Cliffs (CLF) Prices Public Offering Of 44.4 Million Shares

Cliffs Natural Resources Inc. (NYSE:CLF) has announced the pricing of its underwritten public offering. The company has agreed to sell roughly 44.4 million common shares at a price of $6.75 per share.

Cliffs will receive gross proceeds of $300 million from the offering before underwriter commissions, discounts and other related expenses. Underwriters also have an option to purchase up to roughly 6.7 million additional shares in 30 days. In case the underwriters exercise this option in full, Cliffs will raise up to a total of $345 million in gross proceeds from the offering.

Cliffs plans to utilize the net proceeds received from the offering for corporate purposes. The company also intends to deleverage its balance sheet by repaying outstanding senior notes due in Jan 2018. The offering, which is subject to customary closing conditions, is expected to close on Aug 16, 2016.

BofA Merrill Lynch, Credit Suisse (SIX:CSGN), Goldman, Sachs & Co. and Deutsche Bank (DE:DBKGn) Securities are jointly acting as brokers for Cliffs’ offering.

Cliffs’ adjusted earnings of 6 cents per share and sales of $496.2 million for the second quarter of 2016 topped the respective Zacks Consensus Estimate. The company raised its 2016 sales volume guidance for its U.S. Iron Ore division from 17.5 million long tons to 18 million long tons. The production volume guidance for 2016 has also been raised by 500,000 long tons to 16.5 million long tons.

Cliffs remains focused on reducing debt. The company’s total debt fell around 4% year over year to $2.7 billion at the end of 2015 and further reduced to $2.5 billion at the end of the last reported quarter. In the second quarter of 2016, the company paid off the remaining balance of the outstanding equipment loans of $23 million. These measures will also help in reducing Cliffs’ interest expenses. Management has lowered its interest payment guidance from $220 million to $200 million for 2016.

Cliffs currently holds a Zacks Rank #2 (Buy).

Some other favorably-placed companies in the mining space include Rio Tinto (LON:RIO) plc (NYSE:RIO) , Fortescue Metals Group Limited (OTC:FSUGY) and Amerigo Resources Ltd. (OTC:ARREF) . While Rio Tinto sports a Zacks Rank #1 (Strong Buy), Fortescue Metals and Amerigo carry the same Zacks Rank as Cliffs.