TOKYO (June 23, 2003) – Kobe Steel, Ltd. announced that the Mesabi Nugget ITmk3 demonstration plant in northeastern Minnesota, USA, has begun continuous production of iron nuggets.

A successful initial trial run on May 24-25 produced 5 tons of iron nuggets. Beginning June 7, the plant has been operating 24 hours a day and is currently producing around 2 tons of nuggets per hour. On June 13 the first shipment of nuggets was delivered to the EAF shop of Steel Dynamics, Inc. in Butler, Indiana with reported good results obtained from the melting tests conducted.

The continuous operation of the plant will last for 35 days, after which it will be shut down for an inspection of the facility. The development plans call for the demonstration facility to operate for one year, until June 2004.

In March 2002, Kobe Steel signed an agreement with Mesabi Nugget, LLC for the construction and operation of the demonstration plant. The plant is located at the Northshore Mining taconite plant in Silver Bay, Minnesota owned by Cleveland-Cliffs Inc.

Successful operation of the Mesabi Nugget plant would validate the commercial viability of the ITmk3 Process and could allow for the construction of a 500,000-ton commercial-scale plant. After obtaining EPA permission, the commercial plant could start up in 2006.

The ITmk3 Process could provide mining companies with an attractive alternative for mineral processing in supplying a value-added product in the form of iron nuggets. Consisting of 96% to 98% iron and 2% to 4% carbon, the iron nuggets are 50% lighter and 90% more compact than iron ore, thus reducing shipping costs.

About the ITmk3 Process
* The Kobe Steel-developed ITmk3 (pronounced "Eye-Tee Mark Three") Process is a new ironmaking technology that, in a rotary hearth furnace, turns iron ore fines and pulverized coal into iron nuggets of the same quality as blast furnace pig iron.

* Reduction, melting and slag removal takes only about 10 minutes. In comparison, blast furnace steelmaking takes 8 hours, while direct reduction can take 6 hours. The iron nuggets consist of 96% to 98% iron and 2% to 4% carbon, which is nearly the same as blast furnace pig iron.

* Energy efficient and environmentally friendly, the ITmk3 Process emits 20% less carbon dioxide than blast furnace operations.

* Capital investment is projected at roughly half the cost of conventional ironmaking technologies. (On the same scale, initial capital investment of an ITmk3 plant is estimated to be about half the initial investment cost of a blast furnace with associated facilities, including coke ovens as well as oxygen generation and supply equipment.)

* Iron nuggets could provide an attractive mineral processing alternative for mining companies.

Development of the Process
Kobe Steel and its subsidiary Midrex Technologies, Inc. began research on the ITmk3 Process in July 1996. A pilot plant with a production capacity of 3,000 metric tons per year was built at Kobe Steel's Kakogawa Works. Test operations carried out between October 1999 and December 2000 successfully produced iron nuggets under continuous operation. In March 2002, Kobe Steel signed an agreement with Mesabi Nugget, LLC for the construction and operation of the demonstration plant. In May 2003, the plant was completed and trial operation was commenced.

Future Plans
Plans call for the demonstration plant to operate until June 2004. In parallel, preparations would be made for the construction of the commercial plant. The commercial plant would begin operations in 2006.

About the Mesabi Nugget Project
Mesabi Nugget, LLC, formed in September 2001, is the project owner for the Mesabi Nugget project. The equity members in Mesabi Nugget are Ferrometrics, Inc. and subsidiaries of Cleveland-Cliffs Inc, Steel Dynamics, Inc., and Kobe Steel, which provide equity for the $26 million project. The state of Minnesota provides financing for the construction of the project out of the Minnesota Minerals 21st Century Fund.

The project is also supported by the U.S. Department of Energy. Of the total project cost of $26 million, the DOE is anticipated to fund $5 million (19.2%), of which $2 million has already been obligated. In a collaborative R&D strategy called "Industries of the Future," the DOE provides partial funding for steelmaking projects crucial to the industry's future.