Thomson Reuters






Sept 26 -


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Summary analysis -- Cliffs Natural Resources Inc. ----------------- 26-Sep-2012


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CREDIT RATING: BBB-/Stable/-- Country: United States


State/Province: Ohio


Primary SIC: Iron ores


Mult. CUSIP6: 185896


Mult. CUSIP6: 18683K


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Credit Rating History:


Local currency Foreign currency


10-Mar-2010 BBB-/-- BBB-/--


19-Nov-2008 NR/-- NR/--


08-Sep-2008 BBB-/-- BBB-/--


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Rationale


The rating on Cleveland-based mining and natural resources company Cliffs
Natural Resources Inc. reflects the combination of what Standard & Poor's
Ratings Services considers to be the company's "satisfactory" business risk
profile and "intermediate" financial risk profile. These assessments reflect
the company's good domestic market position in the North American iron ore
market, high barriers to entry, and significant cash flow generating ability
throughout a cycle. However, our rating also incorporates the highly cyclical
nature of the iron ore business (given the company's exposure to the volatile
steel industry), Cliffs' significant customer concentration, and the company's
relatively high cost structure.


Under our base-case scenario, we expect 2012 operating performance to be down
from 2011 levels because of lower iron ore prices. A modest slowdown in
Chinese growth has led to a decrease in iron ore imports and has pressured
iron ore prices. As a result, we expect EBITDA of between $1.8 billion and
$2.0 billion, with adjusted debt-to-EBITDA between 2x and 3x and funds from
operations (FFO)-to-debt in excess of 30%. If low iron ore prices persist into
2013, we believe Cliffs will maintain adjusted debt-to-EBITDA of between 2x
and 3x because the company typically has multiyear supply agreements with its
customers, which limits the amount of price increase or decrease in any given
year. We consider these metrics to be in line with the current rating, given
the company's satisfactory business risk profile. In addition, the company's
strong liquidity provides support for the rating.