Cliffs retains 2013 coal volume forecast, lowers revenue estimate

Cliffs Natural Resources (NYSE: CLF) (Paris: CLF) is maintaining its full-year 2013 North American Coal expected sales and production volumes of approximately 7 million tons, the company said in a July 25 second quarter earnings statement.

Sales volume mix is anticipated to be approximately 69% low-vol metallurgical coal and 22% high-vol metallurgical coal, with thermal coal making up the remainder. The company has the Oak Grove longwall mine in Alabama and the Pinnacle longwall mine in southern West Virginia, along with some other mining operations in southern West Virginia under Cliffs Logan County Coal.

Cliffs said it is lowering its full-year 2013 North American Coal revenues-per-ton outlook to $100-$105 from its previous outlook of $110-$115. The decrease is primarily driven by lower market pricing for metallurgical coal products.

Cliffs is also decreasing its cash-cost-per-ton expectation to $90-$95 from its previous expectation of $95-$100. The decrease is driven by an overall focus to improve the operation’s cost structure.

For the second quarter of 2013, the North American Coal sales volume was 2.1 million tons, a 36% increase from the 1.5 million tons sold in the prior year’s comparable quarter. The increase was driven by significantly higher sales volume from the Oak Grove and Pinnacle mines. During the prior year’s second quarter, sales volume was unfavorably impacted as the Oak Grove prep plant only came into full operation during the quarter following repairs needed due to the severe weather damage that occurred in 2011. Consequently, time was needed to rebuild the inventory at the export terminals. Also, Pinnacle’s sales and production volume improved year-over-year due to increased production and customer demand.

North American Coal’s 2013 second-quarter revenues per ton were down 13% to $104.89, versus $120.32 in the year-ago quarter. The decrease was primarily driven by lower year-over-year market pricing for met coal products. This was partially offset by favorably priced annual and carryover contracts, as well a product mix that was comprised of certain higher quality met coal products.

Cash cost per ton decreased 20% to $88.12, from $110.72 in the year-ago quarter. That was due to improved fixed-cost leverage from the increased sales volumes, lower maintenance spending and employment-related expenses, and an overall focus on improving the operation’s cost structure.

Subsequent to the end of the second quarter end, Cliffs announced that Joseph Carrabba will be retiring as the company’s president and chief executive officer by Dec. 31, 2013. James Kirsch, who serves on Cliffs’ board, was elected non-executive chairman of the board, replacing Carrabba as chairman. Kirsch said, “I am looking forward to working closely with Cliffs’ very capable senior management team during this transition. The Board is committed to increasing shareholder value through initiatives that lower the Company’s cost profile, increase productivity and sharpen the capital allocation strategy.”

Cliffs’ board has retained an executive search firm to assist in identifying potential chief executive officer candidates to lead the company. Additionally, Laurie Brlas retired as Cliffs’ executive vice president and president, global operations.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.