Cleveland-Cliffs announced that it is sticking with its plans first announced in February to temporarily shut down its Northshore Mining operations in Babbitt and Silver Bay on May 1.

The company said it would idle the facilities amid a royalty dispute and changing operational strategies. Together, the operations employ 500 people.

“We are treating Northshore in Minnesota as our swing producer,” Cliffs CEO Lourenco Goncalves said. “We are not planning to run Northshore at this time because we feel that that would not be the right thing to do.”

The Star Tribune reported that Northshore’s mine in Babbitt and the taconite processing plant in Silver Bay are expected to be closed for at least four months. The shutdown will be a significant economic blow to both Silver Bay and the Iron Range.

Cleveland-based Cliffs is in a long-running dispute with Mesabi Trust, a publicly traded company that gets all of its revenue from royalties paid by Cliffs for ore mined in Babbitt. Goncalves has called the royalty payments “absurdly high.”

In 2019, Cliffs spent $100 million upgrading Northshore's operations to produce a better grade of iron for steelmaking. But that supply is now being sourced from the Minorca mine near Virginia, MN, which Cliffs has owned since buying ArcelorMittal USA in late 2020.

Through acquisitions over the past couple of years, Cliffs — which also owns two other Iron Range taconite operations — has transformed itself into a full-fledged integrated steelmaker.

The company is shifting away from selling iron ore to other steel companies. It also acquired a scrap-steel firm last fall, which can supply its steelmaking operations in place of some iron ore.

Cliffs reported strong first quarter earnings. It posted net profits of $801 million, or $1.50 a share, up from $41 million or 7 cents a share a year earlier.

Cliffs' stock closed Friday at $28.95, down 63 cents on a down day for the market. The company's stock rose from about $19 in February, before the Russian invasion of Ukraine, to as high as $32.71 in late March.

Ukraine and Russia are major iron and steel producers, and the war has constricted global supplies of both.

“The Russian aggression toward Ukraine has made it absolutely clear to everyone what we at Cleveland-Cliffs have been explaining to our clients for some time: overly extended supply chains are weak and prone to break down, particularly steel supply chains that are dependent on imported feedstock,” said Goncalves. “ No steel company can produce highly specified flat-rolled steel without using pig iron, or iron substitutes like HBI or DRI, as feedstock. Cleveland-Cliffs produces in house all the pig iron and HBI we need, right here in Ohio, Michigan and Indiana, using iron ore pellets from Minnesota and Michigan. With that, we generate and support good paying middle-class jobs right here in the United States. We do not import pig iron from Russia; and we do not import HBI, DRI or slabs.