Cliffs Natural Resources Q4 Results Expected to Include $1.4B of Non-cash Impairment Charges and $542M of Non-cash Tax Valuation Allowances
Cliffs Natural Resources (NYSE: CLF) today announced that as a result of its goodwill impairment test conducted in the fourth quarter of 2012, the Company has determined that approximately $1 billion of goodwill related to Cliffs' 2011 acquisition of Consolidated Thompson Iron Mines Limited is impaired. The goodwill impairment charge will be recorded as a non-cash expense for the year ended Dec. 31, 2012. The impairment is primarily driven by the project's anticipated lower long-term volumes and higher capital and operating costs. The previously announced delay of the Phase II expansion of the Bloom Lake mine also contributed to the impairment. Cliffs also indicated it expects to incur $100 - $150 million of other charges related to its Eastern Canadian Iron Ore business segment.
Additionally, as previously disclosed, Cliffs' Board of Directors recently authorized the sale of the Company's 30% interest in Amapa. Based on the pending terms of the sale, Cliffs expects to record a non-cash pretax impairment expense of $365 million within its fourth-quarter results.
In the fourth-quarter, Cliffs also expects to record $542 million in non-cash valuation allowances related to two of the Company's deferred tax assets: Mineral Resources Rent Tax (Australia) and Alternative Minimum Tax (United States) carryforwards. These valuation allowances are primarily driven by lower long-term pricing assumptions and the related impact on profitability and expected future tax payments. As a result, Cliffs will record these valuation allowances as an expense within the income tax expense line item on its Statement of Operations.
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