The Rising Influence of Rising Affluence

[DewDiligence]

CLF is piling all its dirty laundry into 4Q12:

http://finance.yahoo.com/news/cliffs-natural-resources-inc-expects-130000644.html

• 1) $1B non-cash writedown on the balance-sheet carrying value of the Consolidated Thomson assets (due to reduced expectations from the Bloom Lake mine and the previously announced delay in the second phase of mine development);

• 2) $365M non-cash writedown stemming from the sale of CLF’s stake in Amapá (Brazil) JV as previously disclosed in #msg-83039554 (the actual amount is slightly smaller than the previously announced range of $380-420M);

• 3) $542M non-cash writedown of deferred tax assets due to reduced expectations of future tax payments stemming from reduced expectations of taxable income; and

• 4) $100-150M cash writedown relating to the Quebec iron-ore business.

Of these items, 1) is no surprise and is a non-issue, IMO, while 2) was previously disclosed. However, items 3) and 4) are bearish: the latter because it’s a cash expense that has not been explained (and won’t be until the 4Q12 CC), and the former because of what it implies about CLF’s long-term profitability.

The only bullish take that’s possible from all this is that CLF is cleaning up its balance sheet for a possible sale of the company; however, I don’t think a strong inference exists that such an action is being contemplated.