Replies to post #7181 on The Rising Influence of Rising Affluence

[Democritus_of_Abdera]

Re: CLF suspension of Chromite Project Environmental Assessment and Feasibility Study....

As Dew stated in #msg-88931332 CLF's temporary suspension of its chromite environmental assessment and feasibility study was foreshadowed in the Q1 CC of April 25, 2013.

Albeit not a surprise, I view the decision to suspend the environmental-assessment work as an indication that the new Ontario government might be backing away from the term sheet that had been established with the predecessor administration in May 2012; issues related to road and energy subsidies being of foremost concern.

Selected quotes:

http://finance.yahoo.com/news/cliffs-natural-resources-temporarily-suspends-100100241.html

The Company cited that the following open issues are impeding the progress of the project's environmental assessment process, as well as the Feasibility Study evaluation:

Delayed approval of the Terms of Reference for the provincial Environmental Assessment (EA) process.

Uncertainty regarding the federal EA process due to the current judicial challenge by a number of the impacted First Nations.

Unresolved land surface rights issues following a February 2013 Mining and Land Commissioner hearing.

Unfinished agreements with the Government of Ontario that are critical to the project's economic viability.

2013-04-25 Q1 CLF CC:

Joseph A. Carrabba, Chairman, President & Chief Executive Officer

Moving to our chromite project, while our internal evaluations are nearing completion, resolution of several items, including the definitive agreement with Ontario, is necessary before we will be able to conclude our feasibility study. Unfortunately, talks have not yet resumed with the new provincial government and other significant issues remain unresolved. We will not approve any significant investment capital or major construction activity until key elements supporting economic viability are resolved.

Our work to build positive relationships with the First Nation communities continue. To date, we have invested over $3 million in various programs that have positively impacted these communities. This is an extraordinary project opportunity that would require the support of First Nations, government and others to advance beyond the current phase.

Terrance M. Paradie, Executive Vice President & Chief Financial Officer

... At quarter end, we held $287 million in cash and cash equivalents. We are maintaining our full year CapEx expectation of $800 million to $850 million. Our expected 2013 CapEx includes approximately $300 million of sustaining capital. The remainder is growth in productivity capital and is largely related to the investments at Bloom Lake which will support both Phase I and II. We are also maintaining our expected full year SG&A expenses of approximately $230 million. In addition, we are maintaining our expected cash outflows expectation on growth projects of approximately $85 million. This is comprised of approximately $25 million related to exploration and $60 million related to the completing the feasibility stage of the development of our chromite project in Ontario, Canada.

For the full year, we expect unfavorable working capital adjustments of approximately $250 million and a full year effective tax rate of approximately 1%.

At quarter end, our total debt stood at $3.4 billion, which included $550 million drawn on our $1.75 billion revolving credit facility ... we held $287 million in cash and cash equivalents.

Jorge Beristain – Deutsche Bank Securities, Inc:

And then could you also quantify where you are in the process with the Ontario government? You said there’s obviously been the change of government, but is this a, kind of, back to square one in terms of dealing with them on issues of road and energy subsidies or do you think that you’re able to keep a lot of the work that was done under the prior administration and just trying to get a sense as to how realistic the chromite project is under the previously stated timelines given the change in the government?

Joe Carrabba – Cliffs Natural Resources, Inc.:

We’ve had a – as you know, we had a term sheet that we announced with the government, the predecessor, in May of 2012. We’ve worked with them very diligently and let me just say, and very cooperatively, with the government to get definitive the agreement nailed down. It was just we didn’t get it done on either side prior to the change of government. I think there was a lot of goodwill on both sides to try and get there and we just couldn’t reach that. I think with the new provincial government as cabinet shifts are made and people get settled back in to their seats. It’s just a restart from priorities, I think, it’s no way that we’ve seen at this point in time a backing away from the term sheet, but it’s getting the definitive agreements in place with a new group of cabinet ministers, if you will.

But I would say both from the First Nations perspective, from the Ontario Government, again we’re in negotiation phases, but people want this project to go forward. We’ve just got a lag right now while the government gets reorganized, but they seem to have been, still, very positive on this project and it’s not a restart. But it certainly is a lag in time and again I don’t have a sense of the time either until the government is ready to re-engage once they go through their changes.