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Cliffs Natural (CLF) Prices Offering of $500M Senior Notes

Cliffs Natural Resources Inc.CLF announced that it has priced an offering of $500 million aggregate principal amount of Senior Notes, due 2025. The notes will bear interest of 5.75% annually and will be issued at a price of 100.00% of their principal amount. They will be guaranteed on a senior unsecured basis by the company's material direct and indirect fully-owned domestic subsidiaries. The offering is expected to close on Feb 27.

Cliffs plans to utilize the net proceeds from the offering of the notes, along with part of the net proceeds from its recently announced common share offering, to redeem all of its outstanding 8.00% 1.5 lien senior secured notes and 7.75% second lien senior secured notes, due 2020.

Cliffs has outperformed the Zacks categorized Mining-Iron industry in the past three months. The company's shares have rallied around 60.6% over this period compared with roughly 55.3% gain recorded by the industry.

For 2017, Cliffs expects to generate net income of $510 million. The company projects its full-year selling, general and administrative (SG&A) expenses to be around $100 million, an $18 million decrease from 2016. Of this, $25 million is expected to be non-cash expenses.

The company's interest expense for 2017 is anticipated to be roughly $175 million compared with $201 million recorded in 2016. Cliffs expects 2017 capital expenditures to be $105 million, including $40 million associated with the conclusion of the Mustang Project at the United Taconite mine.

Cliff's remains focused on deleveraging its balance sheet and improving the cost structure. The company's net debt fell around 25% year over year to around $1.8 billion at the end of 2016. Cliffs is also committed to increase shareholder returns through dividends and share repurchases.

Moreover, Cliffs is boosting its mining capacity and is expected to benefit from its pellet supply contracts with its U.S. iron ore customers. Cliffs is also focusing on managing costs, reflected by a decline in overall cash costs in 2016.

Cliffs should also gain from its supply deals with other companies. The ArcelorMittal MT deal allows Cliffs to supply up to 10 million tons of pellets to ArcelorMittal USA. The company also entered into a contract with U.S. Steel Canada to supply pellets. The agreement exceeded the company's original sales expectations. Also, the company is anticipated to gain from an expected rise in steel demand in the U.S.

Cliffs currently carries a Zacks Rank #2 (Buy).

Cliffs Natural Resources Inc. Price and Consensus

Cliffs Natural Resources Inc. Price and Consensus | Cliffs Natural Resources Inc. Quote

Other Stocks to Consider

Other favorably placed companies in the mining space are Iamgold Corp. IAG and BHP Billiton Ltd. BHP , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Iamgold has an expected long-term growth rate of 3%.

BHP Billiton has an expected long-term growth rate of 5.6%.

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ArcelorMittal (MT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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