Mining company, Cliffs Natural Resources Inc. (CLF) restarted its operations at a West Virginia mine that was closed in May. The mine was shut down after elevated levels of carbon monoxide were detected. The operations resumed at the beginning of October.
The mine produces metallurgical coal used for making coke for iron and steel production. It produced 1.1 million tons and employed about 375 miners in the fiscal year 2010.
Cliffs faced another setback when its Oak Grove mine in Alabama was damaged in a tornado.
Last month, Cliffs also announced plans to close and sell a biomass plant in Michigan that had failed to live up to expectations. The company will take a $30 million pre-tax charge, primarily non-cash, in the third quarter of 2011.
The plant in Marquette, Michigan, was built to produce high-energy, low-emission biofuel cubes from sustainably collected wood and agricultural feed stocks. Cliffs bought renewaFUEL in 2007. According to Cliffs, the plant has not performed as per capacity, either by design or by production level that justifies continued operation.
The company stated that it will try to reassign the 30 full-time employees, who were working at the plant.
The company has decided to focus on its core business of producing raw material for steel manufactures.
Cliffs expects demand for its products to remain steady through the remainder of 2011 driven by continued growth in Chinese steel production and steady blast furnace utilization rates in Europe and North America. With a growing production profile, Cliffs is well positioned to generate significant cash flows through 2011 and beyond.
Cliffs increased its SG&A expenses expectation as a result of additional expenses incurred from the Consolidated Thompson acquisition. SG&A expenses are anticipated to be around $240 million, up from its previous expectation of $200 million.
For 2011, Cliffs expects to generate $2.6 million in cash from operations. Cliffs maintained its 2011 capital expenditure budget of approximately $1 billion, comprising approximately $300 million in sustaining capital and $700 million in growth and expansion capital.
Cliffs faces stiff competition from CONSOL Energy Inc. (CNX) and Peabody Energy Corp. (BTU).
We maintain our Neutral recommendation on Cliff with a short-term Zacks #3 Rank (Hold) on the stock.
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