Minnesota Steel Industries - Frequently Asked Questions

• The Resources • The Technology • The Future of Steel • The Financial Picture • Environment Matters • The Resources
	Why locate a steel mill in Minnesota? All the resources are in Minnesota—iron ore, energy and skilled workers. Building an integrated facility near the iron ore—with mining, ore processing and steelmaking all on one site—allows Minnesota Steel to take advantage of economies of scale and minimize operating costs in the process. This will make Minnesota Steel a low cost producer throughout the economic cycle. Why hasn't this been done before? The Butler Mine resource is one of the best in the region and the only ore body that can support an on-site modern steel mill. Because the orebody is made up of large grains of iron ore and silica that are easily separated, it can produce a low silica pellet economically, something that is extremely costly, if not prohibitive, for the other Iron Range pellet producers. A low silica pellet is a must for a natural gas-based Direct Reduced Iron (DRI) plant, which will provide iron units to charge Electric Arc Furnaces (EAF) that produce steel. This technology is the most cost effective and environmentally sensitive way to produce high quality steel available in the world today. What really happened to cause the old Butler operation to shut down? In the mid-1980s, the steel market was in a down cycle with an overabundance of ore. When a member of the consortium that operated Butler experienced severe financial problems, the partnership agreement required that the facility be closed and assets dispersed. Is there energy to support the project? There is an extensive gas and electricity network already in the area, which we will capitalize on for the project. This network is one of the major features that makes the project so attractive to the investors. Where will you get the gas and how much will you pay? In November 2006, Minnesota Steel secured capacity to transport low-cost natural gas from Alberta, Canada, to its facility in Nashwauk via the Great Lakes Transmission Co. Gas transmission in North America is extremely limited and priced by zones. Minnesota Steel’s agreement is for western zone capacity, which means transmission costs will be up to 70% lower than those for central or eastern zones. The agreement begins with plant start up and will remain in effect for 15 years. How many employees will you really have and what is the multiplier effect? At full production we will employ approximately 700 people full time. The multiplier affect on the local community will be approximately 2,100 additional jobs, and the impact on jobs regionally and nationally may be another 2-3 times depending on the value of the product. It looks like Minnesota Steel will be a unionized operation. Will that put you in a non-competititve position? This has yet to be determined and we will explore all options. We plan on having discussions with the United Steelworkers of America but our employees will ultimately make the decision. We assume that we will be competitive with our domestic US competition.
top ^ • The Technology
	Are you sure this technology will work? Minnesota Steel is using only commercially proven technology in its iron ore processing and steelmaking. The DRI and EAF processes are being used successfully today in steelmaking operations around the world. Why don't you make pellets now and graduate into value added products later? The value in this project lies in the beneficiation of iron ore into steel on one site, allowing us to capitalize on the savings of an integrated plant. This keeps the capital costs down and maximizes the return. The phased nature of the operation will minimize the initial risk while creating the opportunity for future growth. How can Minnesota Steel be competitive with current high-energy costs? Steel producers the world over have to pay a higher cost for their energy; accordingly, we will be no worse off than any other manufacturer. There will be significant advantages for new manufacturing using the latest and most advanced technology, having all operations on one site, which maximizes energy efficiency and minimize energy lost to cooling, and only paying to transport a finished product versus waste. All this results in Minnesota Steel’s energy consumption being much less than our competitors. We will use 30% less energy than traditional steelmaking. Do you have to use natural gas for DRI? What about coal? Currently, the more energy efficient and environmentally sound practice is natural gas. The technology is well proven worldwide and acceptable to the banking community. Has staging a project of this magnitude ever been successful? What are the stages? Staging a project of this magnitude has been successful in the steel industry, most recently with Steel Dynamics Inc. (SDI) operations in Indiana. Though not common, if the underpinnings are as strong as in this project, then the success rate will be much higher. Initially, Minnesota Steel plans on producing 1.2 million tons per year and doubling this capacity in Stage II.
