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Analyst: Cliffs made the right call in suspending Ring of Fire project

  • Cliffs Natural Resources (CLF) made the right move in pulling out of the chromite project in Ontario’s Ring of Fire, RBC analyst Fraser Phillips says, since the project would have taken years to develop and the decision removes an uncertainty lurking over its shares.
  • The project required ferrochrome prices of $1.40/lb. to produce an internal rate of return in the 14%-17% range, but with prices closer to $1, Phillips believes the project economics were “questionable at best."
  • CLF can now focus on allocating its capital and resources to its core iron ore assets such as the Bloom Lake mine in Quebec, the analyst says.
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Comments (5)
    , contributor
    Comments (1158) | Send Message
    ha ha ha, I stated this in simple terms on the announcement of them suspending it. Only thing they are not mentioning is the boost as the cut of the staff (more $ onto the bottom line) and then additional tax losses they can right down from the development costs they have put in when times were better can now help them offsetting gains made this year. Could see a very good earnings for them going forward. I'm increasing my est end of year price 4 points to 36.75 based on current material trends.


    21 Nov 2013, 07:09 PM Reply Like
  • Bugle Boy
    , contributor
    Comments (137) | Send Message
    Management seems to have been making the right moves during the period of depressed commodity prices, and has been lauded for it. It makes sense to shutter the project. Expending capital now can only weaken the company. Cap ex under these circumstances, especially until access is secured, makes little sense. When the stars are finally in alignment, I presume that the project will be revisited, unless the "pull out" mentioned in the Market Current is irrevocable.
    21 Nov 2013, 08:08 PM Reply Like
  • sulo
    , contributor
    Comments (111) | Send Message
    Good decision at this time. The ring of fire value does not get lost, as it could either be sold or developed at a future date.
    22 Nov 2013, 07:39 AM Reply Like
    , contributor
    Comments (1158) | Send Message
    I decided to book profits this am, while agree and stated as such this is good choice the market and downgrades most analysts are not looking at long term. So I will watch & buy back at 24 after that but I fear we may have started an early rotation OUT of materials stocks, will be watching (X) and (AKS) for similar breakdown as (CLF) when it dipped under 26 I sold.


    22 Nov 2013, 04:40 PM Reply Like
  • chunghk
    , contributor
    Comments (325) | Send Message
    For CLF, we are all watching whether it could break the strong barrier of $29, otherwise, it will float between $26 and $28 until the end of the year, in the absence of stimulus and good news. For the coming week it will fluctuate between $25.90 and $27.50, briefly touching $28 and moving again downwards towards $26. Until the dividend of $0.15 moving upwards, we won't see a sudden surge of stock price. Small investors, be patient, and don't expect to reap a handsome profit or gain.
    22 Nov 2013, 05:34 PM Reply Like
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