Cleveland-Cliffs, which owns several Minnesota and Michigan iron ore mines and taconite plants, has agreed to buy steelmaker AK Steel, the companies announced Tuesday morning.

The move allows Cliffs to own AK Steel's existing blast furnaces and electric arc furnaces, and supply the furnaces with its own pellets. Cliffs had long sold its pellets to other steelmakers.

That "vertically integrated steel company" model is used by U.S. Steel, which mines and produces taconite at Keetac in Keewatin and Minntac in Mountain Iron that then supplies its blast furnaces throughout the U.S., and ArcelorMittal, which supplies its Indiana Harbor blast furnaces with pellets mined and produced at Hibtac in Hibbing and Minorca in Virginia.

"We're going to basically replicate what Arcelormittal does out of Hibbing and Minorca and what U.S. Steel does out of Keetac and Minntac," Cliffs President and CEO Lourenco Goncalves said in a conference call with investors Tuesday morning.

On Minnesota's Iron Range, Cliffs mines and produces pellets at Northshore Mining in Babbitt and Silver Bay and United Taconite in Eveleth and Forbes. Cliffs also operates the Tilden mine in Michigan's Upper Peninsula.

All three companies own stakes in HibTac, which is managed by ArcelorMittal.

Goncalves will lead the combined company out of its Cleveland headquarters while Roger Newport, CEO and director of AK Steel, will retire.

Newport said AK Steel supported the sale.

"The combination of Cliffs' iron ore pellet capabilities and our innovative, high-quality steel product development and production is strategically compelling," Newport said in a news release Tuesday morning. "Together, we expect to be able to take advantage of growth opportunities faster and more fully than either company could on its own."

When the sale is complete, Cliffs shareholders will own 68% of the company's shares and AK Steel shareholders will own the remaining 32%.

Both boards have unanimously backed the purchase, but the shareholders will still vote on the sale, Goncalves said.

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