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Cliffs (CLF) Announces Public Offering Worth $300 Million

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Cliffs Natural Resources Inc. (CLF - Free Report) has declared the commencement of its underwritten public offering of common shares worth $300 million.

Should the underwriters exercise their option of purchasing additional common shares in full, Cliffs will raise up to a total of $345 million from the offering. Cliffs intends to utilize the proceeds for corporate requirements, including deleveraging its balance sheet. The company particularly intends to repay the outstanding senior notes due Jan 2018.

BofA Merrill Lynch, Credit Suisse, Goldman, Sachs & Co. and Deutsche Bank Securities are jointly acting as brokers for Cliffs’ offering. A statement regarding the offering has been filed with the Securities and Exchange Commission (“SEC”) but is yet to come into effect.

Recently, Cliffs declared its decision to resume its United Taconite mining facility (“UTAC”) in Minnesota in August, two months ahead of schedule. The early restart was driven by an agreement with U.S. Steel Canada to provide the majority of their iron ore pellet requirements during the third and fourth quarters of 2016. The company also intends to increase its production of value-added iron products in the region by developing the Nashwauk, MN mine. Essar Steel Minnesota’s lease for the mine was recently terminated by the State of Minnesota.

Cliffs’ adjusted earnings of 6 cents per share and sales of $496.2 million for the second quarter of 2016 topped the respective Zacks Consensus Estimate. The company raised its 2016 sales volume guidance for its U.S. Iron Ore division from 17.5 million long tons to 18 million long tons. The production volume guidance for 2016 has also been raised by 500,000 long tons to 16.5 million long tons.

Cliffs remains focused on reducing debt. The company’s total debt fell around 4% year over year to $2.7 billion at the end of 2015 and further reduced to $2.5 billion at the end of the last reported quarter. In the second quarter of 2016, the company paid off the remaining balance of the outstanding equipment loans of $23 million. These measures will also help reduce Cliffs’ interest expenses. Management has lowered its interest payment guidance from $220 million to $200 million for 2016.

Cliffs currently holds a Zacks Rank #2 (Buy).

Other well-placed companies in the mining space include Coeur Mining, Inc. (CDE - Free Report) , Fortescue Metals Group Limited (FSUGY - Free Report) and Amerigo Resources Ltd. (ARREF - Free Report) . While Coeur Mining sports a Zacks Rank #1 (Strong Buy), Fortescue Metals and Amerigo Resources hold a Zacks Rank #2.

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