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Cliffs Natural Resources Slips To Loss In Q4, Cuts Dividend By 76%; Stock Down

Cliffs Natural Resources Inc. (CLF) posted a fourth-quarter net loss attributable to common shareholders of $1.6 billion, or $11.36 per share, compared to net income of $185 million, or $1.30 per share, in the fourth quarter of 2011.

Excluding the non-cash items fourth-quarter 2012 adjusted net income attributable to Cliffs' common shareholders was $89 million, or $0.62 per share, down from $213 million, or $1.49 per share, in the fourth quarter of 2011. The decrease was primarily driven by lower sales margin. Analysts polled by Thomson Reuters expected the company to report earnings of $0.58 per share for the quarter. Analysts' estimates typically exclude special items.

During the fourth quarter of 2012, the Company recorded non-cash impairment charges of approximately $1 billion in goodwill related to Cliffs' 2011 acquisition of Consolidated Thompson Iron Mines Limited, as well as $365 million related to Amapa. Cliffs also recorded a $50 million non-cash impairment charge related to its Wabush Mine in Eastern Canada. The Wabush Mine asset impairment was the result of a higher book value versus the asset's fair value.

In the fourth quarter of 2012, Cliffs recorded $541 million in non-cash valuation allowances related to two of the Company's deferred tax assets: Mineral Resources Rent Tax or MRRT and Alternative Minimum Tax carryforwards.

Consolidated sales margin decreased 50% in the fourth quarter to $239 million, from $480 million in the same quarter last year. This was attributed to slightly lower revenues of $1.5 billion, driven by a 14% decrease in fourth-quarter year-over-year seaborne pricing, and a 15% increase in cost of goods sold to $1.3 billion, primarily driven by increased sales volumes, which contributed to higher employment-related costs, mining and maintenance expenses.

Revenues From Product Sales And Services for the quarter were $1.54 billion, down from $1.60 billion in the same quarter last year. Fifteen analysts had consensus revenue estimate of $1.53 billion for the quarter.

Fourth-quarter 2012 U.S. Iron Ore pellet sales volume was 6.2 million tons, compared with 7.8 million tons in the fourth quarter of 2011. The decrease was driven by lower volumes to a customer due to its bankruptcy earlier in the year and a lower year-over-year demand for iron ore pellets.

Cliffs' Board approved the reduction of the Company's quarterly cash dividend rate by 76% to $0.15 per share. The dividend declaration date was February 11, 2013 and the cash dividend will be payable on March 1, 2013, to shareholders of record as of the close of business on February 22, 2013.

The company expects its global iron ore sales to be relatively flat year over year at approximately 40 million tons In 2013.

Cliffs increased its 2013 capital expenditures budget to $800 million - $850 million from its previous expectation of $700 million - $800 million due to additional investments in its Eastern Canadian Iron Ore business segment.

In separate press release, Cliffs Natural Resources announced that it is offering to sell 9 million0 of its common shares, par value $0.125 per share (or up to 10.35 million Common Shares if the underwriters of such offering exercise their option to purchase additional Common Shares) , and 20 million of its depositary shares , each representing a 1/40th interest in a share of its new mandatory convertible preferred stock, Class A , $1,000 liquidation preference per Mandatory Convertible Preferred Share (equivalent to $25 per Depositary Share) (or up to 23 million Depositary Shares if the underwriters of such offering exercise their over-allotment option in full) in separate registered public offerings.

The company said it intends to use the net proceeds from the Common Shares Offering and the Mandatory Convertible Preferred Shares Offering to repay borrowings outstanding under its term loan facility. Any remaining net proceeds will be used for general corporate purposes.

The said it company intends to apply to list the Depositary Shares on the New York Stock Exchange under the symbol "CLV."

CLF closed Tuesday at $36.61, up $0.17 or 0.47%. However, in after hours, the stock dropped $3.45 or 9.42%.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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