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Cliffs Natural Resources Scales New 52-Week High at $5.98
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Cliffs Natural Resources Inc. (CLF - Free Report) scaled a new 52-week high of $5.98 last Friday before retracing slightly to close the day at $5.74.
What’s Driving Cliffs?
The mining company swung to a profit on a reported basis in first-quarter 2016. Adjusted loss of 7 cents a share was much narrower than the Zacks Consensus Estimate of a loss of 29 cents. Revenues fell year over year but surpassed the Zacks Consensus Estimate.
One of the lowest cost producers of iron ore, Cliffs is striving to boost its mining and transportation capacity globally. The company should also gain from its pellet supply contracts with its U.S. iron ore customers, which will help it to mitigate the impact of fluctuation in seaborne iron ore pricing.
Recently, Cliffs entered into a long-term supply contract with ArcelorMittal (MT - Free Report) , which allows it to provide up to 10 million long tons of iron ore pellets to ArcelorMittal USA. Cliffs will be providing iron ore pellets for 10 years to ArcelorMittal’s Indiana Harbor West and Cleveland Works steelmaking facilities, while continuing with its current supply to the Indiana Harbor East facility. The contract ensures Cliffs remains ArcelorMittal USA’s sole outside iron ore pellet supplier through 2026.
Cliffs also entered into multiple contracts with Minnesota Power, a utility division of ALLETE Inc. (ALE - Free Report) , for long-term purchase of power. The contract will help Cliffs reduce costs and improve competitiveness. Focusing on cost management, the company reduced its cost of production by a significant 26% in first-quarter 2016. Further, it aims to lower its selling, general and administrative expenses in 2016.
Additionally, Cliffs has announced that it will resume its operations at the United Taconite facility in Minnesota in August, two months earlier than the scheduled start in October. The early start has been prompted by a contract signed with U.S. Steel Canada to meet a large part of the iron ore pellet requirements in the third and fourth quarters of 2016. The sales volume of the new iron ore pellet order by U.S. Steel Canada will be much higher than Cliffs’ prior expectation.
This has led management to raise its sales and production volume outlook for 2016. Sales volume for 2016 is expected to be 500,000 higher than the previous guidance, at 18 million long tons. Moreover, production volume for 2016 is anticipated to be 16.5 million long tons as compared to 16 million long tons projected earlier.
Cliffs has also stressed on deleveraging its balance sheet. The company reduced its debt from $2.7 billion at the end of 2015 to $2.5 billion at the end of the first quarter. Its commitment to lowering debt will also reduce interest payment. Further, management lowered the interest payment expectation to $220 million from the previous expectation of $240 million for 2016. The guidance was trimmed based on the debt-reduction initiatives undertaken by the company in the first quarter.
Cliffs remains committed to providing maximum return to shareholders in the form of dividends as well as through share buybacks, while maintaining its organic growth pipeline. The company has implemented a strategic capital allocation plan for optimum utilization of cash.
Cliffs currently sports a Zacks Rank #1 (Strong Buy).
Another well-ranked company in the mining space is Vale S.A. (VALE - Free Report) , with a Zacks Rank #1.
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Cliffs Natural Resources Scales New 52-Week High at $5.98
Cliffs Natural Resources Inc. (CLF - Free Report) scaled a new 52-week high of $5.98 last Friday before retracing slightly to close the day at $5.74.
What’s Driving Cliffs?
The mining company swung to a profit on a reported basis in first-quarter 2016. Adjusted loss of 7 cents a share was much narrower than the Zacks Consensus Estimate of a loss of 29 cents. Revenues fell year over year but surpassed the Zacks Consensus Estimate.
One of the lowest cost producers of iron ore, Cliffs is striving to boost its mining and transportation capacity globally. The company should also gain from its pellet supply contracts with its U.S. iron ore customers, which will help it to mitigate the impact of fluctuation in seaborne iron ore pricing.
Recently, Cliffs entered into a long-term supply contract with ArcelorMittal (MT - Free Report) , which allows it to provide up to 10 million long tons of iron ore pellets to ArcelorMittal USA. Cliffs will be providing iron ore pellets for 10 years to ArcelorMittal’s Indiana Harbor West and Cleveland Works steelmaking facilities, while continuing with its current supply to the Indiana Harbor East facility. The contract ensures Cliffs remains ArcelorMittal USA’s sole outside iron ore pellet supplier through 2026.
Cliffs also entered into multiple contracts with Minnesota Power, a utility division of ALLETE Inc. (ALE - Free Report) , for long-term purchase of power. The contract will help Cliffs reduce costs and improve competitiveness. Focusing on cost management, the company reduced its cost of production by a significant 26% in first-quarter 2016. Further, it aims to lower its selling, general and administrative expenses in 2016.
Additionally, Cliffs has announced that it will resume its operations at the United Taconite facility in Minnesota in August, two months earlier than the scheduled start in October. The early start has been prompted by a contract signed with U.S. Steel Canada to meet a large part of the iron ore pellet requirements in the third and fourth quarters of 2016. The sales volume of the new iron ore pellet order by U.S. Steel Canada will be much higher than Cliffs’ prior expectation.
This has led management to raise its sales and production volume outlook for 2016. Sales volume for 2016 is expected to be 500,000 higher than the previous guidance, at 18 million long tons. Moreover, production volume for 2016 is anticipated to be 16.5 million long tons as compared to 16 million long tons projected earlier.
Cliffs has also stressed on deleveraging its balance sheet. The company reduced its debt from $2.7 billion at the end of 2015 to $2.5 billion at the end of the first quarter. Its commitment to lowering debt will also reduce interest payment. Further, management lowered the interest payment expectation to $220 million from the previous expectation of $240 million for 2016. The guidance was trimmed based on the debt-reduction initiatives undertaken by the company in the first quarter.
Cliffs remains committed to providing maximum return to shareholders in the form of dividends as well as through share buybacks, while maintaining its organic growth pipeline. The company has implemented a strategic capital allocation plan for optimum utilization of cash.
CLIFFS NATURAL Price and Consensus
CLIFFS NATURAL Price and Consensus | CLIFFS NATURAL Quote
Cliffs currently sports a Zacks Rank #1 (Strong Buy).
Another well-ranked company in the mining space is Vale S.A. (VALE - Free Report) , with a Zacks Rank #1.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>