- The $268m deal is based on Seneca assuming all liabilities
- Seneca may pay Cliffs as much as $50m in revenue-sharing plan
The biggest U.S. iron-ore producer is out of the coal business and investors are celebrating.
Cliffs Natural Resources Inc. sold its remaining coal mines, Pinnacle in West Virginia and Oak Grove in Alabama, to Seneca Coal Resources LLC in a $268 million deal based on the buyer assuming all liabilities, Cleveland-based Cliffs said in a statement Tuesday. Its shares surged 13 percent to $1.79 in pre-market trading from Tuesday’s close of $1.59.
The transaction, which may also generate $50 million in revenue sharing through 2020, “represents another very important step in the implementation of our U.S. iron ore pellet-centric, environmentally-compliant strategy,” Chief Executive Officer Lourenco Goncalves said.
Prices of iron ore and coking coal, the two principal steelmaking ingredients, have plummeted in 2015 as economic growth in China, the biggest producer of the metal, has slowed since peaking in 2011.
Cliffs was founded as the Cleveland Iron Mining Co. in 1846 to produce the commodity, which had just been discovered in Michigan’s Upper Peninsula. The company joined an expansion and diversification surge during the commodities super-cycle. Now Goncalves, who took control after an activist campaign in 2014, is striving to return the company to profitability by selling iron ore mined domestically to North American steelmakers.