Cliffs Natural Resources Inc. announced projected full-year 2012 capital expenditures expectations, including its plans to invest approximately $1 billion, comprised of about $300 million of sustaining capital and $700 million of growth and productivity-improvement capital. Cliffs' 2012 capital budget represents an expected 12% increase over its 2011 capital expenditures of approximately $880 million. Cliffs indicated this amount was less than its previous estimate of $900 million and an original 2011 budget of $1 billion.
Cliffs says its 2012 capital budget is primarily intended to fund the organic growth pipeline the company has acquired through the completion of a number of strategic transactions in recent years. These transactions have diversified Cliffs' business and provided the company significant exposure to customers outside of its North American steelmaking customer base.
Significant growth and productivity projects earmarked within each of Cliffs' business segments include the following:
In its U.S. Iron Ore business segment, Cliffs anticipates spending $60 million in 2012 related to its previously disclosed project to extend the life of Empire Mine to 2015. This project is expected to allow Empire to continue producing at a rate of approximately 3 million tons of iron ore annually through its remaining mine life.
In its Eastern Canadian Iron Ore business segment, Cliffs anticipates spending $470 million related to Bloom Lake's Phase II expansion to 16 million tons, and $45 million related to port and rail upgrades in Eastern Canada.
In its Asia Pacific Iron Ore business segment, the company expects capital spending of approximately $40 million related to the ongoing capacity expansion of the Koolyanobbing Complex in Western Australia to 11 million tons.
In its North American Coal business segment, Cliffs anticipates capital spending of approximately $50 million related to growing high-volatile metallurgical coal production capacity from its continuous mining operations in West Virginia.
Preliminary capital estimates were also provided for Cliffs’ chromite project in Northern Ontario, where the company controls three large chromite deposits. With a timeline to begin production in 2015 from its wholly owned Black Thor deposit, Cliffs is currently in the pre-feasibility study phase of the project. As part of pre-feasibility, the company continues to evaluate many factors, scenarios, and strategic alternatives that may ultimately impact future investment and timing of the project.
At the time of Cliffs' initial investment in chromite assets in 2009, the company predicated preliminary comments for capital requirements on a baseline expectation of a project annually producing approximately 600,000 tons of ferrochrome. Now the company anticipates an expanded project annually producing 1 million tons of export chromite ore concentrate in addition to the original 600,000 tons of ferrochrome.
Preliminary capital estimates for the project, based on pre-feasibility work completed to date, include the following major engineering components:
• Mine development – approximately $150 million
• Near-mine concentrating plant – about $800 million
• Ferrochrome processing facility – about $1.8 billion.
Cliffs also estimates that an integrated transportation system, including an all-weather road servicing the project, would require further investment totaling approximately $600 million, which was not included in Cliffs' initial investment estimate. However, because this transportation system is provincial infrastructure required for the general use of remote northern communities and other Ring of Fire mining projects, Cliffs anticipates its commitment to invest in the all-weather road would be partial, with the balance to be contributed by other industry participants and government entities.
Based on the completion of a number of additional studies, including feasibility, and other project milestones, Cliffs expects a majority of the project's anticipated capital requirements to be made in 2014 and 2015, with an early works program initiated prior to 2014 to maintain project execution timeline. The pre-feasibility study is expected to be completed in the first half of 2012.
Cliffs Natural Resources Inc., an international mining and natural resources company, is a major global iron ore producer and a significant producer of high- and low-volatile metallurgical coal. Cliffs' strategy is to continually achieve greater scale and diversification in the mining industry through a focus on serving the world's largest and fastest growing steel markets.
The company is organized through a global commercial group responsible for sales and delivery of Cliffs' products and a global operations group responsible for the production of the minerals the company markets. Cliffs operates iron ore and coal mines in North America and two iron ore mining complexes in Western Australia. The company also has a 45% economic interest in a coking and thermal coal mine in Queensland, Australia, and a major chromite project, in the pre-feasibility stage of development, located in Ontario, Canada.