- The future looks dim for Cliffs Natural Resources (NYSE:CLF) with a “coming deluge of iron ore supply” and "waning China steel output," Axiom Capital's Gordon Johnson says as he maintains his Sell recommendation and $2 price target on the stock.
- The firm notes that 75M metric tons of new capacity worldwide has been added since the nadir late last year; China has added 20M tons, Sierra Leone 25M, India 20M, and Australia's Roy Hill 10M YTD.
- Using a Q4 iron ore price estimate of $35/metric ton combined with the company's 2016 guidance, Axiom calculates CLF generating ~$250M in EBITDA vs. costs of ~$305M, which less it to believe the shares "would have little more than option value around a possible debt restructuring."
- Now read Stay away from mining and mining equipment stocks, Axiom says