Mining and natural resources company Cliffs Natural Resources Inc. (CLF - Free Report) has announced its decision to temporarily idle its Wabush Pointe Noire pellet plant in Sept-Iles, Canada, by the end of second-quarter 2013. The decision is due to high production costs and lower pellet premium pricing, which are expected to persist in certain markets throughout the year.
Product mix at Cliffs’ Eastern Canadian Iron Ore business segment contains iron ore pellets and concentrate. Cliffs plans to temporarily shutdown its iron ore pellet plant at Pointe Noire and shift to producing an iron ore concentrate-only product from its Wabush Scully mine in the Province of Newfoundland and Labrador by the end of second-quarter 2013.
The decision to temporarily idle the plant will impact roughly 165 families who were involved in the operations at the plant. However, Cliffs will provide these employees with other employment opportunities.
Cliffs forecasts sales and production volume of 9 million-10 million tons for 2013 at its Eastern Canada business segment. This includes roughly 3 million tons of both iron ore pellets and concentrate products from its Wabush operation and the remaining expected sales volume from Bloom Lake mine.
Cash cost per ton at Eastern Canadian Iron Ore is anticipated to be $95-$100, whereas cash cost per ton at Wabush is expected to be $115-$120 for full-year 2013.
Cliffs, one of the prominent iron-mining companies along with Vale S.A. (VALE - Free Report) , Alderon Iron Ore Corp. and African Minerals Limited , released mixed fourth-quarter 2012 results last month.
Cliffs’ adjusted earnings for the fourth quarter missed the Zacks Consensus Estimate. Cliffs swung to a loss on a reported basis on sizeable charges. Revenues declined year over year on lower pricing but beat the Zacks Consensus Estimate.
Cliffs expects the pricing environment to remain volatile in 2013. Cliffs remains hamstrung by lower iron ore pricing, partly due to the slowdown in Chinese demand and oversupply in the industry. The prices for commodities are expected to remain under pressure due to the uncertain economic environment. Cliffs also contends with higher labor and mining costs.
Cliffs currently retains a Zacks Rank #3 (Hold).