North America’s largest iron-ore producer, Cliffs Natural Resources Inc. (CLF) recently priced its two trances of senior notes offering. One set of $700 million senior notes will bear an annual interest rate of 4.875% and will mature in ten years. Another set of $300 million senior notes will bear an annual interest rate of 6.25% and will mature on October 1, 2040.
Cliffs’ $700 million offering is expected to close on March 23, 2011 and the $300 million offering is expected to close on April 1, 2011.
Cliffs expects to use the net proceeds from the issuance of the Senior Notes for financing a portion of the previously announced acquisition of Consolidated Thompson Iron Mines Limited.
Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated are serving as joint book-running managers for the offering.
In January 2011, Cliffs agreed to buy Canada’s Consolidated Thompson Iron Mines Ltd. for about C$4.9 billion ($4.95 billion) or C$17.25 per share, to expand iron ore sales to Asia.
After the acquisition, Cliffs will manage and operate Consolidated Thompson’s the Bloom Lake open-pit iron ore mine and two adjacent properties in Quebec. This will result in cost savings of around $75 million in terms of transportation and port costs.
Cliffs is the largest producer of iron ore pellets in North America with a 45% share, besides being a major supplier of metallurgical coal in North America with a 30% share. The company operates six iron ore mines in Michigan, Minnesota and Eastern Canada as well as three coking coal mines in West Virginia and Alabama.
The three reportable segments of Cliffs are North American Iron Ore, North American Coal and Asia-Pacific Iron Ore. Cliffs competes with the likes of CONSOL Energy Inc. (CNX), Massey Energy Co. (MEE) and Peabody Energy Corp. (BTU).
Currently, Cliffs has a Zacks #1 Rank (Strong Buy) for the short term and a Neutral recommendation for the long term.
PEABODY ENERGY (BTU): Free Stock Analysis Report
CLIFFS NATURAL (CLF): Free Stock Analysis Report
CONSOL ENERGY (CNX): Free Stock Analysis Report
MASSEY EGY CPY (MEE): Free Stock Analysis Report
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