thickness Surface Topography 29

30 Surface Topography Surface Topography 30

31 Ore and Rock Thickness ORE Resource RK IBC RK5B RK IBC RK5B Hartley/Burt-Forester Pit MagFe WtRec Thickness Ore and Rock 31

32 Ore and Rock Ore Grade Weight Recovery Thickness ORE Resource RK IBC RK5B RK IBC RK5B Hartley/Burt-Forester Pit

33 Ore Grade Weight Recovery Ore Grade Weight Recovery

34 Ore Grade Weight Recovery Taconite Production Cost Tons Dollars $/Ton Crude ore mined 137,429,000 Stripping tons 70,546,000 Total tons mined 207,975,000 $447,580,000 $2.15 Crude Ore Processed 137,429,000 $1,061,260,000 $7.72 Royalty 125,770,000 Administration 235,170,000 Taxes 120,180,000 Pellet tons produced 39,927,000 $1,990,560,000 $

35 Mine Cost Information 2008 Taconite Pellet Production Cost Crude Ore Rock Block 200x200x ,000 Tons 350,000 Tons Per Ton Per Block Per Ton Per Block Mining cost $2.15 $2.15 Processing Royalty Admin Taxes $13.45 $5,110,000 $2.15 $752,500 Note: costs are per ton of crude ore or per ton of rock stripping. A comparable pellet cost would be $49.84 per ton. Taxable Mine Value 2008 Taconite Pellet Value - $80.96/ton Crude Ore Rock Block 200x200x ,000 Tons 350,000 Tons Weight Recovery Revenue Per Ton Revenue Per Block Revenue Per Ton Revenue Per Block 24% $19.43 $7,383, % $21.05 $7,999, % $22.67 $8,615, % $24.29 $9,230, % $25.91 $9,846,

36 Net Value per Block Revenue Per Block Cost per Block Net Value per Block Rock -0 - ($752,500) ($752,500) Crude Ore Weight Recovery 24% $7,383,000 ($5,110,000) $2,273,000 26% $7,999,000 ($5,110,000) $2,889,000 28% $8,615,000 ($5,110,000) $3,505,000 30% $9,230,000 ($5,110,000) $4,120,000 32% $9,846,000 ($5,110,000) $4,736,000 Ore Grade Weight Recovery

37 Economic Model Economic Pit ,350,000 tons rock 7,980,000 tons ore $20.7 Million Net Value 37

38 NA NA MagFe WtRec Thickness LC5B MagFe WtRec Thickness LC5B MagFe WtRec Thickness RK RK IBC IBC RK5B RK5B MagFe WtRec Thickness RK RK IBC IBC RK5B RK5B DRAFT 12/2006 DJS C:\djs\CHS_CIRI DRAFT 12/2006 DJS C:\djs\CHS_CIRI Cross-Section Sherman Pit Fraser Pit Hartley/Burt-Forester Pit State of Minn. Copyright 2006 DRAFT LC5B XS Looking West MagFe Composit +15%/30Ft. Min. Depth ORE Resource Resource Modeling 2000 Sherman Pit Fraser Pit Hartley/Burt-Forester Pit State of Minn. Copyright 2006 DRAFT LC5B XS Looking West MagFe Composit +15%/30Ft. Min. Depth ORE Resource

39 NA MagFe WtRec Thickness LC5B MagFe WtRec Thickness RK RK IBC IBC RK5B RK5B DRAFT 12/2006 DJS C:\djs\CHS_CIRI Net Value Southern Limit? Resource Modeling 2000 Sherman Pit Fraser Pit Hartley/Burt-Forester Pit State of Minn. Copyright 2006 DRAFT LC5B XS Looking West MagFe Composit +15%/30Ft. Min. Depth ORE Resource

40 State Iron Ore Royalties (Fiscal Year Revenue in Millions) $35 $30 $25 $20 $15 $10 $5 $0 State Iron Ore Royalties by fund in $millions $40 $35 $30 $25 $20 $15 $10 $5 $0 Tax Forfeit University School 40

41 Tax Forfeit Mineral Revenue 20% to the state 80% to the local county to be distributed 4/9 to the local school district 3/9 to the county 2/9 to the local city or township Chisholm Annexation of Balkan Township Lands 41

42 Potential Revenue from a Tax Forfeit Parcel 40 acres w/ 120 of mineable ore thickness 209 million cubic feet 19 million tons of crude ore 5.5 million tons of pellets $28.5 million royalty revenue Tax Forfeit Mineral Revenue Distribution State mineral management Percent Local 80% Local Split 40 Acre Parcel 20% $5,700,000 Chisholm Schools 4/9 $10,133,000 St. Louis County 3/9 7,600,000 Balkan Township 2/9 5,067,000 22,800,000 Total State & Local 100% $28,500,000 42

43 Minntac East Pit Expansion Co. Rd 102 Relocation Potential Revenue from a Tax Forfeit Parcel 40 acres w/ 350 of mineable ore thickness 600 million cubic feet 55 million tons of crude ore 14 million tons of pellets $83 million royalty revenue 43

44 Tax Forfeit Mineral Revenue Distribution State mineral management Percent Local 80% Local Split 40 Acre Parcel 20% $16,600,000 MIB Schools 4/9 $29,600,000 St. Louis County 3/9 22,200,000 City of MountainIron 2/9 14,800,000 66,400,000 Total State & Local 100% $83,000,000 Minnesota Mesabi Range Providing Iron Ore to the North American Steel Industry is Sustainable The potential benefit to local communities has never been better 44

45 mndnr.gov 45