Iron-ore producer Cliffs Natural Resources reported lower third-quarter sales and profits amid customer changes, debt repayments and costs associated with a new union contract and the reopening of the idled United Taconite operations on Minnesota’s Iron Range.
Ohio-based Cliffs, which runs three large iron-ore mines and pelletizing plants in northeastern Minnesota, reported Thursday that total U.S. and Asia revenue fell 7 percent to $553 million during the quarter.
The company recorded a net loss of $28 million, compared with a loss of $6 million for the same quarter one year ago.
The loss was impacted by an $18 million loss associated with debt repayments, $20 million in expenses related to idled mines, and a one-time $4 million charge tied to a new labor contract.
Last month, the United Steelworkers and Cliffs agreed to a three-year labor contract. It covers 2,000 union workers employed at United Taconite and Hibbing Taconite in Minnesota and at Cliffs’ Tilden and Empire mines in Michigan. (The contract does not cover the nonunion Northshore Mining in Silver Bay and Babbitt).
Third-quarter profits were also impacted by U.S. production costs that jumped 14 percent to $55.69 a ton due to the restart of United Taconite in Forbes/Eveleth and maintenance at the Tilden mine, officials said. Cliffs idled United Taconite in August 2015, laying off 420 employees. With the help of new contracts, it began reopening two months ago.
In a statement, Cliffs CEO Lourenco Goncalves said Cliffs’ restructuring is almost completed, following two years of historic pricing declines in the industry. After rigorous global restructuring, and a spate of new trade tariffs that help U.S. producers, ore prices are rising again.
During the quarter, Cliffs cut its debt by $500 million for a balance of $2 billion. “With that, we have eliminated the last obstacle in our way to better times.” Goncalves said.
“Our flawless operational performance, commercial accomplishments and financial execution during the last two years have earned the respect of investors and banking institutions, allowing us to execute another important transaction: the early repayment of the 2018 notes,” he said. “We look forward to finishing out the year strong in the fourth quarter, in what we anticipate to be a quarter with substantial cash-flow generation.”
Stock shares closed Thursday at $5.07, down 18 percent.