Cliffs Natural Resources Inc.
) announced that it will incur a $1 billion charge in the fourth
quarter of 2012 related to the acquisition of Consolidated
Thompson Iron Mines Ltd. It will be recorded as a goodwill
impairment charge and as a non-cash expense for the year ended
December 31, 2012.
Cliffs expects to incur the charge due to the project's lower
long-term volumes and higher capital and operating costs. Delay
in the Phase II expansion of the Bloom Lake mine also led to the
impairment. Cliffs also expects to incur $100 million to $150
million in other charges related to its Eastern Canadian iron ore
Cliffs also stated that it will record $542 million in
valuation allowances in the fourth quarter related to two
deferred tax assets. The allowances are based on lower long-term
pricing assumptions and the related effects on profitability and
expected future tax payments.
Few days ago, it was announced that Cliffs along with
Anglo American Plc.
) are set to divest their Amapa iron ore operation in Brazil to a
single entity. Ohio-based Cliffs stated that the value of Amapa
will be adjusted to reflect the fair value of its investment.
Cliffs holds a 30% stake in the Amapa mine while the rest is
owned by Anglo American. Cliffs expects to incur a non-cash
pre-tax impairment charge of around $365 million related to the
divestiture in the fourth quarter.
Similar to Cliffs, another steel maker
) is set to record a goodwill write down of $4.3 billion for its
European businesses in the fourth quarter of 2012. The charge is
in accordance with the results of its goodwill impairment test as
per the IFRS accounting standards. The write down will be in the
form of a non-cash impairment charge.
Cliffs released its third-quarter 2012 results in October
2012. The company posted earnings of 59 cents per share in the
quarter, down 85.8% from $4.15 reported in the year-ago quarter.
Declining iron ore prices and higher costs led to the slump in
earnings. Earnings from continuing operation came in at 61 cents
a share in the quarter. By that measure, it largely missed the
Zacks Consensus Estimate of $1.05.
Sales for the quarter came in at $1,544.9 million, down 26%
from $2,089.1 million in the prior-year quarter, missing the
Zacks Consensus Estimate of $1,742 million. The decline in
revenues resulted from a 36% year-over-year drop in seaborne iron
ore pricing and higher labor, mining and maintenance costs.
Cliffs is slated to release its fourth quarter 2012 results on
Feb 13. Currently, it retains a Zacks Rank #3 (Hold). Another
company in the iron mining industry,
Kumba Iron Ore Ltd.
), carries a Zacks Rank #1 (Strong Buy).
ANGLO AMER -PLC (AAUKY): Free Stock Analysis
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