US-based iron ore and coal producer Cliffs Natural Resources said production from its Bloom lake ore project in Quebec has "completely ceased" and the company's exit from eastern Canada is being executed on schedule.
Cliffs also said it has completed the previously announced sale of its Logan County Coal assets in West Virginia to an affiliate of Coronado Coal for $174mn in cash and assumption of liabilities. The tax benefit from the sale will be 20-25pc of the previously disclosed pre-tax loss of about $400mn.
The Bloom lake mine project has been placed on a care-and-maintenance status and only a small number of employees involved in those activities remain on the payroll. The last shipment of ore from Quebec's Sept-Iles port will take place this month.
"As we approach the final steps of our exit from eastern Canada, we have brought to an end the flawed expansion that has cost Cliffs and its shareholders billions of dollars," Cliffs chief executive Lourenco Goncalves said today.
Cliffs on 19 November said it might close its 7mn t/yr Bloom lake ore project as part of its strategy to exit from its high-cost eastern Canada operations. It estimated closure costs at $650-700mn over five years, much of it in penalty costs for breaking a "take or pay" rail contract.
Goncalves told Argus two days later that Cliffs had "finally decided to shut" Bloom lake.
Cliffs had earlier sought to draw in three steelmakers as equity partners in Bloom lake in order to allow it to expand its output to lower production costs. Talks with steelmakers yielded on results.
Goncalves took over as chief executive in August to execute a plan promoted by activist hedge fund Casablanca Capital that toppled the prior board of the company in a proxy fight. That plan was to attract investors for a Bloom lake expansion while exiting from its Australian ore assets and focusing on US iron ore.
The sale of the Logan County Coal coking coal assets is also part of the company's plant to exit from its coal business, though Goncalves has said he would only do so at the right price. Goncalves in August reversed prior management's decision to idle Cliffs' Pinnacle low-volatile coking coal mine in West Virginia, which produced 2.8mn short tons (2.54mn metric tonnes) of Pocahontas No. 3 Seam coal in 2013.
Logan County Coal, in southwestern West Virginia, comprises three underground mid-volatile coal complexes: the Powelton complex, which produced 832,400 st in 2013; the Lower War Eagle complex, with 632,067st; and the Dingess Chilton complex, with 49,022st last year.
It also includes the Toney Fork surface thermal coal mine, with production last year of 631,909st.
Connecticut-based Coronado operates coking coal mines at the Greenbrier and Midland operations in West Virginia.
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