The so-called Mustang pellets are intended for Cliffs’ largest customer, ArcelorMittal, which signed a long-term supply agreement with the company earlier this year. Construction is expected to take eight months to complete.

The new, higher-grade pellet will be made at Cliffs’ United Taconite mine in Minnesota. It is replacing a pellet that had been produced the company’s Empire facility in Michigan. That facility permanently closed this month, having exhausted its reserves of high-value ore, the Duluth (Minn.) News Tribune reported.

The groundbreaking coincides with the resumption of mining at United Taconite, which was idled amid a period of low prices and weak demand.

“It’s a fabulous day,” Minnesota Gov. Mark Dayton told the audience that had gathered for groundbreaking ceremony at United Taconite. “We are going to have a resurgence of jobs and economic opportunity up here on the (Iron) Range. We are very excited about what lies ahead,” he said, according to the Minneapolis Star Tribune.

Also during the ceremony, Dayton promised Cliffs chief executive Lourenco Goncalves that the state of Minnesota would work to put public mineral leases that had been held by would-be competitor Essar Steel Minnesota into Cliffs’ hands, the Star Tribune reported.

Essar Minnesota, which had been building a US$1.8 billion taconite mine in Minnesota, filed for bankruptcy in July just as the state moved to terminate its public mineral leases on the project. The termination was the consequence of having missed a deadline to reimburse Minnesota for economic incentives related to the stalled project.  

Essar Minnesota is contesting termination of the leases, saying it filed for bankruptcy just before the leases were ended.