FBR Slashes Cliffs Price Target To $1.00, Sees 37% Downside

• Shares of Cliffs Natural Resources Inc CLF have declined 75.49 percent year-to-date, dropping close to their 52 week low on December 21 at $1.55.
• Lucas N. Pipes of FBR & Co. has reiterated a Market Perform rating on the company, while lowering the price target from $3 to $1.
• The company announced the sale of its two remaining low volume met coal mines on December 22 to Seneca Coal Resources.

Analyst Lucas Pipes explained that Cliffs Natural Resources has entered into an agreement to seal its Pinnacle and Oak Grove mines for $268 million in liabilities, along with "a potential $50 million earn-out based on terms of revenue sharing through 2020.”

“Seneca Coal Resources plans to produce 4.4 million tons of met coal in 2016, implying no significant reduction in the two mines’ current production rates,” Pipes mentioned.

Although Cliffs Natural Resources has previously stated that it would not build out longwall panels anymore, Pipes expects the timing of the sale to allow Seneca Coal to continue production at these mines, uninterrupted, without reducing production in 2017 or later.

“We believe that the company has more flexibility to mend its own future than the market is suggesting. Cliffs’ “intangible” assets include the company’s position as the largest supplier of iron ore to the North American steel industry,” the FBR report stated.