Cliffs Near-Term Outlook Neutral

By: Zacks Investment Research Wednesday, November 19, 2008 1:14 PM

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Cliffs Natural Resources Inc (CLF) expects to benefit from robust industrial growth in China and India, which are pushing demand for steel, fueling higher demand for iron ore. However, the company is suffering from a weak production profile, rising energy costs, and high customer concentration.

Recently, it terminated the definitive merger agreement with Alpha Natural Resources, which would have created the largest North American producer of metallurgical coal. Combination of these factors lead us to rate the shares a Hold with a target of $20.00.

In 2008, Cliffs expects revenue per ton in its North American Iron Ore segment to average $91. The company indicated that revenue per ton in its North American Coal segment is expected to average $93 for 2008. Cliffs' Asia-Pacific Iron Ore segment expects average per-ton revenue to be $98.

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