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What Investors Should Know about Cliffs in a Very Weak Market (Part 5 of 11) (Continued from Part 4) Bloom Lake mine
Bloom Lake (or BL) has been a very troubled part of Cliffs Natural Resources (CLF) since the company acquired it in the $4.9 billion Consolidated Thompson acquisition in 2011. You can read more about the Bloom Lake acquisition in the Market Realist article Why Cliffs’ Bloom Lake acquisition hurts its earnings and shares.
BL exceeded capital expenditure (or capex) and operating costs expectations. As a result, it became a drag on the already depressed earnings. On January 27, 2015, Cliffs announced the restructuring of BL.
This restructuring reflects the current restructuring and consolidation efforts in the metals and mining space. Recently, ArcelorMittal (MT) sold its Gallatin operations to Nucor Corporation (NUE), and AK Steel (AKS) acquired its Dearborn operations from Severstal.
Without ‘any’ recourse?
During Cliffs Natural Resources’ 3Q14 earnings call, the company’s chief executive officer said there’s “no risk of contamination to the parent company in the event that we need to do something specific about Canada. Everything would be within the parent company that holds the Bloom Lake assets.” This meant that Bloom Lake liabilities will not have any recourse to Cliffs.
Analysts took some respite in the fact that the estimated closure costs of $650–$700 million will not have any recourse to Cliffs. However, according to Reuters, on March 16, Canada’s Nova Scotia Bank sued Cliffs Natural Resources (CLF) for $52.6 million. Cliffs was a guarantor on the loan given to Bloom Lake operations in Quebec for equipment. According to the news report, filing for creditor protection constitutes a default under the agreement, so Cliffs need to immediately pay the required amount.
Cliffs’ stock slipped 7.5% after this news broke. You can follow this news on Reuters.
The $52.6 million is not a game changer for Cliffs, but it could put management credibility in doubt.
Cliffs, Nucor, and AK Steel form 9.7% of the SPDR S&P Metals and Mining ETF (XME).
Continue to Part 6 Browse this series on Market Realist:
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CLIFFS Natural Resources
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PRODUCTEUR |
CODE : CLF |
ISIN : US18683K1016 |
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ProfilIndicateurs de MarchéVALEUR : Projets & res.Communiqués de PresseRapport annuelRISQUE : Profile actifsContactez la cie |
CLIFFS Natural Res est une société de production minière de fer basée aux Etats-Unis D'Amerique. CLIFFS Natural Res est productrice de fer, de charbon au Bresil, au Canada et en Australie, et détient divers projets d'exploration au Canada. Ses principaux projets en production sont WABUSH MINE, EMPIRE AND TILDEN MINES, HIBBING TACONITE, NORTHSHORE MINE, UNITED TACONITE, OAK GROVE MINE, GREEN RIDGE MINE et PINNACLE MINE au Canada, AUSTRALIAN IRON ORE et SONOMA en Australie et AMAPA au Bresil et ses principaux projets en exploration sont MT JACKSON J1 en Australie et DIAGNOS, WAWA, FREEWEST, MC FAULD'S LAKE, MACFADYEN, WAWA CLAIMS et BIG DADDY au Canada. CLIFFS Natural Res est cotée aux Etats-Unis D'Amerique, en Allemagne et en France. Sa capitalisation boursière aujourd'hui est 5,3 milliards US$ (5,0 milliards €). La valeur de son action a atteint son plus haut niveau récent le 16 mai 2008 à 99,17 US$, et son plus bas niveau récent le 15 janvier 2016 à 1,20 US$. CLIFFS Natural Res possède 297 400 968 actions en circulation. |