Cliffs Natural Resources
|Traded as||NYSE: CLF
S&P 500 Component
|Founded||Cleveland, Ohio, United States (1846)
as Cleveland Iron Company
|Founder(s)||Samuel Mather and associates|
|Headquarters||200 Public Square, Cleveland, USA|
|Products||iron ore, coal|
|Revenue||US$6,794.3 million (2011)45.1%|
|Operating income||US$2,348.6 million (2011)84.9%|
|Net income||US$1,812.6 million (2011)77.7%|
|Total assets||US$14,541.7 mil (Dec 2011)86.9% qoq|
Cliffs Natural Resources, formerly Cleveland-Cliffs, is a Cleveland, Ohio business firm that specializes in the mining and beneficiation of iron ore and the mining of coal. The firm is an independent company whose shares are traded on the New York Stock Exchange. The firm has stated that it had approximately 4,000 employees and a 28% share of the iron-ore pellet market. After acquiring Consolidated Thompson Iron Mines in January 2011 for US$4.9 billion in a negotiated deal (won't close until the 2nd quarter) Cliff's will control 10 iron ore facilities, 6 coal mines and a chrome project with the capacity to produce upwards of 46 million tonnes of iron ore pellets (30) and concentrate (16). Prior to the January 11 deal Cliffs owned 2-3% of the company, 19% of Consolidated Thompson is being purchased from Wuhan Iron and Steel Group of China. The deal gives Cliffs Natural Resources exposure outside of North America (Consolidated Thompson has long term deals with China's third biggest steel producer and two other Asian commodity brokers. The company started producing (and receiving revenue from) coal only since the third quarter of 2007.
For the first nine months of 2010 coal made up 12.9% of total revenue ($421.1 million, down from 14.4% the year before) while iron ore contributed $2,615.7 million (80.3% compared to 80.5% in '09), the other 6.8% (up from 5.1% in '09) came from freight and minority interests (such as its 45% stake in a coking and thermal coal mine in Western Australia and the 30% interest in Brazil's Amapa iron ore project). Although revenue has generally been stable quarter to quarter (no extreme changes) gross income was wildly inconsistent, the result of expenses being high even when total revenue wasn't. Between 2007 and 2010 quarterly sales margin was lowest in each of the two quarters beginning 2009 (combined for $30.7 million despite revenue being over $700 million), combined they generated gross profit 2.5-3 times smaller than during any other single quarter. For the first nine months of 2010 total costs (goods sold & operating expenses) amounted to $2,216.8 million representing a 60% increase over 2009.
History: 19th century
The firm's earliest predecessor was the Cleveland Iron Mining Company, founded in 1847 and chartered as a company by Michigan in 1850. Samuel Mather and six Ohio-based associates had learned of rich iron-ore deposits recently discovered in the highlands of the Upper Peninsula region of Michigan. Soon afterwards, the first Soo Canal opened in 1855, allowing iron ore to be shipped from Lake Superior to Lake Erie.
Technological improvements, such as the Bessemer furnace, made it possible for the North American Great Lakes to produce steel on an industrial scale. The south shore of Lake Erie was close to a supply of coal, making that region an efficient point for the construction of steel mills.
The final decades of the 19th century were a period of business consolidation from the partnership-sized businesses of an earlier generation to a new type of business firm, the stock-market-traded corporation intent on maximizing market share. The former Cleveland Iron Mining Co. was a survivor of this shakeout, purchasing many of its competitors. One key merger in 1890, with Jeptha Wade's Cliffs Iron Company led the combined firm to change its name to the Cleveland-Cliffs Iron Company.
The consolidated Cleveland-Cliffs invested substantial sums in operations to improve the logistics of iron-ore transport. In 1892, the firm built the Lake Superior and Ishpeming Railroad to carry iron ore from the mines directly to company-owned docks on Lake Superior.
History: 20th century
William G. Mather, the son of Samuel, guided Cleveland-Cliffs as president and later as chairman of the board during the period of 1890-1947, participating in the transition from the hard-rock iron ore of Upper Michigan to the soft hematite of Minnesota's Mesabi Range and adjacent lodes.
Under Mather, Cleveland-Cliffs was a leader in the development of the classic-type lake freighter, a bulk-cargo vessel especially designed to carry Great Lakes commodities. The 618-foot (188 m)-long William G. Mather, launched in 1925, is a surviving example of this ship type. For almost a century, the black-hulled Cleveland-Cliffs ships were familiar sights on the upper Lakes.
