Citi Downgrades Cliffs Natural Resources Inc. To Sell

Citi downgraded Cliffs Natural Resources Inc. CLF from Neutral to Sell and lowered its price target from $16 to $5 in a report issued Monday. 

Analyst Brian Yu noted that iron ore prices continued to remain weak and at “$80/tonne iron ore, the company will likely need to shutter production in both Canada and Australia to avoid EBITDA losses.”

“In addition to the jobs toll, any idling will be a tough decision since management is actively marketing these assets (sale or JV) and operating assets are presumably more [valued] than idled assets,” according to Yu.

Yu mentioned that “there could be downside risk to our numbers if the company’s Canada or Australia mines continue to operate in 2015 at current commodity prices. We have also eliminated the dividend in our forecasts.”

The report concluded that after updating the financial model “for actual 3Q14 iron ore and coal prices, we are lowering our 3Q EPS estimate to $0.01 from $0.15 vs. consensus of -$0.01 on EBITDA of $194 million and revenue of $1,330 million.”

Cliffs Natural Resources Inc. recently traded at $8.91, up 1.95 percent.