The Bureau of Mines conducted a study of the cost of installing and operating both a natural gas- and a coal-based direct-reduction plant on the Mesabi Iron Range in Minnesota. The accuracy of the capital and operating costs are +/-25 and +/-15 percent, respectively. Product from the plants would be direct-reduced iron (dri) pellets containing approximately 84 percent metallic iron. The pellets would compete with No. 1 bundle scrap in the Chicago, Illinois, area. Because the quality of dri is higher than scrap, the dri will command a higher price, which has been estimated at approximately $10 per net ton (2,000 pounds) above the price of No. 1 Bundles. An economic evaluation of installing a gas- or coal- based plant near an existing iron oxide pellet plant on the Mesabi Iron Range indicates that currently it is not economically viable.