Cliffs increases revenue, cuts coal guidance

IT was iron ore, not coal, which made for a strong second quarter result for Cliffs Natural Resources and, despite increased sales volumes in its coal division and a steady demand outlook, the producer has cut its whole-year coal outlook.
Cliffs increases revenue, cuts coal guidance Cliffs increases revenue, cuts coal guidance Cliffs increases revenue, cuts coal guidance Cliffs increases revenue, cuts coal guidance Cliffs increases revenue, cuts coal guidance

Cliffs Natural Resources chairman and president Joseph Carrabba.

Donna Schmidt

For the quarter ended June 30, Ohio-based Cliffs’ consolidated revenues were a record $US1.8 billion, a 52% increase over the $1.2 billion reported during the same quarter last year.

Quarterly operating income jumped 69% year-on-year to $617 million and second-quarter net income totalled $408 million versus $261 million in 2010.

Cliffs cited higher pricing in its iron ore business for all of the improvements, as well as sales from its newly acquired Bloom Lake complex in Canada.

The news for the North American coal segment was not all bad; sales volumes were 1.3 million tons, or 76% higher than the 719,000t the company sold in last year’s second quarter.

Officials said the jump was mainly due to 770,000t of incremental sales volume from the West Virginia coal operations of INR Energy, which it acquired last year.

Unfortunately, offsetting the positive direction in sales was lower sales volumes, which stemmed from Cliffs’ Pinnacle and Oak Grove longwall mining operations.

“Severe weather, including a tornado, resulted in significant damage to Oak Grove Mine's preparation plant and overland conveyor system,” Cliffs said.

“By quarter end, the overland conveyor system was essentially repaired, and the preparation plant refurbishment work is ongoing. Oak Grove Mine's underground operations are fully functional, enabling the company to stockpile raw coal until construction to restore the preparation plant is completed.”

The producer said it anticipated resuming sales to customers in the latter part of this year’s fourth quarter.

Pinnacle’s issues were not weather related, but rather were due to elevated carbon monoxide levels recently detected in a section of the mine.

In late June, the US Mine Safety and Health Administration denied a new submitted plan designed to address the CO concentrations.