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Cliffs CEO promises continued growth in '18

Taconite iron ore pellets move through the furnace at Cleveland Cliffs Northshore Mining plant in Silver Bay. The company will spend $50 million on the plant this year to make a new pellet for its new iron plant in Ohio. News Tribune file photo1 / 2
Northshore Mining, owned by Cleveland-Cliffs, in Silver Bay. Katie Rohman/News-Chronicle2 / 2

Cleveland-Cliffs had a good year mining and selling Minnesota and Michigan iron ore in 2017, the company reported Thursday, Jan. 25, and should have an even better year in 2018.

Cliffs nearly doubled net revenue, hitting $371 million in 2017. That's up from $199 million in 2016 as the company and industry continue to rise out of the global iron ore doldrums of 2015.

The nation's largest producer of taconite iron ore pellets used to make steel had full-year 2017 consolidated revenues of $2.3 billion, compared to the prior year's revenues of $2.1 billion, although reenu it he fourth quarter was actually down from 2016.

Cliffs CEO Lourenco Goncalves told mining industry analysts in a conference call that he promised one year ago that 2017 would see strong and steady growth "and we delivered."

"Our customers have a strong appetite for pellets," Goncalves said, promising increased growth in 2018.

Cleveland-based Cliffs owns and operates United Taconite in Eveleth/Forbes and Northshore Mining in Silver Bay/Babbitt, and is operator and part-owner of Hibbing Taconite. It also owns and operates the Tilden mine and processing center in Michigan's Upper Peninsula.

The company Thursday said it plans to continue its push toward an added-value, direct-reduced iron product that can be used in the electric arc mini-mills that produce nearly two-thirds of U.S.-made steel. Cliffs will spend $250 million in 2018 on building its hot briquetted iron plant in Toledo, Ohio, and $50 million to refurbish Northshore Mining's pellet operations in Silver Bay to make the type of taconite pellet needed for the Toledo plant.

Goncalves said groundbreaking will occur on the Toledo plant in April and that the plant will be producing iron in mid-2020.

Goncalves touched on his controversial announcement in December that Cliffs had purchased the rights to some of the mine area of the developing Mesabi Metallics project in Nashwauk. Goncalves repeated that the company acquired the iron ore-rich area as potential future feedstock for its Iron Range operations, most likely nearby Hibbing Taconite.

A federal bankruptcy judge in Delaware is still deciding whether the Cliffs acquisition is legitimate and, if so, whether Cliffs may be obliged to sell Mesabi Metallics the ore under previous agreements in the bankruptcy settlement that gave health-care billionaire Tom Clarke the reins of the Mesabi Metallics project.

Goncalves took another swipe at Minnesota officials, namely Gov. Mark Dayton and Iron Range lawmakers, who have tried to support Mesabi Metallics' development. Meanwhile, Goncalves has worked to keep the project down and the property's iron ore — potential competition for his product — in the ground.

The State of Minnesota "has backed the wrong horse for the last several years," Goncalves said, repeating his claim that Cliffs is the best-situated company to bring growth to the Iron Range ore industry.

Goncalves referred to Clarke as "Chewbacca," the character from Star Wars (a name he's used before, for Clarke's company Chippewa Capital Partners). He said Clarke has promised much but that he will be unable to deliver the project. Goncalves said he will eventually submit a mining plan for the Nashwauk land, although it's not clear how that would be possible. Mesabi Metallics already has a state mining permit and approved mine plan for the same property.

Cliffs said it will produce about 20 million tons of taconite iron ore pellets in 2018, full capacity for its four operations. The company said its revenue will range up to $102 per ton, including pellet premiums paid by Asian steelmakers for North American pellets. The company said its cost to produce a ton of taconite will range between $58 and $63 per ton.

For the full-year 2017, the company recorded net income of $371 million, or $1.28 per diluted share. For the full-year 2017, adjusted EBITDA was $513 million, compared to $374 million in 2016.

The company reported that its single iron ore mine in Australia may be near the end of its useful life and that it may take action to close the operation if Pacific iron ore prices don't recover. The company said it will continue to operate the mine only as long as it makes a profit and then will cease operations, reclaim the site and sell its assets.