TORONTO (miningweekly.com) – North American iron-ore producer Cliffs Natural Resources on Tuesday announced that it had slashed its 2014 capital expenditure (capex) budget by more than half year-over-year, driven by a significant reduction in the company's expansion and tailings and water management capital spending at its Bloom Lake mine, in Quebec.

New York- and Paris-listed Cliffs also revealed that it would idle production at its Wabush mine, in the province of Newfoundland and Labrador by the end of the first quarter. 

Cleveland, Ohio-based Cliffs said it expected its full-year 2014 capex to be in a range of $375-million to $425-million, compared with its full-year 2013 capital spending of $862-million.

"Sharper capital allocation must drive our decisions. Today's announcement to reduce overall capital spending is an important first step. Bloom Lake's orebody is well suited for a global market that increasingly values quality and diversification of supply, but it also requires time and capital to be properly developed, built out, and operated to realise its full potential.

“Ultimately we must extract the highest value from Bloom Lake for our shareholders and operating Phase 1 preserves all possible options for this asset. Given the wide range of outlooks for iron-ore prices, we reduced our 2014 capital expenditures at Bloom Lake mine as we evaluate the best alternatives for this asset as part of our overall focus on enhancing value for shareholders,” president and COO Gary Halverson said.

In the current pricing environment, Cliffs expects to produce and sell 5.5-million to 6.5-million tons from the Bloom Lake mine's first phase in 2014, which is in line with full-year 2013 results. Cliffs expects Bloom Lake’s full-year 2014 cash costs to be $85/t to $90/t, compared with fourth-quarter 2013's results of $89/t

Cliffs indicated that it would idle Phase 1 if pricing significantly decreased for an extended period of time. With the Phase 2 expansion indefinitely suspended, the company had made adjustments to various components of the mine plan, mainly in the project's tailings and water management strategy. This had enabled Cliffs to defer and lower its year-over-year capital spending while continuing to operate Phase 1.

Cliffs expects Bloom Lake mine's full-year 2014 capital expenditures to total about $200-million.

The company said costs were unsustainable at the Wabush mine, illustrated by the fourth-quarter cash costs of $143/t.

Cliffs had already idled Wabush mine's Pointe Noire pellet plant in June 2013.

About 500 employees at both the Wabush Scully mine and the Pointe Noire rail and port operation would be impacted by these actions. 

“We simply cannot continue operating a high-cost mine while pricing and freight markets are so volatile,” Halverson said.

Cliffs expects to incur idle costs related to the Wabush mine of about $100-million in 2014. Also, owing to the shuttering of the Wabush mine, Cliffs expects to record impairment and write-off charges of about $183-million, which would be reflected in its fourth-quarter 2013 results.

Cliffs would continue to operate the Port at Pointe Noire, in Sept-Îles, Quebec.