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Local Communities Struggling with Northshore Mining Closure

Northshore Mining, a subsidiary of Cleveland-Cliffs, Inc., was shut down in May of this year, laying off several hundred full-time employees. Northshore includes the Peter Mitchell Mine in Babbitt, a lakeside taconite mill in Silver Bay, and a railroad connecting the two facilities.

According to Cleveland-Cliffs CEO Lourenco Goncalves, the shutdown decision was taken after they concluded the inventory being produced was not needed by their customers at the time. Another factor in that decision is an unresolved dispute over the amount of royalties owed to Mesabi Trust. This publicly traded entity was created in 1961 to derive income from the Mitchell Mine and the parties have been unable to negotiate a reduction in royalties that is acceptable to Cleveland-Cliffs.

Two cities were built by Reserve Mining in the 1940s and 1950s to support a taconite mining and processing operation for the Mitchell Mine. Babbitt, the site of the mine, and Silver Bay, the processing and shipping plant for the taconite. Both cities are impacted negatively by the layoffs.

Andrea Zupancich, Mayor of Babbitt since 2014, said, “I’ve been through a couple of layoffs before. This is the longest layoff and it feels different.”

Northshore projects that it may open the mine in April of the coming year. With unemployment benefits for workers coming to an end now, there is growing uncertainty for city leaders.

Northshore does not pay property taxes to Babbitt and Silver Bay. Instead, it pays a socalled production tax. No production, no payment to the city governments.

According to Mayor Zupancich (whose term ends this month), Babbitt is cutting about $400,000 from its budget for the coming year, a significant hit to a city of fewer than 1,500 people. “It’s the largest hit we’ve had,” Zupancich said.

A much-needed new roof for the municipal building that was planned for next year is on hold. Non-essential services and other capital improvement projects will be cut. A new municipal campground, which is expected to be funded by operations, will be completed for the coming season.

The city is in need of a new water treatment plant that is projected to cost $12 million. That project is on hold until the mine is reopened.

Mayor Zupancich, a real estate broker, points out that the layoffs hit the whole town. Businesses don’t receive the equivalent of unemployment benefits. She said that consumer belt-tightening is evident across the community from the business activity being down at bars, restaurants, and retail businesses to slower real estate sales. She added that more housing inventory is on the market now.

Down the tracks 47 miles from Babbitt is the city of Silver Bay, built by Reserve Minning in the 1950s. It is the site of the first taconite processing facility in North America.

With unemployment insurance for most of the laid off personnel ending this month, an effort is underway with the next Minnesota legislature, which convenes in four weeks, to provide extended benefits for those workers.

It is not clear if those extensions will be retroactive for the missing weeks. But the impact is not limited to Northshore workers.

“It (layoffs) affects everybody. Every business and the local vendors of ClevelandCliffs,” said Wade LeBlanc, Mayor of Silver Bay. Mayor LeBlanc is a lifelong resident of Silver Bay and a small business owner. He’s not certain if the extended unemployment benefits that are contemplated would be applied to other workers in the area who have been laid off during this time as a direct result of the mine closure.

Mayor LeBlanc said that the Silver Bay Council sought no increase this year in its tax levy. Like Babbitt, the Northshore Mining taconite plant does not pay property taxes to Silver Bay. Instead it pays a production tax. The city will see a substantial reduction in revenue due to the shutdown and the amount won’t be clear until later next year.

LeBlanc also mentioned that the plant is the city’s biggest customer for sewer and water services. Due to that lost revenue, cost cutting was necessary. They were able to manage lower costs without direct staff reduction.

Despite the hardships created by plant and mine closures, long time residents remain optimistic that the mine will reopen, having lived through the ups and downs over the years. The company is suggesting it will reopen operations in April of next year.

Steve VanHouse, owner of VanHouse Construction in Silver Bay, is another life-long resident who displays a matter-of-fact attitude about the closures. His company counts Northshore as one of its customers. “They’ll be back and running again,” he says. “They say it’ll be in April.”

Keri Parks, a food shelf volunteer in Silver Bay says that up until now they didn’t see a big impact from the closing. There has been more customer activity recently, but November is historically the busiest month so they aren’t attributing the increase to the end of unemployment insurance for Northshore workers More importantly, the food shelf is having difficulty getting enough inventory from its main supplier.

According to Mabel Tarlton, food shelf manager in Silver Bay, part of the reason for the supply problem is higher prices of food generally. A main source of inventory for the food bank is Second Harvest Food Bank in Duluth. Tarlton says that for the past four months she has been unable to get peanut butter, an integral staple for clients, from Second Harvest.

Tarlton says that donations for the food bank can be sent to Silver Bay Food Shelf, 99 Edison Blvd. Silver Bay, MN 55614. Non-cash donations of canned goods and staples like paper towels, toilet paper, facial tissues, napkins, and peanut butter of course, can be delivered to the Food Shelf at the Mary MacDonald Business Center.

According to Mining Data Solutions, a Candadian firm that compiles data on mining and publishes on www.miningdataonline.com, the expected life of the Peter Mitchel Mine was 48 years on January 1, 2021.

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