According to Reuters, Cliffs Natural Resources Inc. (CLF) and Anglo American Plc. are set to divest their Amapa iron ore operation in Brazil to a single entity. Ohio-based Cliffs stated that the value of Amapa will be adjusted to reflect the fair value of its investment. The companies did not disclose the value of the deal.
Cliffs holds a 30% stake in the Amapa mine while the rest is owned by Anglo American. Cliffs expects to incur a charge of around $380 million to $420 million related to the divestiture for the year ended December 31, 2012.
Cliffs, in November 2012, announced its decision to halt production at two of its U.S. iron ore operations, Northshore Mining in Minnesota and Empire Mine in Michigan. The company also announced that it will delay portions of its Bloom Lake Mine Phase II expansion in Quebec. The company took these steps to adjust its 2013 operating plans for its North American iron ore businesses to align with expected sales volumes. Cliffs released its third-quarter 2012 results in October 2012. The company posted earnings of 59 cents per share in the quarter, down 85.8% from $4.15 reported in the year-ago quarter. Declining iron ore prices and higher costs led to the slump in earnings. Earnings from continuing operation came in at 61 cents a share in the quarter. By that measure, it largely missed the Zacks Consensus Estimate of $1.05.
Sales for the quarter came in at $1,544.9 million, down 26% from $2,089.1 million in the prior-year quarter, missing the Zacks Consensus Estimate of $1,742 million. The decline in revenues resulted from a 36% year-over-year drop in seaborne iron ore pricing and higher labor, mining and maintenance costs.
Cliffs, which competes with CONSOL Energy Inc. (CNX) and Alpha Natural Resources, Inc. (ANR), currently retains a short-term Zacks #5 Rank (Strong Sell). Currently, we have a long-term (more than 6 months) Underperform recommendation on the stock.