Cliffs Natural posts loss after writedown, cuts payout – Staff ( – February 12, 2013)

(Reuters) – Cliffs Natural Resources Inc (CLF.N) reported a quarterly loss on Tuesday, dragged down by a writedown in the value of a Canadian acquisition, higher costs and lower iron ore prices, prompting the miner to slash its dividend by 76 percent.

Shares of the Cleveland-based producer of iron ore and metallurgical coal dropped 7.5 percent to $33.86 in after-market trading. The writedown was announced previously, but the dividend cut was a surprise.

The reduced payout was a sharp reversal from last March, when Cliffs more than doubled its payout and pledged to focus on boosting shareholder returns. The business also felt the impact of a sharp drop in iron ore prices, which plunged to $86.70 a tonne, in September from more than $180 a tonne in September 2011.

That partly reflected on falling demand from China, the world’s largest producer and consumer of steel. Benchmark 62-percent grade iron ore .IO62-CNI=SI has since recovered to about $155 a tonne.

“In their Canadian operations, which is really their platform for future growth, it cost on a cash basis $117 a tonne and they sold each ton at $101,” said Morningstar analyst Daniel Rohr. “So when your main growth area is turning in those kind of numbers, it’s not so hot.”

The company also announced plans for a share offering, with proceeds earmarked to repay debt outstanding under its term loan facility. It has not set a final price for the offer.

Rohr said the company’s share price were likely down on both the lackluster result and the plans to raise capital through an offering, which he estimated to be worth about $900 million.


The net loss amounted to $1.62 billion, or $11.36 a share, compared with a profit of $185.4 million, or $1.30, a year earlier.

Excluding the impairment charge and other items, earnings fell to a stronger-than-expected $89 million, or 62 cents a share, compared with $213 million, or $1.49, a year earlier.

Cliffs, which supplies iron ore from its mines in Canada, the United States and Australia to steelmakers in North America and Asia Pacific, said it expected 2013 sales to be in line with its 2012 sales. It expects prices will remain volatile.

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