Despite Q1 net loss, iron-ore rebound boosts Cliffs sales

VANCOUVER (miningweekly.com) – US iron-ore producer Cliffs Natural Resources has reported surging sales for the three months ended March, as improved demand pushed prices higher after years of declines.

First quarter sales jumped 51% to $462-million also because of increased sales volumes and seaborne iron-ore prices. Revenue results beat analysts' average forecast by $50-million.

Cleveland, Ohio-based Cliffs, which operates the Hibbing Taconite, United Taconite and Northshore Mining  operations, in Minnesota, reported a $30-million loss for the first quarter, owing to restructuring that cut debt by $550-million during the period.

The loss compares to a year-ago, first quarter net income of $117-million. Those gains included a significant $179-million benefit from the extinguishment of various debts. The company now owes $1.6-billion, down from $2.5-billion a year earlier.

Excluding special items and taxes, Cliffs' adjusted first quarter profits soared 156% to $92-million.

"During the first quarter, we put our finishing touches on what has been a remarkable operational, commercial and financial transformation of this company. Over the last two and half years, Cliffs has transformed itself into a lean and focused company, with a strong balance sheet and a lot less to pay in interest expense.

“This is particularly evident in our strong first-quarter results, which exceeded our expectations in revenues, Ebitda [earnings before interest, taxes, depreciation and amortisation] and earnings per share,” stated president and CEO Lourenco Goncalves.

Following a hotly contested proxy fight in 2014, which Goncalves subsequently won, Cliffs has transformed its business by selling off its coal assets, pulled out of Canada and refocused energies on iron-ore mines and processing plants in the US and Asia. It built a new $65-million iron-ore pelletising plant in Forbes, Minnesota, next to its United Taconite facility. The new plant will service long-time customer ArcelorMittal and replace product supplies disrupted when Cliffs shut its Empire mine, in Michigan, last year.

Based on the assumption that iron-ore and steel prices will average for the remainder of 2017 their respective April month-to-date averages, Cliffs expects to generate about $380-million of net income and $700-million of adjusted Ebitda for the full-year 2017.

Iron-ore started the quarter on a rising trend, reaching $95.05/t in February, the highest level since August 2014, supported by higher mill demand in China. Prices averaged $85.64 a dry metric ton, also the highest quarterly average since the third quarter of 2014, and 20.9% higher than in fourth quarter of 2016.

Cliffs’ MYSE-listed stock fell by as much as 13.5% early in the Thursday session, but regained much of its losses to change hands at $6.75 a share early in the afternoon.