Lowering Cost at Cliffs Natural Resources (CLF) Easier Said Than Done

July 3, 2013 8:59 AM EDT
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Price: $8.73 -3.11%

Rating Summary:
    3 Buy, 12 Hold, 12 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Goldman Sachs today maintained a Neutral rating on Cliffs Natural Resources (NYSE: CLF) and adjusted its price target to $16.00 (from $21.00). Goldman also lowered Q2 EPS estimates to $0.39 from $0.85. 3Q and 4Q 2013 EPS estimates were also lowered, taken to $0.69/$0.72 from $1.05/$0.90.

"We remain concerned about Cliff's long-term earnings potential based on our expectations for $80-$90 per tonne iron ore starting in 2015, particularly for its Canadian and Australian operations. Although it plans to lower costs at Bloom Lake, we believe getting to its targeted $65 per tonne cost from around $90 currently will be a tough path, even if it decides to mothball its Phase II expansion," said analyst Sal Tharani.

Cliff is faced with a number of tough decisions and might be forced to pullback from international operations.

"We believe that CLF will need to make some tough decisions to sort out its portfolio of assets, and will most likely return to being a US iron ore company where is has the lowest cost and a stable captive market," added the analyst.

For an analyst ratings summary and ratings history on Cliffs Natural Resources (NYSE: CLF) click here. For more ratings news on Cliffs Natural Resources click here.

Shares of Cliffs Natural Resources closed at $16.60 yesterday.

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