Cliffs Natural Resources announced on November 19 that it is pursuing exit options for its eastern Canadian iron ore operations, which may result in the closure of its Bloom Lake mine.
The announcement came on the heels of a late-October Cliffs announcement of a $4.5 billion write-down of the Bloom Lake property (E&MJ, November 19, 2014, p. 5).
At the time of the write-down announcement, Cliffs Chairman, President, and CEO Lourenco Goncalves said Bloom Lake lacks sufficient volume to be profitable at its current 7-million-mt/y operating rate. Negotiations were in progress with potential steel company partners to invest in an approximate doubling of production, with a goal of having such an agreement in place by year-end 2014. However, if such an agreement could not achieved by year-end, Bloom Lake would be shut down, Goncalves said.
On November 19, Goncalves said that despite continued interest in Bloom Lake on the part of prospective equity partners, an acceptable agreement was not achievable within a time frame acceptable to Cliffs: “With expansion no longer viable, we have shifted our focus to executing an exit option for eastern Canadian operations that minimizes the cash outflows and associated liabilities.”
Investment required for the proposed expansion had been estimated at $1.2 billion. In the event of a closure, Cliffs estimates closure costs will be in the range of $650 million to $700 million over the next five years.
Plummeting iron ore prices provided background for the November 19 Cliffs announcement. The spot price for iron ore on that day was down for the fifth day in a row and approaching $70/mt, its lowest level in five years.