Minnesota's mining boom

Loading iron ore on Minnesota's Lake Superior

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(Fortune Magazine) -- Until recently it seemed that Bob Dylan's ballad "Girl From the North Country" would be the last vestige of northern Minnesota's mining culture. The onetime world capital of iron ore had buckled under competition from foreign mines, with layoffs beginning in the 1980s and culminating in the 2001 bankruptcy of its second-biggest mine.

But just as globalization takes away, it also gives back. The run-up in commodity prices beginning in 2004, as developing economies demanded historic quantities of metals, made it again economical for U.S. steel mills to use domestic ore.

Now Minnesota's mines are in demand. "Every single plant is going max, pedal to the metal," says Dan Jordan of the state's Iron Range Resources agency.

Production on the Mesabi Range -- a two-mile-wide, 125-mile long vein of open-pit mines near Lake Superior -- has increased by about 25% since 2001, supplying about two-thirds of U.S. iron-ore needs. (For more, see "The New Iron Age") Mining revenues are up 30%, to $1.6 billion a year, and could double if planned new mines come online.

A flood of foreign capital has funded the renaissance. China's Laiwu Steel and the Netherlands' ArcelorMittal (Charts), the world's biggest steel company, bought mines from bankrupt U.S. firms in 2003 and 2005.

More recently, three small U.S. mining startups have raised capital on the London and Toronto stock exchanges to finance exploration for new copper and nickel mines in the Duluth Complex, a region neighboring the Mesabi, considered the world's largest untapped source of those metals.

"Back in 2001, you couldn't raise a dime out here," says Franconia Minerals CEO Brian Gavin, who plans to open a Duluth mine by 2012.

Considering that in 1988 the town of Duluth had a sign on the road out of town, WILL THE LAST PERSON LEFT PLEASE TURN OUT THE LIGHTS? mining's return is a boon for the local economy. About 3,000 new permanent and 4,000 temporary construction jobs are anticipated. Those jobs won't come close to replacing the 10,000 layoffs since 1980, but demand for mining software engineers and steelworkers -- both six-figure jobs -- has brought new life to smaller towns.

"We're already looking at a couple of new housing developments," says Marlene Pospeck, mayor of Hoyt Lakes, population 2,000, where two new mines will open in the next year. "I'm anticipating getting a fast-food restaurant," she says.

To be sure, Minnesota has seen its share of post-boom busts too. But India's Essar Steel recently won clearance to open a steel mill, the iron range's first in two decades. That and other multinational investments are convincing locals that even if commodity prices fall, mining won't be saying goodbye for good anytime soon.