Demand for American iron ore hit peaks during World War I, World War II, and the post-WWII consumer boom. In 1933, Edward Greene (the son-in-law of Jeptha Homer Wade II) replaced William G. Mather as the head of the company. The Mather A Mine opened in the early 1940s and the Mather B shaft in the 1950s. As the Cold War continued, reserves of mineable hematite dwindled in northern Minnesota and Cleveland-Cliffs returned some of its focus to its traditional areas of interest around Marquette, Michigan, where new deposits of magnetite were opened. The first pellet plant was built at Eagle Mills in 1954, followed by the first grate/kiln plant at the Humboldt Mine in 1960. The Republic Mine was converted from a shaft mine to an open pit and concentrator in 1956 and a two-kiln pellet plant was added in 1962. The Empire Mine opened in 1963 and was expanded in the mid- and late-1970s; the Pioneer Pellet Plant was opened in 1965 to pelletize the underground ore from the Mather B Mine in Negaunee. In 1974 the Tilden Mine opened in Ishpeming. This mine was and is the only mine in the world with the ability to produce both hematite and magnetite pellets.
In 1970, a high-grade iron-ore mine was opened at Pannawonica in the Pilbara region of Western Australia, with a 200-km rail line to processing facilities at Cape Lambert for which the residential township of Wickham was built. A pellet plant was built but ceased operation before 1980, following a sharp increase in the cost of diesel fuel.
During the 1970s, Cleveland-Cliffs had sizeable interests in uranium and shale oil fields, as well as the oil and gas drilling industries. It also had holdings in the forest products industry. This interests were disposed of in the 1980s when the company refocused its efforts on its core iron ore business.
The periods following the recessions of 1974-75 and 1981-83 were harsh ones for the iron ore industry. Cleveland-Cliffs shrank its operations, closing the Mather B Mine and the Pioneer Pellet Plant and associated Ore Improvement Plant in 1979. The Humboldt Pellet Plant closed in 1981 and the Republic Mine was idled in 1981 and closed for good in 1996, when Cliffs began turning the associated tailings ponds into compensatory wetlands for its other properties. Over 50% of the Marquette Iron Range employees were laid off and, in 1984, Cliffs withdrew from the Great Lakes shipping industry.
In 2002, LTV Steel, a partner in the Empire Mine managed by CCI, closed and the Empire was idled for 6 months. Cleveland-Cliffs stock plummeted. President George W. Bush enacted steel tariffs that helped domestically produced steel rebound.
In the years following the introduction of steel tariffs, a sharp increase in steel production in China and other developing countries led to a significant upswing in the price of global iron ore. This trend benefited Cleveland-Cliffs after the two lean decades that had preceded it. To remain competitive, Cleveland-Cliffs decided to expand globally and to diversify into other minerals, leading to the acquisition of iron-ore properties in Brazil and Australia and coal properties in Australia and the US.
In June 2007, Cleveland-Cliffs purchased its first domestic coal property. The coal company, called PinnOak, mines coal in Alabama and West Virginia and once belonged to U.S. Steel. In line with its venture into coal, the company changed its name from Cleveland-Cliffs to Cliffs Natural Resources in October 2008.
On January 11, 2011 it was reported that Consolidated Thompson Iron Mines Limited agreed to a US$4.9 billion takeover by Cliffs Natural Resources ($200 million of that was already owned, the cost includes debt (In September 2011 Thompson reported $230.56 million in long term with $566.07 million in total liabilities). The deal, scheduled to close in the second quarter saves both companies a combined US$75 million in operating expense (partly due to many of their facilities being adjacent to one another). The deal gives Cliffs the large Bloom Lake iron ore mine in the province of Quebec, very close to Labrador.
Cliffs Natural Resources has deposited many of its pre-1981 papers in the Historical Collections of the Great Lakes at Bowling Green State University. They have also deposited material at Central Upper Peninsula and Northern Michigan University Archives
- "Cliffs Natural Resources 2011 Full Year Results". February 15, 2012.
- "Cliffs Natural Resources 2010 4th qtr statements of operations". 2010-02-16.
- "Cliffs snags Consolidated Thompson". 2010-01-11.
- "Cliffs Quarterly Statements of Operation March 2003 to September 2010". Retrieved 2011-01-12.
- "Consolidated Thompson shares up sharply after Cliffs takeover deal". 2011-01-12.
- Cleveland Cliffs Iron Company - GLMS 62 at BGSU Historical Collections of the Great Lakes
- Cleveland-Cliffs Inc Article at Encyclopedia of Cleveland History, Case Western Reserve University
- Financial Statements for Consolidated Thompson Iron Mines Limited
- "Consolidated Thompson shares up sharply after Cliffs takeover deal". 2010-01-12.
- "Cliffs Natural Resources joins ranks of the Fortune 500". Mary 6, 2011.
- Terry S. Reynolds; Virginia P. Dawson (2011), Iron Will: Cleveland-Cliffs and the Mining of Iron Ore, 1847-2006, Wayne State University Press, ISBN 0-8143-3511-X