Cliffs Natural Resources Inc., the U.S. iron-ore producer facing calls from an activist shareholder to spin off foreign assets, will idle a Canadian mine and cut spending at a second operation in the country.
Cliffs expects to stop operations at the Wabush Scully mine in Newfoundland and Labrador by the end of the first quarter because of “unsustainably high” costs, the Cleveland-based miner said yesterday in a statement. Cliffs’ total capital expenditure in 2014 will be $375 million to $425 million, less than half the level in 2013, after the company reduced spending plans at the Bloom Lake mine in Quebec.
Cliffs, the biggest U.S. iron-ore producer, is among mining companies struggling to increase profits after prices for the commodity declined. The company delayed plans to expand Bloom Lake and cut its dividend last year as its chief executive officer and president of global operations resigned.
“Sharper capital allocation must drive our decisions,” President and Chief Operating Officer Gary Halverson said in the statement. “We simply cannot continue operating a high-cost mine while pricing and freight markets are so volatile.”
Casablanca Capital LP, Cliffs’ fourth-largest shareholder according to data compiled by Bloomberg, has called for the company to double its dividend, convert its U.S. assets to a master-limited partnership and significantly cut costs, according to a letter filed with regulators Jan. 28.