Cliffs (CLF) To Redeem Senior Notes Due Jan 2018 To Cut Debt

Cliffs Natural Resources Inc. (NYSE:CLF) has announced its decision to redeem all of its outstanding Senior Notes due Jan 2018. This decision reiterates the company’s focus on reducing debt and interest expenses.

The principal amount due for the notes is around $284 million. Based on the conditions mentioned for the notes as well as the agreement governing it, the total amount payable to holders of the notes is roughly $301 million, excluding accrued and unpaid interest. When the notes are completely redeemed, Cliffs will save $17 million annually on interest payments. Holders will be provided with a notice on the redemption as well as the procedure for the same.

Cliffs is able to redeem the notes following the successful closure of its equity offering. The company will now have around four years before the next maturity of outstanding notes.

Shares of Cliffs fell around 1.1% to close at $6.28 on Aug 17.

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. Its total debt fell around 4% year over year to $2.7 billion at 2015 end 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 reduce 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).

Other equally ranked companies in the mining space include Fortescue Metals Group Limited (OTC:FSUGY) , Coeur Mining, Inc. (NYSE:CDE) and Kumba Iron Ore Ltd. (OTC:KIROY) .