The type of mine proposed - a four-mile long open pit, could damage water supplies and human health, according to a DNR report.
The company proposing the project, Gogegic Taconite, is unhappy the report was assembled before the firm has finished testing rock samples it's taken from the region. Spokesman Bob Seitz also accused the DNR of displaying bias.
The agency insists the report only identifies issues that need attention and is not a replacement for the environmental impact study the DNR will conduct, after the company submits a mining application.
Opponents of the proposed iron ore mine have always contended the process would damage the extensive watershed, just south of Lake Superior.
Supporters of the plan say it would mitigate many detrimental effects, while creating much-needed jobs.