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Cleveland-Cliffs

About Cleveland-Cliffs

It is not iron or something else but iron ore alone that fuels Cliffs Natural Resources' revenue growth. The company produces iron ore pellets, a key component of steelmaking, and owns or holds stakes in six iron ore properties that represent almost half of North America's iron ore production. Cliffs' operations, including Northshore Mining and Empire – more... Iron, produce more than 38 million tons of iron ore pellets annually. The company sells its ore primarily in North America but also in Europe and Asia. It also has a growing number of iron ore interests in the Asia/Pacific region and in Latin America.

Sales and Marketing

In 2011 ArcelorMittal USA, Essar Steel Algoma, and Severstal North America accounted for 24% of Cliff's total revenues. Although the bulk of sales are made in North America (54%), sales in Asia -- particularly in China and Japan -- have grown to 31% and 8%, respectively, of the company's overall revenues. 

Financial Analysis

Cliff's revenues increased by 45% in 2011 due to the 44% increase in US Iron Ore revenues thanks to improvements in sales prices and volumes, as well as the ArcelorMittal USA price re-opener settlement, and a 147% increase in Eastern Canadian Iron Ore revenues due to a significant increase in sales volume as a result of the acquisition of Canada-based Consolidated Thompson.

Net income grew by 78% in 2011 thanks to higher revenues, an increase in operating income, and a growth in income from continuing operations ($1.83 billion in 2011 against $1.01 billion in 2010). The acquisition of Consolidated Thompson resulted in $431.0 million of additional costs in 2011.

Strategy

Cliffs' strategy is to achieve scale and presence in the mining industry through acquisitions and organic growth, and to concentrate its focus on the world's largest and fastest growing steel markets.

In 2012, Australian subsidiary Australia Coal sold its 45% stake in the Sonoma joint venture coal mine in Queensland to QCoal Sonoma for A$141 million ($142.60 million). The company plans to use the proceeds for projects where Cliffs has operational control.

Cliffs has made several acquisitions to expand its business. In 2011, Cliffs acquired global iron ore producer Consolidated Thompson Iron Mines Limited for about $5 billion. Cliffs wants the raw materials from Consolidated Thompson's operations to bolster its exports to China and other global customers, with the goal of diversifying its customer base beyond North America.

It raised its minority stake in iron ore producer Wabush Mines to full ownership in 2010, buying out partners U.S. Steel Canada and Dofasco. Around that same time, Cliffs bought Freewest Resources for about $225 million. Also that year, Cliffs acquired 51% of a joint venture with Mariana Resources to explore iron oxide-copper-gold deposits in north-central Chile.

Through a subsidiary, Cliffs acquired Spider Resources in 2010 to gain control of the "Big Daddy" chromite project in Northern Ontario. The company also acquired the metallurgical and thermal coal-mining operations of West Virginia-based INR Energy LLC for $757 million.

The Freewest, Wabush, Mariana, Spider, and INR acquisitions allowed Cliffs to increase production capacity and add additional reserves to its iron ore and coal businesses, gain additional access to the seaborne iron ore markets serving Europe and Asia, and diversify its market base. – less

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