Cliffs Natural Resources Closes Sale Of Logan County Coal - Analyst Blog

Cliffs Natural Resources Inc. (CLF) has closed the divestment of its Logan County Coal assets, located in West Virginia, to Coronado Coal II LLC, an affiliate of Coronado Coal LLC. The company completed the sale for a cash consideration of $174 million and the assumption of certain liabilities.

Cliffs sees tax benefit in the range of 20% to 25% of the earlier disclosed pre-tax loss of about $400 million, representing an additional benefit of $80 million to $100 million in future cash tax savings. The company will record results of the transaction in its fourth-quarter 2014 earnings.

In a separate announcement, Cliffs stated that it has completely stopped active production at Bloom Lake and put the mine on care and maintenance. Only a few employees are still posted at the mine and the company expects the last shipment of iron ore out of the Port of Sept-Iles to be completed in early Jan 2015. Per Cliffs, it is exiting out of Eastern Canada in accordance to the previously announced schedule.

According to Cliffs, expansion of the Bloom Lake mine would require an investment of $1.2 billion, which is impossible to achieve within the given time frame. As the project is no longer viable, Cliffs decided to shift its focus on an exit option for its Eastern Canadian operations that will reduce cash outflows and related liabilities.

Cliffs released its third-quarter results in Oct 2014. Sales from the Eastern Canadian iron ore segment declined 12% year over year to 2.3 million tons, reflecting reduced shipments from the Wabush Mine, which had been idled in first-quarter 2014. Revenues per ton for the segment decreased 33.5% year over year to $70.91, while cash cost per ton dropped 12.4% to $81.71.

Cliffs reported net loss of $5.9 billion, or $38.49 per share in the third quarter, against a net income of $104 million, or 66 cents per share, in the year-ago quarter. The bottom line was hit by impairment charges of around $5.7 billion associated with its coal and iron ore assets.

Excluding the impairment charge and other items, adjusted net income came in at 21 cents per share, outpacing the Zacks Consensus Estimate of 5 cents.

Sales for the quarter came in at $1,298.2 million, down 16.1% from $1,546.6 million in the prior-year quarter. Sales, however, exceeded the Zacks Consensus Estimate of $1,277 million. The decline was due to significantly lower market pricing for iron ore and metallurgical coal.

Cliffs currently carries a Zacks Rank #3 (Hold).

Other mining companies with a favorable Zacks Rank include Banro Corporation (BAA), Pretium Resources Inc. (PVG) and Dominion Diamond Corp. (DDC). All of these stocks carry a Zacks Rank #2 (Buy).

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