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Business North - The Daily Briefing - Business Newspaper Online
Cliffs' to idle two Silver Bay production lines, affecting 125 workers
Cliffs Natural Resources will idle two of its four production lines at Northshore Mining in Silver Bay effective Jan. 5, reacting to a slowdown in taconite demand and lower pellet prices.
Cliffs also will temporarily idle production at its Empire Mine in Michigan beginning in the second quarter of 2013 in the form of an extended summer shutdown.
Approximately 125 employees at Northshore and 500 employees at Empire mine will be affected.
Full-year 2013 expected sales volumes for U.S. iron ore remain unchanged at 19 - 20 million tons as the company previously announced. Cliffs said the production decreases are driven by increased iron ore pricing volatility and reduced North American steelmaking utilization rates.
"Unfortunately, the U.S. iron ore production curtailments will affect many of our employees. However, at this time, we believe it is prudent and necessary to match our production volumes with market demand. We will remain operationally flexible to ramp up production volumes throughout the year if the demand increases," Laurie Brlas, president of global operations, said in the Monday announcement.
Cliffs has experienced substantial revenue and profit declines this year. Its third quarter consolidated revenues decreased 26 percent to $1.5 billion versus $2.1 billion in the same quarter last year. Net income was $85.1 million, down 86 percent from $601.2 million during the year-ago quarter. Year-to-date, net income was $719 million, down 50 percent from $1.4 billion a year ago.
In part, the lower revenue is linked to lower iron ore prices. They peaked at $187 per dry metric ton in February 2011 but had dropped to about $114 last month.
The slowdown also will affect Cliffs' Bloom Lake Mine in eastern Canada. Cliffs is suspending some components of its Phase II expansion, including the completion of the concentrator and load out facility. As a result, construction related to these activities will cease and third-party contractors will be demobilized.
Cliffs will continue its environmental projects related to completing Bloom Lake's water and tailings management system and ore storage facility. Depending on market conditions, Cliffs expects to complete Phase II construction in early 2014.
Cliffs continues to develop its 2013 business plan and expects to reveal full-year company-wide assumptions and expectations as part of its fourth-quarter 2012 results. The company's preliminary 2013 capital expenditures are estimated to be in a range of approximately $700 - $800 million.
"Disciplined capital allocation is core to our operating strategy and reducing higher cost production will enhance our financial flexibility in both the short and longer term," said Joseph A. Carrabba, Cliffs' chairman, president and chief executive officer. "Despite today's announcement, we are still committed to our investments in Canada and believe Bloom Lake will deliver significant long-term value over time."
During the company's third quartr conference call, executives stressed the natural resources business is cyclical and will rebound, expressing confidence in a future economic development rebound in China.Previous Daily Briefing Articles:
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