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Cliffs Shares Fall On Dividend, Salary Cuts

The Associated Press

NEW YORK (AP) — Shares of Cliffs Natural Resources Inc. tumbled on Wednesday a day after the iron ore and coal miner said it will slash its dividend by more than half, launch a public offering of 12 million shares and cut salaries of virtually all its salaried personnel to save money.

Cliffs shares fell $4.67, or 16 percent, to $24.24 in midday trading.

Given the continued uncertain outlook for the industry and its steel clients, Deutsche Bank analyst Jorge Beristain said that the proceeds from Cliffs' offering will likely go toward strengthening its balance sheet as opposed to mergers and acquisitions in the near future.

Beristain rated Cliffs to "Buy," noting that its stock is trading at a discount compared to its peer group.

But BMO Capital Markets analyst Tony Robson said that because shares have rallied in the past 10 weeks, the company's stock price has risen high enough.

Given that the stock recently beat his earlier price target of $30, Robson downgraded the company to "Market Perform" from "Outperform" and lowered its price target to $25.

Since the beginning of March, shares of Cliffs have more than doubled to reach as high as $31.02 just last Friday. Shares have ranged between $11.80 and $121.95 over the past 52 weeks.

Overall, the impact of Cliffs' cost-savings and cash-generating actions will be mixed, said Robson, who called the dividend cut "erroneous" and said it sent the wrong signal to the market regarding the company's financial status.