Forest Fires Shuts Cliffs' Wabush Plant - Analyst Blog

Cliffs Natural Resources Inc. (CLF) has temporarily halted productions and evacuated employees from the Wabush Scully mine situated in the town of Wabush, Canada owing to the forest fires in the region. A local management team will decide when to restart operations after assessing the situation.

Cliffs said its priority is to safeguard its nearly 500 employees and their families from this fast spreading wildfire. Cliffs has also extended its support to the Wabush authorities to help with volunteers and equipments to create a firebreak. The company is also providing fooding and lodging facilities in Wabush and Fermont.

Cliffs had also temporarily suspended the environmental assessment activities for its Chromite Project in the “Ring of Fire” region of Northern Ontario on Jun 12 due to certain unresolved issues. The issues that led to the suspension included delayed approval of the Terms of Reference for the provincial Environmental Assessment (EA) process, unresolved land surface rights issues and unfinished agreements with the Government of Ontario among others. Once these issues are resolved, Cliffs will go ahead with the project.

Suspending productions may affect company's financials and this production halt comes after Cliffs suffered lower profit on a reported basis in first quarter 2013. Though earnings beat the Zacks Consensus Estimate, sales missed the same. Also, lower iron ore pricing, partly due to oversupply in the industry, continues to challenge this international mining and natural resources company.

The prices for commodities are expected to remain under pressure due to the uncertain economic environment. The company also contends with higher labor and mining costs.

However, Cliffs remains optimistic about its financial flexibility, including its prospects for cash generation and opportunities that will fund organic growth projects and return cash to shareholders. It also has a significant presence in the Asia-Pacific region, where demand is still robust.

Cliffs currently retains a Zacks Rank #3 (Hold).

Other companies in the mining industry worth considering are Brigus Gold Corp. (BRD), with a Zacks Rank #1(Strong Buy), and Claude Resources, Inc. (CGR) and Lake Shore Gold Corp. (LSG), both carrying a Zacks Rank #2 (Buy).