Cliffs 2Q16 Earnings Call Notes

Cliffs Natural Resources (CLF) C. Lourenco Goncalves on Q2 2016

We won

“To those of you who witnessed Cliffs make it through this difficult time and now believe we have gotten to a great spot, we would like to say four things. First, yes, we won. All the problems we encountered here two years ago have been resolved. Second, we knew we would win. Third, we are just getting started. Fourth, Cliffs’s best days are still ahead of us.”

Cheap iron ore allowed Chinese cheap steel to flood foreign markets

“Harding’s used car lot wisdom does not apply to the vast majority of his clients, such as the Japanese and South Korean steel mills whose respective domestic markets were flooded with cheap Chinese steel enabled by cheap iron ore.”

I’m encouraged by RIO’s new leadership

” I am encouraged by the refreshing message coming out of Rio Tinto’s new leadership. It is good to hear that the leading iron ore miner is now pursuing value, performance and shareholder returns instead of the misguided goals of the previous regime, market share, volume for volume’s sake and not paying taxes in Australia.”

Lower foreign steel prices was the consequence of illegal dumping

“the verdict applied to all trade cases so far confirmed what we have always said that the lower steel prices we see from foreign sources are not a consequence of these foreigners being more efficient or more cost effective. They are just the consequence of illegal dumping. Based on previous anti-dumping and countervailing cases, the duties imposed at this time around will be in place for at least the next five years, until they are due for a sunset review, and will likely stay in place for some more years after the sunset review.”

We think our 500m 2017 EBITDA forecast is conservative

“Of course, if the eternal bears at the commodities desks of the big banks and the research analysts that get their steel price information from middlemen working out of their respective basements are all correct, our 2017 forecast of more than $0.5 billion of EBITDA in 2017 would not be achieved. On the other hand, any improvements beyond current international iron ore prices or domestic steel prices will cause our actual 2017 EBITDA to increase above the forecast. In sum, we believe that our $500 million forecast is actually pretty conservative.”