Mining company Cliffs Natural Resources Inc. (CLF) has announced an agreement to sell its 45% stake in the Sonoma coal mine joint venture in Queensland, Australia, to QCoal Sonoma Pty. Ltd. (QCoal) for approximately AUD$141 million in cash. Cliffs expects to close the deal in the fourth quarter of 2012.
Apart from QCoal, JS Sonoma Pty. Ltd, CSC Sonoma Pty. Ltd. and Watami (Qld) Pty Ltd. also have stakes in the joint venture. The existing joint venture provided all the stakeholders with the rights to acquire their share of Cliffs’ interest on a pro rata basis depending on the conditions of sale.
Cliffs, in April 2012, released its first-quarter 2012 earnings. The company witnessed lower profit in the quarter on account of higher costs. However, sales improved 7% year over year to $1,264.7 million driven by higher volume across the board.
Cliff is switching its focus from acquisition-led growth to organic growth including developing assets within its existing project pipeline. The company sees steady end-markets for its customers on the back of a recovering U.S. economy.
Cliffs is the largest producer of iron ore pellets in North America. It remains optimistic regarding the prospects for cash generation and the opportunities that will fund organic growth projects and return cash to shareholders. The company also has a significant presence in the Asia-Pacific region, where demand is still robust, lending support to shipments.
However, the prices for commodities have been under pressure due to the uncertain economic environment. International demand and economic conditions strongly affect the prices of iron ore and coal. The current uncertain macroeconomic environment, including the European sovereign debt crisis, may impact the company’s operations and its results.
Cliffs, which competes with CONSOL Energy Inc. (CNX) and Alpha Natural Resources, Inc. (ANR), currently retains a Zacks #3 Rank, reflecting a short-term (1 to 3 months) Hold rating. Currently, we have a long-term (more than 6 months) Neutral recommendation on the stock.
ALPHA NATRL RES (ANR): Free Stock Analysis Report
CLIFFS NATURAL (CLF): Free Stock Analysis Report
CONSOL ENERGY (CNX): Free Stock Analysis Report
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