Cliffs Natural Resources recorded an after-tax non-cash impairment charge attributable to its shareholders of approximately $5.7 billion during the third quarter of 2014. The total included $4.5 billion related to the company’s Bloom Lake and $28 million related to its Wabush iron ore mines in eastern Canada; $390 million related to its Asia Pacific Iron Ore business, whose primary asset is the Koolya-nobbing iron ore mine is Australia; and $539 million related to its North American coal business, which owns and operates six metallurgical coal mines in West Virginia and Alabama and one thermal coal mine in West Virginia. The remaining $254 million was attributable to impairments of the Cliffs Chromite Ring of Fire assets in northern Ontario.
In a conference call on October 28, Cliffs Chairman, President, and CEO Lourenco Goncalves emphasized that the Bloom Lake mine lacks sufficient volume to be profitable at its current 7-million-mt/y, phase I operating rate. Negotiations were under way with potential steel company partners to invest in a phase II approximate doubling of production, with a goal of having an agreement in place by year-end 2014. However, if such an agreement is not achieved by year-end, Bloom Lake will be shut down, Goncalves said.
The Wabush Scully mine was shut down at the end of the first quarter of 2014.
Goncalves emphasized that Cliffs’ core business—its United States Iron Ore mining and pelletizing operations in northern Michigan and Minnesota—demonstrated remarkable strength in the third quarter. Those operations on their own generated more EBITDA than the company as a whole on a consolidated basis, Goncalves said.
Cliffs reported consolidated third-quarter 2014 revenues of $1.3 billion—down $248 million, or 16%, from the prior year’s third quarter. The lower revenues were primarily driven by a 32% reduction in market pricing for iron ore and a 17% reduction in market pricing for metallurgical coal.
Due to the asset impairment charges, Cliffs recorded a net loss for the quarter attributable to its common shareholders of $5.9 billion. Excluding impairment charges and other items, Cliffs reported third-quarter adjusted net income of $33 million, or $0.21 per diluted share, compared to an adjusted net income of $144 million, or $0.88 per diluted share, in the prior-year quarter.