TORONTO (miningweekly.com) – US iron-ore and coal producer Cliffs Natural Resources, which is locked in a proxy fight with an activist shareholder for control of the board, on Wednesday reported a net loss for the three months ended June 30, as lower iron-ore and metallurgical steelmaking coal prices and reduced sales pressured the balance sheet.

The Cleveland, Ohio-based miner reported a loss of $2-million, or $0.01 a share, compared with a net income of $133-million, or $0.82 a share, in the second quarter of 2013.

The year-over-year consolidated revenues were 26% lower at $1.1-billion, mainly impacted by a 24% drop in sales volume from the company's US iron-ore operations.

Seventeen Wall Street analysts had on average expected a loss of $0.06 a share, based on revenue of $1.17-billion.

The cost of goods sold decreased by 17% to $1-billion, mainly driven by reduced volumes, lower idle costs and favourable foreign exchange rates when compared with the second quarter of 2013.

Lower revenues significantly contributed to a 66% decrease in the consolidated sales margin to $92-million, down from $268-million in last year's comparable quarter. The consolidated sales margin also included $18-million in lower-cost-or-market adjustments in the North American coal and Eastern Canadian iron-ore business segments.

OPERATIONS REVIEW

In the US, iron-ore pellet sales totalled 4.3-million tons compared with 5.7-million tons in the second quarter of 2013. The decrease was mainly driven by reduced vessel shipment availability owing to the freeze on the Great Lakes, resulting in a delayed start of the 2014 shipping season, as well as lower export and other spot sales. This decrease was partially offset by increased demand from two customers, the company said.

Cliffs highlighted that it now expected to only hit the lower end of its full-year US iron-ore output guidance of 22-million tons, owing to weather-related impacts.

In Eastern Canada, iron-ore sales volumes were up 3% to two-million tons, an increase of 3% over the prior year's quarter and reflected Bloom Lake mine concentrate sales only. Cliffs added that Bloom Lake’s second-quarter sales volume increased 33% over last year's comparable quarter and was a record quarter for tons shipped.

This was mainly driven by improved production rates and a Chinamax-sized vessel shipment that was delayed in the first quarter owing to the adverse weather-related impact on logistics. The segment's sales volume increase was partially offset by an absence of sales from the Wabush mine, which shipped 500 000 t in the prior year's second quarter, reflecting the mine's recent idling.

Cliffs expected to achieve the high end of its output guidance for the quarter under review of seven-million tons.

Cliffs’ Asia Pacific iron-ore sales volume decreased 3% to 2.9-million tons, from three-million tons in the 2013 second quarter. The decrease was attributed to the timing of vessel shipments. Cliffs revised its full-year Asia Pacific iron-ore sales and production volumes outlook to about 11-million tons, comprising about half lump and half fines iron-ore.

Meanwhile, Cliffs reported that North American coal sales were down 2% to two-million tons, down from 2.1-million tons sold in the prior year's comparable quarter. The decrease was driven by lower sales to certain customers owing to lower domestic nominations for metallurgical coal sales, partially offset by increased low-volatile metallurgical coal export sales and increased thermal coal sales.

During the quarter, Cliffs issued a notice to employees at the Pinnacle mine, in West Virginia, that it intended to temporarily idle its operations as a result of current poor market conditions for metallurgical coal. The miner noted that should market conditions not improve, it expected that the idling of the operation could last more than six months from about August 25.

The company expected sales and output of seven-million tons, consisting of 67% low-volatile metallurgical coal and 20% high-volatile metallurgical coal, with thermal coal making up the remainder.

PROXY CONTEST

Cliffs shareholders will on Tuesday vote during the company’s annual general meeting to either keep most of the current board, or to install a new majority from 5.2%-activist shareholder Casablanca Capital. Casablanca accused the company of destroying shareholder value and wanted to replace Cliffs' CEO with its own nominee and a majority of board members with its slate of candidates.

Institutional Shareholder Services and Glass Lewis & Co had issued strong recommendations in support of Casablanca’s campaign for certain board changes.

Cliffs’ NYSE-listed stock fell $0.18 in after-market trading to $15.30 apiece on Wednesday, having shed 41.35% of its value since the start of the year.