The Vermilion Range exists between Tower and Ely, Minnesota, and contains significant deposits of iron ore. The Vermilion, along with the Mesabi and Cuyuna Ranges, constitute the Iron Ranges of northern Minnesota. While the Mesabi Range had iron ore close enough to the surface to enable pit mining, mines on the Vermilion and Cuyuna ranges tended to be deep underground. The Soudan mine was nearly half a mile underground. The ore had to be blasted from Precambrian sedimentary bedrock.
The reason that mining companies went through the trouble of blasting tunnels so far underground was the quality of the hematite ore; the Soudan Mine had ore so pure that two pieces could be welded. The bedrock, known as taconite, also contained iron, but in a much lower concentration. Eventually, the high-quality ore was mined out, and new processes had to be developed to extract the iron from the taconite. This was successful, and Minnesota's iron industry centered on the Mesabi Range, where the taconite was much easier to access.
In 1875, Philadelphia financier Charlemagne Tower, who owned extensive interests in the Northern Pacific Railroad, began to investigate the possibility of iron mining inland from the North Shore. Although the scare of 1873 had depressed the price of iron to $5.50 per ton, by the 1880s it was back to about $9.25 per ton. Tower started acquiring land in the Vermilion Range, where ore had an iron content of 69%. Tower also acquired the rights to the Duluth Iron & Railway Co., which entitled him to ten square miles (26 sq.km) of land for every mile (1.6 km) of rail built between Duluth and Agate Bay (Two Harbors), 25 miles (40 km) northeast along the shore. Speculators bought up land at Agate Bay, but the rail line was not completed until 1887, so all travel to Agate Bay was originally by steamboat. Between 1884 and 1885, two large wooden loading docks were built in the harbor for shipping iron. In 1887, when the railroad was completed, the Minnesota Iron Company owned 95.7 miles (154.0 km) of track, 26,800 acres (108 km²) of property, 13 locomotives, 340 cars, the loading docks at Two Harbors, and five pit mines.
This growth attracted the interest of Henry H. Porter, a Chicago railroad owner, who bought 25,000 acres (100 km²) of land further up the North Shore than Tower’s holdings around Two Harbors and Tower, a mining settlement named after its founder. Porter coerced Tower into selling the Minnesota Iron Company for 8.5 million dollars. He built Chandler Mine, Pioneer Mine, Zenith Mine, Savoy Mine, and Sibley Mine between 1889 and 1899. In 1896, the iron traveling through Two Harbors exceeded 2,000,000 tons. Two Harbors steadily built more docks and replaced the wooden docks with concrete over the course of the next several decades.
Iron production continued steadily for many more decades, but in the 1950s, traditional iron mines had exhausted most of their resources. However, it had been known for many years that northern Minnesota had an ore called taconite, which could be refined into iron through a process called beneficiation. A taconite processing plant was built further north along the North Shore at Silver Bay and it quickly became the major taconite shipping port. Minnesotan taconite produces over half of the iron mined in Minnesota at the present date.