2014 January 2014 - Investor Presentation

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Cliffs 2014 January 2014 - Investor Presentation

Transcript of 2014 January 2014 - Investor Presentation

  • 1.Cliffs Natural Resources Inc.January 2014

2. FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of the federal securities laws. Although the Company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties relating to Cliffs' operations and business environment that are difficult to predict and may be beyond Cliffs' control. Such uncertainties and factors may cause actual results to differ materially from those expressed or implied by forward-looking statements for a variety of reasons including without limitation: uncertainty or weaknesses in global economic conditions, including downward pressure on prices, reduced market demand and any slowing of the economic growth rate in China; trends affecting our financial condition, results of operations or future prospects, particularly the continued volatility of iron ore and coal prices; our ability to successfully integrate acquired companies into our operations and achieve post-acquisition synergies, including without limitation, Cliffs Quebec Iron Mining Limited (formerly Consolidated Thompson Iron Mining Limited); our ability to successfully identify and consummate any strategic investments and complete planned divestitures; the outcome of any contractual disputes with our customers, joint venture partners or significant energ y, material or service providers or any other litigation or arbitration; the ability of our customers and joint venture partners to meet the ir obligations to us on a timely basis or at all; our ability to reach agreement with our iron ore customers regarding modifications to sales contract pricing escalation provisions to reflect a shorter-term or spot-based pricing mechanism; the impact of price-adjustment factors on our sales contracts; changes in sales volume or mix; our actual economic iron ore and coal reserves or reductions in current mineral estimates, including whether any mineralized material qualifies as a reserve; the impact of our customers using other methods to produce steel or reducing their steel production; events or circumstances that could impair or adversely impact the viability of a mine and the carrying value of associated assets; the results of prefeasibility and feasibility studies in relation to projects; impacts of existing and increasing governmental regulation and related costs and liabilities, including failure to receive or maintain required operating and en vironmental permits, approvals, modifications or other authorization of, or from, any governmental or regulatory entity and costs related to implementing improvements to ensure compliance with regulatory changes; our ability to cost-effectively achieve planned production rates or levels; uncertainties associated with natural disasters, weather conditions, unanticipated geological conditions, supply or price of energy, equipment failures and other unexpected events; adverse changes in currency values, currency exchange rates, interest rates a nd tax laws; availability of capital and our ability to maintain adequate liquidity and successfully implement our financing plans; our ability to maintain appropriate relations with unions and employees and enter into or renew collective bargaining agreements on satisfac tory terms; risks related to international operations; availability of capital equipment and component parts; the potential existence of significant deficiencies or material weakness in our internal controls over financial reporting; problems or uncertainties with productivity, tons mined, transportation, mine-closure obligations, environmental liabilities, employee-benefit costs and other risks of the mining industry; and other factors and risks that are set forth in the Company's most recently filed reports with the Securities and Exchange Commission . The information contained herein speaks as of the date of this release and may be superseded by subsequent events. Except as may be required by applicable securities laws, we do not undertake any obligation to revise or update any forward-looking statements contained in this presentation.1 3. CLIFFS NATURAL RESOURCES - A LEADING, GLOBAL IRON ORE MINER REVENUE BY PRODUCTCoal 13%Cliffs Natural Resources (NYSE: CLF) (Paris: CLF) is an international mining and natural resources company. A member of the S&P 500 Index, the Company is a major global iron ore producer and a significant producer of metallurgical coalOther 6%Iron ore 81%GLOBAL MARKET EXPOSURE (2012 REVENUE OF $5.9 BILLION) Other 18% U.S. 36%Canada 12%Cliffs is executing a strategy designed to increase scale and diversity and focused on serving the worlds largest and fastest growing steel marketsChina 34%With core values of environmental and capital stewardship, our colleagues across the globe endeavor to provide all stakeholders