Cliffs Settles Dispute with MT - Analyst Blog
11 Aprile 2011 - 11:15AM
Zacks
North America’s largest iron-ore
producer,Cliffs Natural Resources Inc. (CLF),
reached an agreement with steel giant
ArcelorMittal (MT) to settle disputes over price
reopener entitlements for 2009 and 2010 and pellet. Cliffs will get
a payment of around $250 million to $270 million after reaching an
agreement with ArcelorMittal.
In addition, as part of the
settlement, Cliffs and ArcelorMittal have agreed to replace the
previous pricing mechanism with a world market-based pricing
mechanism beginning in 2011 and through the remainder of the
contract for one of the iron ore supply agreements that Cliffs has
with ArcelorMittal. As a result of the new pricing feature, going
forward, the parties also agreed to forgo future price
reopeners.
Earlier in January 2011, Cliffs
agreed to buy Canada’s Consolidated Thompson Iron Mines Ltd. for
about C$4.9 billion ($4.95 billion) or C$17.25 per share, to expand
iron ore sales to Asia.
After the acquisition, Cliffs will
manage and operate Consolidated Thompson’s the Bloom Lake open-pit
iron ore mine and two adjacent properties in Quebec. This will
result in cost savings of around $75 million in terms of
transportation and port costs.
Cliffs is the largest producer of
iron ore pellets in North America with a 45% share, besides being a
major supplier of metallurgical coal in North America with a 30%
share. The company operates six iron ore mines in Michigan,
Minnesota and Eastern Canada as well as three coking coal mines in
West Virginia and Alabama.
The three reportable segments of
Cliffs are North American Iron Ore, North American Coal and
Asia-Pacific Iron Ore. Cliffs competes with the likes of
CONSOL Energy Inc. (CNX), Massey Energy
Co. (MEE) and Peabody Energy Corp.
(BTU).
Currently, Cliffs has a Zacks #2
Rank (Buy) for the short term and a Neutral recommendation for the
long term.
PEABODY ENERGY (BTU): Free Stock Analysis Report
CLIFFS NATURAL (CLF): Free Stock Analysis Report
CONSOL ENERGY (CNX): Free Stock Analysis Report
MASSEY EGY CPY (MEE): Free Stock Analysis Report
ARCELOR MITTAL (MT): Free Stock Analysis Report
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