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Cliffs ‘well aware’ of threat from Great Lakes projects

Keywords: Tags  Cliffs Natural Resources, Joseph Carrabba, iron ore, Great Lakes projects, Stacy Irish

NEW YORK — Cliffs Natural Resources Inc. is "well aware" of the competition it could face from new iron ore projects that have been announced in North America’s Great Lakes region over the past two years.

"Naturally, we are monitoring these projects on a regular basis and we are well aware of the potential competition we could face later this decade," Cliffs chairman, president and chief executive officer Joseph Carrabba said April 25 during an earnings conference call with analysts.

Cliffs’ iron ore business in the Great Lakes region generates 75 to 80 percent of group earnings. However, the company is facing a supply/demand imbalance, which could seriously erode its earnings potential, analysts have said (, April 8).

"I would like to take this opportunity to address recent concerns over the long-term sustainability of our U.S. iron ore business," Carrabba said. "As many of you know, our U.S. iron ore segment has really been the core of Cliffs’ global operations. Over the past decade, we have significantly increased our market position, enabling us to become the largest merchant supplier of iron ore pellets to steel mills in the USA."

The company sells its iron ore to North American consumers via long-term sales contracts and it will continue to do so for the next three-and-a-half years, he said.

"Our U.S. iron ore cash costs are consistent quarter over quarter," he said. "This enables us to generate respectable sales margins and to price competitively. That being said, we fully intend to protect the long-term volumes in our U.S. iron ore business."

Cliffs’ main North American iron ore mines are both in Canada: the Wabush Mine in Labrador, with an annual capacity of 5.6 million tons of hematite iron ore, and Bloom Lake in Quebec, with an annual capacity of 8 million tons of magnetite and hematite. Bloom Lake is 75-percent owned by Cliffs and 25-percent owned by Wugang Canada Resources Investment Ltd.

A version of this article was first published by AMM sister publication Steel First.

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