operating and financial transparency as embodied in the Global Reporting Initiative (GRI) framework Source: Company filings and presentations.2 4. CLIFFS STRATEGIC IMPERATIVESBuilding scale through diversificationGlobal execution Multiple Revenue Streams Product Diversification Geographic Presence Competencies of the Firm Outlook of Personnel Global ScalabilityOperational excellenceShareholder returns Safety Technical Competencies Operating Efficiencies Shareholder Value Risk Management Earning the Right to Grow3 5. GLOBAL FOOTPRINT - FOCUSED ON SCALE, DIVERSITY AND GROWTH7 mt2 14mt325mt46mt1 9mtPRODUCT KEY Iron Ore Coal11mtChromiteEND MARKET KEY North America Asia Pacific EuropeNote: The volumes listed above represent Cliffs production capacity as reported in the Companys 2012 Form 10-K. 1 Wabush current annual capacity. Phase I and Phase II capacity. 4 Based on Cliffs equity share of annual rated production capacity, converted to million metric tons.42100% of Bloom Lake Phase I capacity.3100% of Bloom Lake 6. U.S. IRON ORE U.S. IRON ORE PROVEN & PROBABLE MINERAL RESERVES (IN LONG TONS) Empire 6mtUnited Taconite 126mtTilden 247mt823 Million Tons Northshore 361mtHibbing 83mt Pioneers in developing the beneficiation and pelletizing process CLIFFS USIO SHIPMENTS (MILLION METRIC TONS1) 2325 222122 - 23 Largest merchant supplier of iron ore pellets to U.S.based steel mills Significant portion of U.S. Iron Ore volume contracted for the next decade1420092010201120122013E2014E Cliffs U.S. mines are well capitalized, well maintained and run by world-class operatorsCLIFFS EXPECTS TO SUSTAIN ITS LONG-TERM VOLUMES IN U.S IRON ORE Source: Company filings51Converted from long tons. 7. EASTERN CANADIAN IRON ORE BLOOM LAKEWABUSHBLOOM LAKE CAPITAL EXPENDITURES ($ MILLIONS)Phase II expansion 2011 & 2012Successfully idled the pelletizer in the second quarter 2013Number of processing lines in the concentrator expected to be reducedIf $100 cash costs at Wabush are not achieved by year-end, a more permanent solution will be consideredCurrently selling Wabush's iron ore concentrate product on a short-term spot basis$739 Phase II expansion1Remaining$900CASH COSTS ($ PER METRIC TON)$90-$95 $70-$75 Mid-$60s2013 OutlookTargeted Phase I cash costsSource: Management estimates, company filings and earnings releases6Long-term1Excludes sustaining capital 8. ASIA PACIFIC IRON ORESALES VOLUME1PROVEN & PROBABLE RESERVES(MILLIONS OF METRIC TONS)(MILLIONS OF METRIC TONS)1296 8988938889 77420052012 Tripled sales volume through expansion projects and acquisitions 2012 execution of a large-scale expansion project completed on time and on budget12005 sales reflect Cliffs 80% ownership of Portman Limited72006200720082009201020112012 Maintained reserve base despite significant sales volume growth 9. NORTH AMERICAN COAL NORTH AMERICAN COAL SALES VOLUME (MM SHORT TONS)2.5002.0001.9 1.8 1.7 1.51.5001.41.3 Sharpened focus on metallurgical coal1.1 1.000 Significant sales volume growth achieved through the successful completion of several large capital projects0.9 0.9 0.70.500 0.30.4 0.3 0.30.30.3 0.20.20.10.10.20.2Q1 '11 Q1 '11 Q2 '11 Q2 '11 Q3 '11 Q3 '11 Q4 '11 Q4 '11 Q1 '12 Q1 '12 Q2 '12 Q2 '12 Q3 '12 Q3 '12 Q4 '12 Q4 '12 Q1 '13 Q1 '13 Q2 '13 Q2 '13 Q3 '13 Q3 '130.000Metallurgical8Thermal Substantially lower cash costs through project execution and new management Recent sales volume increases driven by higher premium metallurgical coal sales 10. Q3 2013 HIGHLIGHTS & CONSOLIDATED RESULTSSALES MARGINOPERATING INCOMEYTD SG&A EXPENSE$349M$224M$168M76%194%YTD EBITDA$1.1B17%HISTORICAL CONSOLIDATED FINANCIAL HIGHLIGHTS 1 Announced Gary Halverson as President and Chief Operating Officer.($ IN MILLIONS)1,5471,5361,489 1,2201,1981,545 1,2971,3471,141 903 Achieved lower cost-per-ton rates across all business segments, and reduced exploration and SG&A expenses, excluding special items. U.S. Iron Ore strong sales volumes expectation of 22 23 million tons in 2014.Q3 2013Q2 2013Q1 2013Revenue 1Source:Company filings9COGSQ4 2012Q3 2012 11. CURRENT PENDING DECISIONS BLOOM LAKE PHASE II DECISION Future volume & EBITDA Stabilization of phase I Tailings investment Rail take or pay contract Future iron ore pricingWABUSH OPERATIONS FUTURE High quality producing asset Sound logistics in place High cost structure Challenging labor conditions Future iron ore pricing 10 12. LIQUIDITY AND CAPITAL STRUCTURE TOTAL DEBT AND CREDIT FACILITY1CASH & CASH EQUIVALENTS(OUTSTANDING, IN BILLIONS)(IN MILLIONS)$4.1$299$287 $263$3.9 $195 $3.4 $3.3$3.3$36 1Q3 2012Q4 2012Q1 2013Q2 2013Q3 2013Q3 2012Q4 2012Q1 2013Q2 2013Q3 2013DEBT MATURITY PROFILE (IN MILLIONS)Baa3 / Stable BBB- / Stable $1,750 $900 $500$0$0$02013 11$0 201420152016Source: Company filings. 1$700$80020212040$0 2017201820192020 13. IRON ORE PRICING VOLATILITY EXPECTED LONGER TERM FUNDAMENTALS INTACTConstructive long term iron ore trends New supply sources challenged by rising costs, capital constraints and delays Developing market