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Cliffs is in talks with steel makers about selling a stake in its Bloom Lake mine in Canada, among other assets.
Cliffs Natural Resources Inc. (NYSE:CLF), the largest iron ore producer in the U.S., said Friday it expects to take a $6-billion charge to write down the value of some assets in the third quarter due to weak prices for its two key commodities: iron ore and coal.
The Cleveland-based mining and natural resources company, cut to junk by Standard & Poor’s last week, said the impairment is tied to expected lower long-term pricing and the difficult market for seaborne iron ore and metallurgical coal compared with its more stable U.S. iron ore business.
After attempting a comeback since ending September at a more than 5-year low of $77.50 a tonne, the steel-making commodity sank again yesterday amid Australian and Brazilian miners announcing they will continue to rise output even as top consumer China imports less.
So far this year iron-ore prices have fallen by more than 40%. Prices for metallurgical coal, another steelmaking ingredient, have halved over the past three years as a result of rising output from Australia, Indonesia, South Africa, Colombia and the U.S. and sluggish demand from both industrialized and emerging markets.
Cliffs is looking to sell iron-ore mines in Eastern Canada and Western Australia.
In July, activist investor Casablanca Capital LP pushed through the election of six new board members and installed Lourenco Goncalves as chairman and chief executive officer.
The miner said today its $1.25 billion credit facility was undrawn as of Sept. 30 and that it ended September with about $250 million in cash on hand. Cliffs reports third-quarter earnings on Oct. 27.
It also announced, in a separate note, that Janice K. Henry, who has served on the company’s board since 2009 and chaired the audit committee, has resigned.
Comments
Larry Southwick
Real money
As our West Virginia US Senator of two generations ago used to say, expanded three orders of magnitude for this inflationary world, “A billion here, a billion there, pretty soon you are into real money.”
Reported elsewhere, Cliffs falling behind on its lead roles in developing both the Ring of Fire and the Labrador Iron Ore Trough has severely put those regions at risk for much in the way of near term progress. Of course, in both of those area First Nation interests could themselves well set back several projects.
There are other Perfect Storms swirling around the world – Greenland, west Africa iron ore, any non-major iron ore project, serious mining spills in Canada, Mexico and S. America, continuing troubles commercializing first of a kind technologies, rising demands for more CSR (corporate social responsibility) without a concomitant more responsible society to make CSR work.
The worst of times. But also maybe the best of times – to solve the above nagging problems, what with the crises as a driving force.
Just a few thoughts about what might help.
(1) More technical people in management who understand what truly makes the business profitable, realize its operational risks, grasp the factors needed for successful operations, and who are experienced in the perils of commercializing new technologies.
Too often business gauges their success on a mindless and irrelevant group of financial metrics and paper work. Rather hey need to know and understand the root causes of higher expenses, lower productivity, poor product quality, low customer satisfaction and employee motivation.
(2) A Society that is more aware of their responsibilities to see that what is needed to supply the basic things in life, as well as the finer, can indeed be provided. Miners have a responsibility to supply the needs of society, and society needs to allow them enough freedom to do that.
(3) We’ve seen enough of pseudo science in the environmental field. If man made carbon dioxide is so bad, what will green things do to live large(r) without it? The smoke and mirrors approach (orsilver pinwheels – wind turbines, and shiny solar panels) won’t fill the cart..
These options are expensive, periodic, have small unit capacity, require huge new transmission lines to get the power from where environmental factors favor its production to where the people and industry are. Lines that will be very
expensive, very susceptible to terrorism and storm disruption, and so
interconnected that a few failures can bring down many of its parts.
And very much under the control of the government – taxes to pay for it rather that increasing power bills, the latter which would allow the public to realize how expensive environmental activism really is.
(4) Lastly a fuller appreciation at all levels of society of how much China’s needs and wants impacts the rest of the world. Pushing more of the metals and
manufacturing industries over there (by closing off abilities for companies to
operate economically elsewhere) is a win-lose game.
They win, we lose.
Larry M. Southwick