Cliffs Natural Resources Falls 16% On Nomura Downgrade

Shares of Cliffs Natural Resources CLF were pummeled Friday after a downgrade from Normura.  The firm changed CLF’s rating from Buy to Reduce and revised the Price Target from $18 to $5.

Analyst Curt Woodworth made the changes based on “sharply reduced NAV following a significant downward revision to our ore deck. The ~$55/tonne decline in iron ore prices in 2014 has significant negative implications for medium-term earnings and should severely limit strategic options with regards to potential asset sales.”

Woordworth’s report continued by expressing the belief that the "CLF USIO segment should see significant ASP compression over the next two years owing to contract shifts at Algoma and the impact of indexed tonnage which accounts for ~65% of total volumes.”

Due to weak iron ore prices and CLF’s high debt leverage, Woodworth did not believe that CLF could finance the $1 billion it needs for expanding its Eastern Canada mines.

The Nomura report revised the projection for FY 2014 EPS from $0.16 to -$0.03. 

Cliffs Natural Resources Inc. closed at $8.32 Friday, down 16.80 percent.