Copying and distributing are prohibited without permission of the publisher
Email a friend
  • To include more than one recipient, please separate each email address with a semi-colon ';', to a maximum of 5

Cliffs tumbles into red amid lower prices

Keywords: Tags  Cliffs Natural Resources, Casablanca Capital, earnings, iron ore, Bloom Lake, metallurgical coal, coal, mining raw materials

NEW YORK — Cliffs Natural Resources Inc., the largest U.S. iron ore miner, posted a $1.9-million net loss in the second quarter amid falling iron ore and metallurgical coal prices.

The Cleveland-based company’s second-quarter revenue of $1.1 billion was down 26 percent from nearly $1.49 billion in the same period last year, driven by "significantly decreased" market prices for iron ore and metallurgical coal along with a 24.3-percent drop in sales volumes from the company’s U.S. iron ore segment, its largest unit by sales volume.

"We continue to take prudent and decisive actions to optimize the business in the face of continued commodity pricing pressures," chief executive officer Gary Halverson said in a statement. "During the quarter, our team cut costs across the board and significantly reduced our capital expenditures."

He attributed lower U.S. sales volumes to the delayed start of the 2014 shipping season due to icy conditions on the Great Lakes. The harsh winter also was a factor in the company’s first-quarter results (, April 25).

Second-quarter capital spending fell 77 percent from a year earlier to $61 million, while lower sales volumes and idled mines drove a 17-percent cut in the cost of goods sold. Most of the company’s projected 2014 capital budget of $275 million to $325 million will be devoted to sustaining projects, but Cliffs still expects to spend $15 million on exploration.

Cliffs’ Bloom Lake iron ore mine in Quebec, which has been the subject of shareholder lawsuits (, May 28), shipped a record 2 million tons in the second quarter, up 33 percent from a year ago, and cash costs per ton edged lower.

The company has yet to conclude a strategic review of Bloom Lake, which could end in a sale or new partners for the project, executives said during an earnings conference call July 24.

Cliffs has said in recent months that it would idle some mines as commodity prices remained weak, including its Pinnacle metallurgical coal mine in West Virginia (, June 25) and its Wabush Scully Mine in Newfoundland and Labrador (, Feb. 12).

Cliffs’ Asia-Pacific and North American coal units also delivered weaker year-over-year results in the second quarter, with per-ton revenue falling 26 percent and 31 percent, respectively, on weaker market pricing.

Per-ton revenue fell in all four of the company’s segments, executive vice president and chief financial officer Terry Paradie said during the conference call, driven by a 19-percent decline in iron ore prices and a 30-percent drop in metallurgical coal prices compared with a year earlier.

The raw materials company said it expects demand for its products to gain support in both North America and China as U.S. automotive and construction markets recover and Chinese officials target an economic growth rate of 7.5 percent.

The company projected full-year sales of 22 million tons for 2014.

Cliffs has been embroiled in a battle for board control with New York-based hedge fund Casablanca Capital LP, a dispute expected to end at the company’s annual shareholder meeting July 29.

Have your say
  • All comments are subject to editorial review.
    All fields are compulsory.

Latest Pricing Trends