top ^ • The Future of Steel
	When will you be in operation? We intend to begin construction in 2007, with start-up of operations in 2009. This project has been around for a long time. Why will it happen now? This project should have been developed earlier but the underpinnings were not in place to move it forward. This mill will be one of the low cost producers in the world. The domestic steel market needs a high quality/low cost product. No new steel mills have been built in the USA in more than 10 years, and demand is at its highest level. This imbalance is expected to last for a number of years, especially as higher cost, older blast furnace technology is taken out of service. Many blast furnaces are more than 40 years old, are quite costly to refurbish and pose environmental problems. There is also a shortage of iron ore in the market, caused by demand out of Asia. Minnesota Steel has its own iron ore supply of approximately 1.4 billion tonnes that will last up to 100 years. Similarly, there is a shortage of coke—a coal-based product used in steelmaking. Minnesota Steel does not require coke in its steelmaking. All I can see is competition for existing Iron Range mining operations and their employees. Minnesota Steel will not be in competition with any local producer of pellets. We are further beneficiating taconite using technologies not currently used by the local mining community, i.e. DRI and EAF. Minnesota Steel will only enhance services available in the area, which is a benefit to all operations. What kind of steel products will you be making? Minnesota Steel initially will provide slab steel to the domestic market. Current demand for slab far exceeds availability, forcing the import of about 7 million tonnes per year. A variety of domestic customers exists for slab steel, and the initial production investment and learning curve are relatively short. Minnesota Steel’s current plans are to develop capacity to produce hot rolled coil in Stage II. Does the northern Minnesota location with severe winters put us at a disadvantage, vis a vis our competitors? Not at all. The weather around the Great Lakes area, where a number of North American mills currently are operating, also can be very severe. In addition, there are mills operating in more drastic conditions worldwide, including Eastern Europe, Russia and the flood prone regions of South America.
top ^ • The Financial Picture
	Isn’t all of your money just going out East to some steel company? In fact, all of Minnesota Steel's money was being spent in Minnesota, including the leasing of all the lands required, environmental permitting and mine planning, which has put more than $8 million into the community. Once construction starts, this amount will grow to more than $1 billion, providing significant cash flow into the local community. How are you going to raise the capital? Essar Steel Holdings Limited, a wholly owned subsidiary of India-based Essar Global Limited, an international conglomerate, purchased Minnesota Steel in April 2007. This is such a huge operation, are you sure you can go at it alone? We have no intention of going it alone. We have invested considerable energy and resources to validate the iron ore reserve and to secure rights to the ore. We have identified commercially proven technologies to make steel. We have developed a sound business plan. In short, we have put into place all of the underpinnings to develop a successful project. Essar Steel Holdings Limited, a wholly owned subsidiary of India-based Essar Global Limited, an international conglomerate, purchased Minnesota Steel in April 2007. Who will be your strategic partner? On October 24, 2007, it was announced that Essar Steel Holdings Limited, part of Essar Global Limited, completed the acquisition of Minnesota Steel Industries, LLC. Do you plan to take Minnesota Steel public? Currently there is no intention to take Minnesota Steel public. How do you compare with SDI and Nucor? The principal difference is that these companies have traditionally relied on scrap iron as their primary raw material and have been forced to pay increasingly high prices, Minnesota Steel will use raw iron units obtained from its mine contiguous to its plant site. Therefore: We should be in the lowest 10% cost bracket of producers in the world. In the case of SDI and Nucor, depending on the time of the business cycle, Minnesota Steel’s cost could be up to 20% lower because of our captive, on site raw material source. What will be your targeted market? Our targeted market will be the Midwest. We are well positioned to service this area utilizing the Great Lakes Seaway, two rail lines and a quality road infrastructure. We will examine the commercial viability of other alternatives outside this area as they arise. What percent of the market are you targeting? Minnesota Steel, though a large manufacturing facility, will produce approximately 2% of total US consumption. In the Midwest region we would anticipate our market share to be under 10%.
top ^ • Environment Matters
	What about mineland reclamation? Are you just going to leave those big holes in the ground? Traditionally, backfilling has not been required of Iron Range operators. We will work very closely with the State and Federal regulators and the local community to identify and follow requirements and what is best for all involved. How can you obtain environmental permits in Minnesota? Minnesota Steel worked closely with State and Federal regulators to review and assess potential environmental impacts from the project and to develop permits to protect human health and the environment. The environmental impact statement was approved in August 2007 and all permits required for operation were issued by September 2007. The environmental review and permitting process included significant opportunity for public participation, in accordance with State and Federal laws. Isn’t steelmaking a dirty business that will pollute the environment? Traditional steelmaking can create pollution. It requires the production of coke from coal, a process with significant environmental emissions, and relies on blast furnaces, many of which were built before the advent of contemporary environmental standards. In contrast, Minnesota Steel will produce steel using clean-burning natural gas with commercially proven technologies. Minnesota Steel also will be more environmentally friendly than most EAF steelmaking, which uses scrap metal that can contain contaminants that are released to the environment. We will meet Minnesota’s stringent environmental protection requirements, making Minnesota Steel one of the cleanest steelmaking operations in the world.