Cliffs Natural Resources records $93.5 million net income in Q1 2010

Cleveland, Ohio, US-based metallurgical coal and iron ore pellet producer Cliffs Natural Resources Inc. (Cliffs) has reported a net income of $93.5 million in the first quarter of 2010, compared to net loss of $7.6 million in Q1 2009.
 
In its first quarter financial report, Cliffs posted quarterly revenues of $727.7 million, up 57 percent from the corresponding period of the previous year, due to higher year-over-year pricing in each of Cliffs' business segments and improved sales volume from its North American operations, reflecting rebounding global demand for steelmaking raw materials.
 
In the given period, Cliffs' North American iron ore equity production volume reached 5.39 million metric tons, up 36 percent, while the company's total North American coal production amounted to 611,450 metric tons, increasing by 54.23 percent, both compared to the first three months of 2009. The company's North American iron ore sales in Q1 2010 amounted to 4.42 million metric tons, climbing by 116 percent, while its North American coal sales totaled 600,560 metric tons, up 34 percent, both compared to Q1 2009.
 
On the other hand, in the first quarter of 2010, the company's lump and fine iron ore production in its Asia Pacific segment totaled 2.1 million metric tons, rising by 23.53 percent year on year, while its Asia Pacific iron ore sales came to 2.11 million metric tons, down 4.27 percent compared to the year-ago period.
 
Cliffs said that it expects strong demand for steelmaking raw materials to continue throughout 2010. Recently, the emergence of new pricing mechanisms replacing the historic benchmark systems for iron ore and metallurgical coal are resulting in pricing more reflective of current supply and demand dynamics, but still uncertain pricing models, for these commodities. Cliffs is currently in discussions with customers regarding how its current supply agreements will take into account these new mechanisms. According to the company, these discussions may result in changes to the pricing mechanisms currently used with various customers and could impact sales prices realized in current and future periods, which could have a material effect on the company's results of operations.
 
Consistent with first quarter shipments being recorded using a provisional pricing factor of a 90 percent increase in the seaborne price for blast furnace pellets, Cliffs assumes also a 90 percent increase in the seaborne price for blast furnace pellets in Q2 2010 and a 2010 range for hot band steel pricing of $660-770/mt in North America.
 
Assuming current market prices for all spot sales, Cliffs expects revenue in North American Coal to reach $155-160 FOB mine.