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Weather, ore prices hinder Cliffs' first quarter, but company predicts improvement

Hit by falling prices for coal and iron ore, higher energy prices, and by a winter so cold it continues to impact shipping well into April, Cliffs Natural Resources on Friday announced reduced income and earnings for the first quarter of 2014.

In a teleconference with industry analysts today, Cliffs officials said the company generated year over year revenue of $940 million, down 18 percent, pushed by a two percent decline in year over year iron ore sales that were hindered by cold weather and ice on the Great Lakes that has slowed shipping to a crawl.

“The first-quarter's winter weather in North America was some of the worst conditions we have experienced in 30 years,’’ said Gary Halverson, Cliffs' president and chief executive officer.

 Iron ore prices have dropped from $135 per ton in November to about $112 per ton last month, and recovered to about $120 in April – an important factor because Cliffs must sell all of its product to steel producers. Coal prices have dropped even more.

      For the first quarter of 2014, Cleveland-based Cliffs recorded a net loss of $83 million, or 54 cents per diluted share, compared with a net income of $97 million, or 66 cents per diluted share, in the first quarter of 2013.

    Cliffs is a major player in Minnesota’s taconite iron ore business and among the largest employers in Northeastern Minnesota. The company owns United Taconite in Eveleth and NorthShore Mining in Silver Bay/Babbitt, and is part owner and operates Hibbing Taconite. It also owns and operates the Tilden-Empire operations in Michigan’s Upper Peninsula along with iron ore mines in Canada and Australia and several coal mines in the U.S. and abroad.

The company reported 4.63 million tons of taconite iron ore produced at its U.S. operations during the first quarter, down from 5.12 million tons for the same period in 2013. But the company said it expects to make that up and still produce, sell and ship its expected goal for 2014 of 22 or 23 million tons from U.S. mines.

Halverson said higher water levels on the lakes will allow Great Lakes freighters to carry bigger loads this summer and that he expects several idled lakers will be brought back into service over the summer months to help make up for the late start to shipping.

As reported in the News Tribune in January, Cliffs continues to face pressure from the New York based hedge fund Casablanca, which has called for Cliffs to divest its foreign assets and dramatically cut costs to improve shareholder value. Casablanca owns about 10 percent of Cliff’s shares. Cliffs has cut costs and spending in recent months by closing its Wabush mine in Canada and scuttling plans to expand its Bloom Lake mine in Quebec.