Cliffs Natural Resources Inc. announced last week that it has entered into a revised commercial agreement with ArcelorMittal USA Inc. to supply iron ore pellets for an additional two years through the end of January 2017. There also is a mutual option to extend for a third year.
Cliffs and ArcelorMittal USA have also extended their joint partnership for the Empire Mine located on the Marquette Iron Range in Michigan. Previously, Cliffs had announced an impending closure of the Empire Mine. Until the amended commercial agreement was reached with ArcelorMittal, the Empire Mine did not have a customer for pellet production beyond 2014. With this decision, Cliffs and ArcelorMittal will extend the life of this mining operation into 2016.
Just a year ago, Essar Steel Minnesota announced it had entered into a long term iron ore pellet off take agreement with ArcelorMittal USA. The 10-year agreement called for the supply of pellets to begin during the second half of Essar’s fiscal year ending March 31, 2014. The company has encountered difficulty financing the completion of its Nashwauk pellet processing plant, which would have produced the pellets.
“This agreement was made possible by the close working relationships we have with ArcelorMittal, both at the commercial and operational level. Importantly, this extension builds upon the long-term customer and partner relationship we have with ArcelorMittal particularly at the Empire Mine,” said P. Kelly Tompkins, Cliffs’ Executive Vice President – External Affairs and President Global Commercial. “We are pleased to continue as a reliable supplier of high-quality iron ore pellets to one of ArcelorMittal USA’s facilities which is also good news for our dedicated employees who have demonstrated that Empire remains a safe, viable producer of high-quality, cost competitive pellets.”
Cliffs is maintaining its 2014 full-year sales and production volume expectation of 22 - 23 million tons from its U.S. Iron Ore business. Cliffs’ full-year 2014 U.S. Iron Ore cash-cost-per-ton expectation is $65 - $70. The company said that this extension will require very limited capital.