TORONTO (miningweekly.com) – The NYSE-listed stock of US iron-ore miner Cliffs Natural Resources rallied on Thursday after the company's results for the three months to September 30 beat analyst forecasts, as the company's turnaround strategy gained traction.
The company narrowed its net loss attributable to common shareholders to $15-million, or $0.10 a diluted share, compared with an attributable net loss of $5.9-billion, or $38.49 a diluted share in the third quarter of 2014. This was also better than analyst expectations of a loss of $0.23 a share for the quarter.
Third-quarter consolidated revenues of $593-million were, however, 39% lower year-on-year.
"Our performance this past quarter illustrates how far we have come in our turnaround story. We have been able to deliver significant cost reductions in all areas of the business through disciplined execution of the strategy instituted last year.
“We expect the domestic steel market to improve in 2016 as trade actions reduce the pressure of imports and firm up steel pricing. Our solid cost position, coupled with stronger demand from the mills, should drive better profitability for Cliffs,” president and CEO Lourenco Goncalves stated.
For the third quarter, the adjusted earnings before interest, taxes, depreciation and amortisation totalled $60-million, which included idle expenses of $33-million related to production curtailments.
Selling, general and administrative (SG&A) costs fell 55% year-on-year to $22-million. Cliffs noted that, despite the decrease mainly being attributable to the previous year's proxy contest, as well as change in control and severance-related expenses that were not repeated this year, overall SG&A expenses were further impacted by lower staff costs and reduced external services spending.
US iron-ore pellet sales volumes were 18% lower year-on-year at 5.6-million tons, driven by lower US steel mill demand. Cash production costs for US ores were $48.99/t, down 16% from $58.38/t in the comparable quarter last year. The decrease was driven by salaried workforce reductions and overall lower employment costs; reduced maintenance and repair costs, based on cost reduction and predictive maintenance initiatives; and lower energy rates.
In its Asia Pacific iron-ore sales segment, volumes decreased 5% to 2.9-million tons, mainly owing to the timing of shipments related to port maintenance activities. Cash production costs in the region were $26.87/t, down 49% from $52.58/t.
Total debt at the end of the third quarter was $2.7-billion, compared with $3.1-billion at the end of the September 2014 quarter. Cash and cash equivalents totalled $270-million, compared with $244-million the year before.
Cliffs reduced its full-year sales volume guidance for its US business segment by 1.5-million tons, to 17.5-million tons of iron-ore pellets, mainly owing to the early termination of the Essar Algoma pellet sale and purchase agreement in October. The company maintained its forecast for cash production cost of $55/t to $60/t and the cash cost of goods sold of $60/t to $65/t. This included expected idle costs.
Cliffs, however, lifted its full-year Asia Pacific sales and production volume expectations to about 11.5-million tons, from its previous guidance of 11-million tons. The product mix was expected to contain 50% lump and 50% fines. Asia Pacific cash production costs were expected to decrease by 49% to $27/t.
The miner also lowered its full-year capital expenditures budget to $85-million to $95-million, from its previous guidance of $100-million to $125-million, which included outflows related to its former North American coal segment and assumed no further asset divestitures.
Cliffs’ stock on Thursday rallied as much as 13% in intraday trading, before settling at $2.67 apiece. On Friday, the stock was up 1.12% at $2.70 each.