“While our North American businesses are suffering from the dramatic drop in steel production in North America and Europe, our Asia-Pacific businesses are performing quite well, given the difficult demand environment for steelmaking raw materials around the world," Cliffs chairman, president and chief executive officer Joseph A. Carrabba said.
Cliffs’ North American iron ore mines have not fared too well during the ongoing global steel slump, with total metallurgical coal production in the region for the March quarter diving to 436,000 tons, 56.7% lower than the same period last year.
Cliffs responded in mid-April by cutting back production and development work at its Pinnacle operations in West Virginia and Oak Grove operations in Alabama.
On the cuts, Carrabba said the decision was not taken lightly but conserving cash and preserving financial flexibility must be the management team’s top priority.
From its 45% stake in the Sonoma project, Cliffs gathered net sales of $US28.7 million from its 383,000-tonne share of production.
The company is expecting the mine to produce 3.1 million tonnes for 2009, down from 3.5Mt last year, and at a 60:40 mix of thermal and metallurgical coal.
Cliffs expects production costs at the mine, which is also part-owned by private company QCoal, JFE Steel, China Steel and Watami Trading, to be $10 lower, in the range of $US75-85/t.
“The decrease from previous expectations is a result of lower-than-anticipated contract mining costs and royalties,” the company said.
Cliffs had a $97.3 million cash position at the end of March, down from $179 million at the end of December due to expenses for product inventories, property, plant and equipment.
Cliffs’ portfolio of mines consists of six iron ore mines and two coking coal mines in North America, two iron ore complexes in Western Australia, its 45% stake in Sonoma and a 30% stake in the Amapa iron ore project in Brazil.