The Canadian steelmaker said in a statement that the long-dated, US$100 million option would give it the rights to acquire the stake in a to-be-formed joint venture that will own the Minnesota mine and pellet plant. 

“This transaction represents a major milestone for Stelco as it secures a long-term supply of high-quality iron ore pellets and a highly valuable future option in the Minntac mine — the best asset on the iron range,” said Stelco executive chairman and chief executive Alan Kestenbaum.

“Having this level of security for our iron ore supply, combined with the efficiencies gained from our remaining capital projects for 2020, positions Stelco as one of the lowest cost producers in the North American steel market," he added.

U. S. Steel said the option can be exercised for an additional US$500 million up until the end of 2027.  

“We are pleased that this transaction validates the competitive advantage of our iron ore mining assets and gives us a path to an additional US$500 million of capital to support continued execution of our strategy,” said U. S. Steel chief executive David B. Burritt. 

“This transaction shows that while we will be nimble and flexible in executing our world-competitive, 'best of both' strategy, we will not be deterred,” he added.  

Stelco said the pellet contract replaces an agreement that was set to expire at the end of 2022. The new contract provides for all of Stelco's anticipated pellet needs at its Lake Erie Works over the life of the contract, Stelco said.