On Mar 25, we issued an updated research report on mining
Cliffs Natural Resources
). While the company should gain from its cost management
initiatives, it remains exposed to volatility in commodity
pricing and weakness in its North American coal business.
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Cliffs' adjusted earnings for the fourth quarter of 2013,
reported on Feb 13, topped the Zacks Consensus Estimate. The
company turned to a profit in the quarter, helped by its cost
reduction measures. Sales fell modestly but beat expectations.
Cliffs, a Zacks Rank #4 (Sell) stock, remains optimistic
regarding prospects for cash generation and the opportunities
that will fund organic growth projects and return cash to
shareholders. It also has a significant presence in the
Asia-Pacific region, where demand is still robust, lending
support to shipments.
Moreover, Cliffs has taken up initiatives to drive organic growth
including developing assets within its existing project pipeline.
The company is also boosting its mining and transportation
capacity globally. It sees steady demand for its products on the
back of a mending U.S. economy.
Cliffs is also expected to gain from its cost-saving initiatives.
Management is focusing on improving cost structure amid a weak
pricing environment, reflected by reductions in SG&A and
exploration costs targets for 2014 and cost cuts in the North
American Coal division. The company expects a 50% year over year
reduction in its capital expenditures in 2014.
However, Cliffs' North American Coal segment remains under
pressure due to weak pricing for coal products. Weak coal pricing
led to a 19% slide in the division's revenues (per ton basis) in
the fourth quarter. Pricing of commodities is expected to remain
volatile in the near future.
Moreover, the company's decision to curtail Phase II expansion at
its Bloom Lake project and idle production at its Wabush Scully
Mine in Newfoundland and Labrador is expected to affect
production in the Eastern Canadian Iron Ore division in 2014.
Other Stocks to Consider
Other companies in the mining industry with a favorable Zacks
General Moly, Inc.
African Minerals Limited
BHP Billiton Limited
). While General Moly retains a Zacks Rank #1 (Strong Buy), both
African Minerals and BHP Billiton carry a Zacks Rank #2