Cliffs to Take $1 Billion Writedown on Consolidated Thompson

Cliffs Natural Resources Inc., the biggest U.S. iron-ore producer, said it will take a $1 billion writedown for the fourth quarter related to its 2011 acquisition of Consolidated Thompson Iron Mines Ltd.

The writedown is primarily due to an anticipated decline in Consolidated Thompson’s long-term production volumes and an increase in its capital and operating costs, Cleveland-based Cliffs said today in a statement.

The company also said it will take charges of as much as $150 million related to its eastern Canadian iron-ore business and a $365 million writedown on a Brazilian joint venture. Cliffs will record $542 million of expenses in the quarter related to two deferred tax assets.

Cliffs is taking the measures after iron-ore demand and prices slumped in the fourth quarter. The company announced in November that it will idle production in Michigan and Minnesota, fire 625 workers and postpone the expansion of its Bloom Lake project in Quebec. Cliffs bought Consolidated Thompson for C$4.9 billion ($4.89 billion) to gain mines in Quebec and Newfoundland and Labrador and add exports to Asia.

Iron ore in China averaged $120.58 a dry metric ton in the quarter, 14 percent lower than a year earlier, data from The Steel Index show. U.S. steel capacity utilization fell to 72 percent in the period from 74 percent, according to the American Iron and Steel Institute.

Cliffs said Jan. 3 it agreed to sell its 30 percent stake in the Amapa joint venture in Brazil to Zamin Ferrous Ltd. Anglo American Plc. also agreed to sell its 70 percent stake in the venture.

Cliffs fourth-quarter earnings will fall 59 percent to 59 cents a share, according to the average of 19 analysts’ estimates compiled by Bloomberg. The company will issue results on Feb. 13 after the close, Cliffs said today.

The shares fell 3.2 percent to $36 at the close in New York.