Cliffs the newest victim of iron ore price slump: to take $6bn charge

Cliffs the newest victim of iron ore price slump: to take $6bn charge

Cliffs is in talks with steel makers about selling a stake in its Bloom Lake mine in Canada, among other assets.

Cliffs Natural Resources Inc. (NYSE:CLF), the largest iron ore producer in the U.S., said Friday it expects to take a $6-billion charge to write down the value of some assets in the third quarter due to weak prices for its two key commodities: iron ore and coal.

The Cleveland-based mining and natural resources company, cut to junk by Standard & Poor’s last week, said the impairment is tied to expected lower long-term pricing and the difficult market for seaborne iron ore and metallurgical coal compared with its more stable U.S. iron ore business.

After attempting a comeback since ending September at a more than 5-year low of $77.50 a tonne, the steel-making commodity sank again yesterday amid Australian and Brazilian miners announcing they will continue to rise output even as top consumer China imports less.

So far this year iron-ore prices have fallen by more than 40%. Prices for metallurgical coal, another steelmaking ingredient, have halved over the past three years as a result of rising output from Australia, Indonesia, South Africa, Colombia and the U.S. and sluggish demand from both industrialized and emerging markets.

Cliffs is looking to sell iron-ore mines in Eastern Canada and Western Australia.

In July, activist investor Casablanca Capital LP pushed through the election of six new board members and installed Lourenco Goncalves as chairman and chief executive officer.

The miner said today its $1.25 billion credit facility was undrawn as of Sept. 30 and that it ended September with about $250 million in cash on hand. Cliffs reports third-quarter earnings on Oct. 27.

It also announced, in a separate note, that Janice K. Henry, who has served on the company’s board since 2009 and chaired the audit committee, has resigned.

Cliffs the newest victim of iron ore price slump: to take $6bn charge