A must-read guide to Cliffs Natural Resources’ operations

Anuradha Garg

Must-know: Should you own Cliffs Natural Resources right now? (Part 2 of 10)

(Continued from Part 1)

U.S. Iron Ore

This Cliffs segment operates five surface mines across northern Minnesota and Michigan:

  1. Empire
  2. Tilden
  3. Hibbing
  4. North Shore
  5. United Taconite

Three of these mines are also partially owned by ArcelorMittal and U.S. Steel. The combined capacity of these mines is 32.9 million metric tonnes (or MT), of which Cliffs owns about 25.5 million MT. This accounts for 46% of total U.S. annual pellet production capacity.

The company sold 21.3 million MT of iron ore pellets from its share of production in 2013. The revenue and cash cost per ton for this segment in 2013 were $113.08 and $65.08, respectively.

 

Eastern Canada Iron Ore

This segment operates two iron ore mines in Eastern Canada: Wabush and Bloom Lake. Bloom Lake is partially owned by the Chinese steelmaker Wuhan Iron.

These mines have an annual capacity of 12.8 million MT, out of which Cliffs owns 11 million MT. But in February 2014, the company announced plans to idle its Wabush mine in Newfoundland and Labrador in the first quarter of 2014. These plans are due to unsustainably high costs that would have rendered operations economically unviable. This step will lower the company’s estimated capacity to 7.2 million MT.

Canadian operations give Cliffs a greater ability to serve European and Asian seaborne markets. Production for 2013 was 8.7 million MT. The company’s revenue and cash costs per ton in 2013 were $114.45 and $105.66, respectively.

Asia Pacific Iron Ore

This segment operates one wholly owned iron ore complex in Western Australia, Koolyanobbing. This complex produces iron ore lumps and fines. It had an annual capacity of 11 million MT of iron ore in 2013.

North American Coal

This segment owns and operates six metallurgical coal mines across West Virginia and Alabama and one thermal mine in West Virginia.

While Cliffs Natural Resources (CLF) has most of its operating mines in the U.S., its peers Rio Tinto (RIO) and BHP Billiton (BHP) have their major assets in hematite-rich area of Western Australia.

Meanwhile, Vale SA (VALE) has access to the Minas Gerais area of southeastern Brazil, known for its rich iron ore deposits.

The SPDR S&P Metals & Mining ETF (XME) is also exposed to the iron ore industry and the above-mentioned companies.

Continue to Part 3

Browse this series on Market Realist: