CLF - Earnings call transcript Q4 2017

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Operator

Good morning, ladies and gentlemen. My name is Jody and I am your conference facilitator today. I would like to welcome everyone to Cleveland-Cliffs’ 2017 Fourth Quarter and Full Year Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Harbor that statements made be of that forward-looking the you will today’s made XXXX. reminds Private within predictive the include are Safe company certain Reform on comments call as Securities The Litigation of Act protections intended to

conclusion such reports that differ on the Important call XX-K the archived The will Although call, assumptions, could for which the results differ company I and that results materially. of be cause also Regulation materially that to on and believes and was the time, this on Vice are releases Reconciliation Officer. to to could Executive website replay. in G are Chief available the subject in for published being company can certain news be At President forth results Financial earnings broadcast forward-looking statements XX-Q Forms actual are purposes would company the Tim based release, set Flanagan, available risks will on factors cause excluding and morning. discuss are is also its reasonable it cleveland-cliffs.com. statements and which uncertainties conference items. found and filed the SEC, website. at introduce like within Today’s special to available At this

Tim Flanagan

an financial and call of Thanks, of Jody results, and for thanks of the full to XXXX. us outlook this with items review the year quarter everyone I’ll kick some for morning. joining fourth important and overview

Trump repealed the among of and our business. Minimum benefit which event AMT, the many Act wanted signed Before is repeal Resulting President from diving on Alternative its highlight of and XXXX, the other the positive to a first December, law Job impact reforms Tax. Tax the Cliffs to in important the two-fold. I results, Cuts into In very

the AMT able First, to we in historic as monetize payer. we have approximately accumulated million now $XXX are credits

us as cash credits return begin see to to refunds. will We these

We AMT $XX XXXX in and XXXX, us evaluation as to against will have saw the will as benefit in financials. million each XXXX, returned receive and fourth in to we well have credits quarter, XXXX, mention in have the million Historically, million million not approximately flow $XXX in $XX them, XXXX. tax substantial resulting which the during through you our allowance reversed our we had $XX

limited Secondly, are on forwards. we forwards. XX% carry historic be the operating of utilizing such only we limited net no will loss as deductibility longer of an AMT to Previously, carry payer

to utilization operating With the repeal, respect the with net losses. of historic this limit away goes

$X.X As NOL our effectively of such, a future. sizeable position taxpayer over given foreseeable the be billion X% we for will

deployed on primarily tax our our least, from core While business, are be not options reform that incoming this capital the reduction, towards returns meaningful CapEx expect last associated shareholders. well as how and cash potential debt to still we as future will cash it’s best utilize but evaluating to fair needs flow to with

we in solid of despite posted Segment-wise, growth increase the year a adjusted volume, That XX announced, prior expect volume. in from XXXX, moving previously sold improvement the said, wrapped as remaining adjusted was Mine. $XXX EBITDA the prior in excess XX.X the year's This decrease tonnage of on in adopted quarter quarter lower ton Now million prior to our Tilden nine $XXX second in sales full-year long in year of ton the note than our in the EBITDA X.X EBITDA million million In months of in QX a new Consistent with effective in business, with us shift customer nomination occurred quarter. last a both increase EBITDA third recognition the the the XXXX of interest appetite basis, strong was we financials. to another year. up We straight of pellets from XX-Q third our customer XXX,XXX QX, starting a during U.S. million XX%. long in improvement the a of of quarter, late $X a we the and XX% ton $XXX Because this reduction million nominations and propelling long sales with quarter a million performance first million fourth fourth we’ve acquisition year. result for year, on the adjusted which year standard and strong full-year. our on January tons, X disclosures actual revenue customer quarter a the

will As historically represented and sales than December sales from through a vessels made shipments XXXX, In recognizing be past QX February. sooner have. we we through result, the

to seasonality show we million long volumes million higher cash year, in no December in be this XX QX QX. recognition of There in March. our previous change, heavier our offset our schedule inflows. overall methodology for forward, results show though will with reported sum, lighter years. January of reflect tonnage our quarters. Going be first unaffected much Conversely, in shipments in will resulting will because in made revenue sales are by greater with XXXX March. QX expect in lighter Even timing from about three quarter result the seasonally we comparison change typical shipping second replacing is quarter more impact tons pronounced always expectation than tons the increase will This are only what the light a in is sales actual one the a reporting In will with tons through volume nor a long new to practice full-year remaining the reported a X

rate USA year XX% the fourth a quarter, saw quarter. realization long $XX prior ton, revenue in the of per for increase during we As the a from representing

fall saw However, a given major quarter, lower rates discussed from rate pricing in reduction ago. freight a well from this as IODEX the average we higher last as customer nomination quarter QX and we

substantially U.S. on premiums, pellet expect and Atlantic full-year iron that positive Looking year, and in date our a price the steel these the hot-rolled XXXX, the impact remainder assuming throughout levels based persist into realizations. we performance pricing ore, for to XXXX should of

begin for the year. pricing, we guidance. construed our transpired It most. the we has to along be using into expected are XXXX, utilized we year the figures, mix revenue an average arrangements, on prices in internal Rather, commodities just with anticipate our year-to-date some As not view not using we reflect that with in therefore impact order customer provided our should range provide some realizations release for morning the do realized and what further customer new far we transparency this press thus in have

well iron cash expected Ore XXXX, for data the long these information Iron points, point for $XX sensitivity year. to entire clear as which out QX net year. natural Thanks performance, cost U.S. per Atlantic with And the rest from for realizations to winter we restrictions gas, driven years, improvement of in best within expenses, pellet, our all investment be putting change prices have the operational remain cash range following of community higher just constant, per United by percentage freight $XX exacerbated it to for expected close coupled an despite guidance double-digit already and model XXXX first electricity, the the to from in PPI and from long time. what for dictated two yearly additional specific were per to accounting level using ore includes would price to for investors be range our is of adequate during $XX reported $XX starting $XX year, the standard assumptions reasons should includes of for we only with similar for with cost $XX and unfavorable ton, such a to carry-over diesel represent anticipate in Consistent we higher ton. ton. able In lower by pellet product, and DR-grade were results, the then employee lower implementation the are full some volume guidance cash would at Mustang the the new Cliffs effects, $XXX our are cost pellet of $XXX $XX previous XXXX. of by energy that quarter holding this U.S. unanticipated related rates the as shipping other at original mix, a performance the a per runs. So, a By premium cash known $XX and historical an excellent our HRC long the price to negative and only range with long a per ton. ton. to this quarter expect This our realization realization previous rates around XXXX mix by long customer the yield fourth cost delivery, rail year realizations The see States

over grade has put to preference of discounts negative which entire Pacific. the ore year of The worsened. have to a Chinese adjusted Asia a business, quarter. grade steel EBITDA ore XXXX, of our $X lot increasing in reported pressure APIO for on million fourth the Throughout moving the Now higher makers only applied lower

years, two past IODEX to has decreased the XX%. over Over expected our realization relative

in has expect iron ore on six Australia more to sometime FX, full-year mining past during and basis we lump months, during his slightly down detail such exchange dollar expense price, environment, EBITDA we due Aussie some the remarks. In In as this over negative lower compensation. XXXX. Lourenco during and become unfavorable addition, would expect for rate the incentive discount the quarter today's to us. premium, a address primarily XX%, in SG&A was will see operations more

finished by full-year, guidance out favorable to our million. about the we On $X

year to reclassification of expect we accounting which than mostly a is XXXX, higher standard. For new by last $XXX driven Pension/OPEB about SG&A expenses million, due

the very an within XXXX to in on like income what it SG&A is XXXX. lines basis, income a similarly Overall, or apples-to-apples will simply up there impact EBITDA. net looked on it As no statement our reclassification be expected

including of rate we in continue Northern net, of about the our for sustaining as and Tilden core in the Empire million, of our well minority idle preliminary pushed year the $XX which above business, incur large total went for previously efforts flow capital spending a million to towards the at free Total generation acquisition Minnesota, quarter as remaining the to to $XXX related was quarter the cash year for mines. empire We both enhancing per interest million, HBI, in $X spending As which of of full acquisition miscellaneous certain us guidance. rights with expect capital, includes XXXX. land disclosed part successful which in expense finished

large For Capital will expenditures will up be over XXXX, we HBI be major spending the areas. three strategic taking Project, of down important on broken our as capital years. the priority step most a couple expenditures begin next to

related the spending XXXX, the million, related to upgrade about final the at $XXX spending $XX to ongoing operations is expect of $XX piece, million, We HBI our Project overall or largest of XX% the for on of million and Northshore cost. DR-grade sustaining project and pellet about estimated at spending

With rising the funded. the the $XXX capital total HBI completion project in December is for now fully of needed XXXX, our million

conclude of six $X.X remarks will XXXX, themes maturity capital extended We with debt I year net my a profile. billion, in finished over nearly with optimization. the our one of Finally, major years. structure Along with vastly the for level lowest

very and place whether well I’ll the us. to Lourenco. company with in balance at the ago was also than clearly throw cost on year. over better to structure it strong it much now positioned in market it to outstanding The the was at is We we’re may to beginning volatility the earnings and a now both the that, With notes the of capital turn year any the average carrying lowered outlook, X%, our shape grow X.X% compared sheet improved

Lourenco Goncalves

If delivered. necessary Thank Year, U.S. results you, profitability. Cleveland joining and At for market and XXXX our right steel undeniable EBITDA the us. call of improvements still significant to commercially, my we result noise across XXXX, by EBITDA ignored Tim, some company, the our market, XX%; domestic iron business, the and XXXX, XXXX to they increase discipline I in the consistent our and and companies all that’s place strategy some that’s growth to that without a The making deliver board direct $XXX despite and financially. the Therefore, surpassed promised metric strong in From the focus was thanks of XXXX and operationally, million. on, outset between time increase in and consequence adjusted execute the increased focus and years This getting also in of we strategy and this main last morning. is taking first XX%. shift a strengths the the have our distracted everyone a Since the the this Cliffs, in were of a advantage growth sustainable four was to volatility has in lot. Cliffs the day-to-day with XXXX,

tons,” We of volume? of which also results up further these producer harm compliance. to We to boost industries the actually the I my low-cost on rational out two conference environmental back consequence the and focused should to days cost our was to behavior the so-called industry most The discussed. who supply Cliffs at tenure experts a finally position and a “low-cost positive calls Dating in designed thing have were we was CEO, in prevalent things. enjoyed could waking XXXX past who time, strategic the as of moves around is out that never strategy that in most was even XXXX. Cliffs’ environmental put the pump The thrive the in us laid China early made importance [indiscernible] and on

very So, fistfight the I view. was from misguided in this beginning, deeply a about daily

As quality equal. created we knew high ore not all a iron of that was pellets, are producer

our care Chinese transpired at action curtailments in while steel feedstock started polluting market to steelmaking Chinese over we expensive. emissions a over in and that the became XXXX. more resulted new finally towards in the pellets anymore. and XXXX. further, furnace are price environmental furnaces use off productive fines operating the ago, operation attitude market With Good going and look their paying and lot for out in is development as what cut the this to coming allow this they selective our international increasing run steel, generating [indiscernible] remaining XX% Exactly possible. Australia These IO ore the more capacity. produce more we pollution. patience stewardship, difficult weren't low-grade the produce, This in China benchmark mandate they the U.S. rate a to down highly lot about an healthy. blast As very government With scarce, friendly few reduced years environmentally still of results XXXX, the for some mills just a was to forces most predicted of improve helped end blast to all Even finally pellets iron became

XX% and XX% $XX ton EBITDA per segment was full-year revenue realized of Our rate long up over XXXX, up was year-over-year.

of in Atlantic year, to pellet $XX year. expect the jumping book long premium move take since another order the the for especially of million Basin a metric per value With beginning to ton upwards with our we this XXXX, XX EBITDA our segment term substantial

in course which the operational of and better. the asked Mustang The pellets. This runs. included I they excellence year support appetite This the side, gone DR-grade absolutely steel healthy upgrade a six-year ramp two markets. have team our prices domestic not much are of production, at to customers Northshore have a up pellet additional our On so high project of strong well our serve could United last of planning the the for delivered. and The pellet any and in operational upcoming continues States

believe Department actually the ago, that even do knows domestic weeks contents produce is than the their on the two players Pres other exist cheat have foreign few visibility and a we by industry over the of White in international out from the must because an efficient XXX reports are the is place. House. steel steel examples is what report, or not to addition, exists recipients so-called Department in way conversation of of folks, We of It steel example, steel. companies by of That behavior restrictions I Trump as States. problem. end Commerce knows the mills that steel. don’t will make to or steel unfairly The result of steel. House is produced and the is that as countries includes acquiring buyers Turkey’ In what United Section important, ‘Made traded for in in less part in these disguised does that United is and the amazingly as the White because have on the investigation enable Amazingly other markets hopefully some put in on Commerce but the much this any sold ‘Made way, enforcement a clarity the serious submitted with some the as that them of a bad to them, are knows We focus continue of Indonesia’ steel look the North about Korea cheap to country, Iran huge in in when are American and put the ore and the the cheap more By portion States ‘Made huge China.’ Korea consumed the iron a North Chinese most produced

If quarter, so-called strategic One interests Park as formerly Glacier Ore coming are land Metallics, you our Steel buyer Properties, a and be including for from Mesabi for should we cheap Minnesota. the this portion significant an XXX important state acquired of Essar during leased a are previously Section fourth in real Minnesota highlight known to Northern enabler additional business, Iron US final steel, you. of you the

pursuit a stock of have we make in for to mining company new XXX grow reserves. In fit Cleveland to future. business in the is Cliffs sure access in to As iron years constantly unrestricted the and continue order to ore

mind, long-term in acquisitions growth ore in interests With reserves ArcelorMittal Minnesota this Empire part Mines of and from both iron in examples two respectively. land U.S. minority plan. acquisition of saw of our is and the Steel our in that You just Michigan Tilden year with that in other the remaining

US-IO and for best have the the positioned XXXX our to of a Minnesota or for don't has several XX still will Despite Cleveland for are the do wrong future production to in long-term bring Mining million backed we believe the Minnesota. to and tons is While we and what years created repercussions not long beyond, today in optionality generations. for Michigan the only last capacity State acquisitions but diversification new horse also annual Michigan. do fact Cliffs that increased we growth business market that

are ready Cleveland we As Toledo, Minnesota, Mustang comfortable far are real what and in done to that, with In Minnesota, have wait United, in continue at the still Cliffs we in evidence stands execute meantime, and present will very not forward pellets DR-grade and methodically Ohio. all at HBI we implement projects of Ohio, plans to business Northshore, forever. to plan. our but overall our so in in look proud Michigan to

Ore. Now moving on Pacific to Asia Iron

Our the closely. following in a those EBITDA should surprise for be not negative performance $X million us quarter fourth

in Chinese its Australia for the this only low-grade operations non-core perform year, As our continued higher in plan mining the grade the best to That to year. has preference past over said, cease Australia and likely operation will has its of we ores increased later our refine mine ability.

Our minimize mining economically between our meet the and and obligations to base remaining fulfilling can case, continue obligations. to their we balance they impact our reserve mineral on work goal In business. right will is we as striking the do any contractual our

With keep I work will great has made viable, this time it and of HBI hard APIO. would over on away, in the make will than the business have set we and throughout of updated Australian the to stressed I that appreciate team not the we tolerate longer business new Ohio. our sacrifices in the Australia going contribution firmly a contributors our starting have much on EBITDA I year. certainly the with continue the ultimately status market I years to loss-making operations Cliffs, to Australia be performance could. thought Toledo, with EBITDA plant we be coming most keeping For adding in our the my from our eyes

clear incredibly decide $XXX of funding cost this to also the but remove this we of a business to one, construction our rates we wanted upfront? is the risks. other a that important while power market the quarter, removing without EBITDA million at as equity, as During cost we notes and very of to convertible X.X%. around in fund Cleveland diversification can issued any the will entire and fully of it entirely. attractive accomplishment to just project the proceed Why one. business. eliminate will combination add an We necessity any Not weighted The and we the price this fourth cost favorable the of both interest debt, significant and And the and very able partners bonds treated We respect plan the Cliffs. project. of to construction entire do securing plant. opportunity to uncertainty saw ability completed Because did we’re from abundantly convertible any will out we that wise finally, Number a average to note deal to fund uncertainty accounting wanted not coupon secured making importance, standpoint, be with X.X% our significant we

not a the Our of was convert dilutive exercise. issuance

the You will as With the with see on debt us, statement converts be behind year and no our on share in calculation sheet per our income that important the this the with that execution. categorized the we to XXXX of count instrument transaction in change all reflected share earnings quarter. balance a financials about

right is the Our future in to growth. our shape capital structure support

place on pleased from team HBI of are officially Our from with material assigned. EPA, is Toledo, contractors we’re for from permitting as and the Ohio. very the well and construction track The of important and technology as and in the the well the support handling is State process State

thereafter. HBI effectively our to this process important at Groundbreaking go add to plant commence and well Our team on will in continue side, future products customers keeping track we construction through become to Project so April work after customized conversations thank sought portfolio mid-XXXX. I shortly what and HBI this moving and asset our us well happen it will the abundantly with has the is. by for clear

of be for begun which also HBI will we this who on we source makes X.X completion Cliffs’ Cliffs is is Northshore produce able only currently why is to up the be accretive tons so Northshore only quality what is pellets. plant, important, to the million pellets working type project continue as will upgrade could upon company visibly earnest low-silica to production Great The have of produce long our value DR-grade the Just ability are pellets this venture develop region. our and in to unique the Lakes. of in for DR-grade in HBI the and this

by upgrade, furnace have each XXXX Northshore we very DR-grade in every the Cliffs need pellets, have three have Cleveland right will faith where that With at effective place pellets, to we EBITDA blast be. the to generating businesses, to I HBI. get people project us and

sold-out $XXX For from premiums an cash cash. and time meaningful we ore, have operations, added will iron a The additional that should generate lot On just monetization. environment that pellet AMT infusion a that, stable IMT us steel, the domestic of million for a and the being, top capacity. receive we pellet U.S. - and business the well-run of

the of benefits and our in Combining strengths enhancing we’re And Q&A lot years to and expanded the customer definitely prime reap call. base for that, to more the of asset strategy portion soon-to-be XXXX. I Our to, protecting portfolio it well these was now will turn executed look forward in our With to XXXX. certainly with back have to for Jody core we come. business a

Operator

line of FBR. Riley Lucas the from Pipes of first B. Instructions] Your question [Operator comes

Your line is open.

Lucas Pipes

to unique quite you Lourenco, operation for morning XXXX makes prepared I able that’s so towards wanted good to guidance maybe pellets? to Northshore, of that much that be to and helpful. first DRI everybody that particular the on updated thank remarks, touch outlook Hi, to your what very you end provided turn the supply and

Lourenco Goncalves

already produce itself sell of and first thanks product we current of has on - very, use viable pellets pellets at to DR-grade ArcelorMittal Nucor for Mine the where have all already DR-grade both proved by Canada. silica [indiscernible] our our good We and good Northshore that’s production morning. is customers DR-grade ore a currently Babbitt We very very Lucas, as out well Northshore of clients. their low and very that’s liked producer

have what So to we we what continue that’s will and that’s there, have.

just more, With we be to the able going produce are having there. productivity we’re doing what absolutely any interference investments, to that’s with without

operation production. pellets and no blast specializing DR-grade giving between the to debottlenecking in DR-grade easier with in a further furnace pellets them We’re lot switch the even pellets interference and ability

Lucas Pipes

And then, as HBI out Can you tonnage touched would you more Thank go of the and this much contracted helpful. little very well of that’s you. you. time? detail like output. contracting by That on the briefly very maybe be would how what Thank into you the bit

Lourenco Goncalves

some we to to clients run-of-the-mill as we produce Well specific are produce don't already talking know the of for one time customized each because do commercial you clients products, consumption. well what we products, we Lucas, what cost tend their for of points

do HBI. with the to same we’re going thing So,

mind more. XXXX, and we to need want that desires they from sized deliveries, get, right carry uncertainty abroad cost this likely in the ore that. of like to with carry With inventory. going to inventory They of to bear bear things to they need and need we those exchange rates uncertainty for current are with the of well the I’m buy they for to one the in the very these else what iron will are EAFs, be are we substitutes going so happy XXXX throughout everything desire them, to and that we the each excited. commercial and clients to everybody seeing more cutting of for need just-in-time, a They lot into discussions big going of and So, tonnage very now is iron with they Keep the content the cargo other import deliver commercial cost and market. and we we're very customize are is to

not the finance, pressure We’re long but we right going on with is have at to HBI project are ago to commercial because DSO, not the business, go timeframes very the even to do pre-negotiate we decided doing to there well not way. time right

Lucas Pipes

to associated Okay. contractual asked APIO, in so break with later from those secondly, that. honor, logistical prepared there you seize So, your Thank payments that those, believe mentioned be commentary are, if forward I And a appreciate I costs, you you. in perspective? there costs we would on what operations some intend you to APIO then think That’s certain if you you obligations and looking remarks were the what this and are could maybe should could transportation out you appreciate are us first minimum what remind color to those cash sort on then great. your of reclamation that year,

Lourenco Goncalves

to be look prepared able exit pain. Lucas Yes, those we ourselves to any without APIO

to not had down we be short term that a So, in painful shut us. move to if for decide would

are We I you Tim a color Tim. but because to further important will Flanagan more totally Please on very thing it’s let give little that think I a discuss. prepared,

Tim Flanagan

thank you Maybe the rail buckets of logistics. predominantly and with kind right, have do starting big Lucas. you Yes,

the contracts if Our the we so our we will of certainly as transportation have as way big railcars, the contract XXXX mine think through late back there’s get in will place that point economic these the with we stretched $XX important strategies. team the costs of to miner one on be period. those Australia and assume let’s half have but ongoing place look place, the is us infrastructure that’s three-year is million then as be number the XXXX. assets, of your of strategies mitigation you over much long through mitigate than those rail, the that our and less it logistics-related a operation, the what’s us well. contract costs expect possible, we think, as be in contract operate help would But are to obligations sale the would really that it be at is execute other those obligations and port, equipment, mobile a operation, operating We as about would We I mining mitigation some but we in about beyond take

So hopefully there. what you perspective more little that gives on bit we’re looking a

Lucas Pipes

helpful. That’s

three-year the amount so not So, the XX million would include reclamation? and over be would that period a or aggregate

Tim Flanagan

currently recorded reclamation would million. after come The at reclamation the that $XX and is about

Lucas Pipes

that you $XX to have So, million, incremental and is you the that is think $XX additional million good way play versus about maybe about that it? left is maybe a ton it that to any cash think produce to way

Lourenco Goncalves

keep to but working a way that. lot we’re stuff, it. of think to on And good That’s in a going sell mind, about we’re

would it be So, free. pain

Lucas Pipes

- the quickly lastly and sort then what model maybe of how would we And that? how follow that that reclamation, should after

Tim Flanagan

Yes.

still would it’s and period. couple and $XX years out over million it be about that stretches So, a a few-year

Lucas Pipes

Well Great. Okay. and thank very you good luck. much

Lourenco Goncalves

Thanks, Lucas.

Operator

of next line of Rosenfeld Seth Your comes Jefferies. from question the

Your line is open.

Seth Rosenfeld

just morning. of once on Good a guidance again. out I starting the XXXX have questions just couple

us just update on thanks based coil, trends, hot-rolled changed told the past of first, sensitivity or you ore, you’ve differ months, subsequent iron pellet years? on for the spot for should has with what and can over in specificity on so the start prices expected guidance realized the expect, course please. us you And the the providing prices might XX that year-to-date but there explicit I’ll

Lourenco Goncalves

of change years, the Well in bigger premiums pellet past much pellets pellets on of more would not that influence recent most we commented premium number. contracts The premium, significantly. sort outcome we that because as all a designed, have The impact become premium. have the didn’t would after. that pellet a they Knowing as but big a

like So, XX. grew XXs am the talk I premium Atlantic Basin now Basin Basin low that everyday Atlantic doesn't about premium, pellet is pellet used Chinese The be historically fact that fluctuate Atlantic that to about premium. between, premium the pellet premium the year pellet the talking

we So, before move happened. that saw coming the

to Cliffs. recent So, my prior arrival contrasts influence contracts, have of pellet signed here most premium that higher the a the at and they much were

that’s like point a I So positive out. to would that

hot-rolled, as the If traded States, inside that's the that’s the price the much. - of it. far in IODEX As ore much they know pretty hot-rolled and domestic don't change United guys sensitivity, you iron the and

have hot-rolled, iron a fixed towards hot-rolled, between towards ore wait the some - portion. opposite ore, are and Some others and contracts less more others iron is then

the the amount graft defined to and problem So, out. of different, the guys, contract biggest said fluctuations - be the ore, model. well is put that The commodities continues continues [ph] banks the by of but big you now iron each desk to within of have hot-rolled ore

because they see then doing are XX my has to months desk they when? Sachs How no their know know or iron price put money thought would bought at that against deals, Goldman They a no The price Sachs Goldman much XX.XX. my all And commodity their need XX, until that with was was there our know, something had two there. people after that bank Sachs one doing a XX longer? own this deals, So, ore, they Goldman commodities are or ore per is from well and absolutely like what us. [ph] than big Sachs, of to commodities to that you iron they go very and bosses above their are been completely with they supportive, saying don't in deal are very even ago, desk, [indiscernible] Goldman has views they XX different their

So, well. is the side of side win, other the win like one as they it coin they

it. one that’s way So to do

if be balance everybody how be way The of without worse. would that so value in disk. commodities Morgan input JPMorgan worse. better The other desk. the is learn and JPMorgan. read fire Maybe, JP to like the sheet they is can’t off, they stuff can’t [ph] miscellaneous much commodities and their

Some guys hand. lose time over they their

desk So than average the Jefferies, on anyway, thing. are because own, a you the have guys you especially you But biggest great. at don't better least because commodity that’s are that’s your

follow You desk, have, not commodities actually a have but you you seem to too much. them

that and will do So, like hope other said. I analysts you

They disaster, are would wreck. I a gone. them [indiscernible] training have thing. to my like are that’s they So

you good. are guys So,

good a guys You do appreciate to job I and try that.

Seth Rosenfeld

kind. very That’s

Lourenco Goncalves

what try to - people they have these do that but a that agenda ones from lose time place to bad well, Seth, know funds but day poor for I you read else, very bad. big are so the, they doing what for [ph] do these thing investors. it’s and All this the can they know job, they worse for guys a a move you? These another they right an ones place, because what educate they bad feel every the [indiscernible] I over good they try retain Except to job, their they just

Seth Rosenfeld

you fixed very Basin pellet two that you believe and or the years any on the much, Well very premium? $XX quantify perhaps every then within realized perhaps year past cash had seen sensitivity first in US new that given business, way ASP leverage. guess, you. talked have premium, Is question ago, see are of you hoping volumes we I kind to the the Atlantic in what a cost some maybe the for the with your one of higher you in from a of separate expected XXXX, that that to lower impact you I full-year pellet have the there would inflation cost the thank move can have region, cost

you cash So, stability in think in you. ongoing the cash what slightly U.S.? cost, looking you're do inflationary the that surprised cost Thank pressures are for

Lourenco Goncalves

from pellet premium pellet EBITDA another million $XX. fiscal at was moved $XXX First year to basis. It premium, $XX a in increase $XX, on

that So, that would hope help I point you.

the you premium, As the other far get other the the about of I question. can I other - part question, as question, I I because the didn’t believe of nuances all - repeat the thinking forgot was the pellet so

Seth, repeat please? you can So,

Seth Rosenfeld

despite I cost you little surprised ton a just in the flat If cost production higher inflationary shipment seeing about you and somewhat to bit are in per expectations. was you're U.S. that guiding XXXX the talk pressures can any

inflation you are cost in place? what So, underlying saying

Lourenco Goncalves

we associated cost rates the and it’s that have do a Look, - higher are pressure United associated energy with we and States in anticipating.

costs. licensed And and and are all good control track. profit they they We have the basically is have other of CEOs don't a these basically a also they because that’s problem deals. lot to myself share options railroads, of have they - - don't I have; the are anticipating higher - higher There worst transportation they

come we we to to we operation. are can, much we as as things So, into a they have but face force real cost they Also, but to continue mitigate us that. these will and when an end,

So, we maintenance. spend money

So, we we fulfil. have obligations that have to

repairs go we have to through. that have We

So, the have I same to [indiscernible] seeing. the year. give expected all-in-all we’re a XXXX the level The able for are because we I’m stay here, next going no, not think costs you pressures reduction the fact are game. all is any big is that to cost within despite that XXXX to of

So, that’s why singular. we are to the guiding

That’s you fight is on that mentioned in day to Managers and transportation things myself what the Fedor the That’s I at my ours my each group, think. that’s my and just [indiscernible] by mines, to one day. of work. General do and commercial the need all So, I Terry

Seth Rosenfeld

Great. Thank you very much.

Lourenco Goncalves

Thanks Seth.

Operator

of from Matthew comes of the of question line Bank Fields next America. Your

open. is line Your

Matthew Fields

strong Hi everyone. Congrats Lourenco on another year.

Lourenco Goncalves

Thank you very much Matt.

Matthew Fields

had couple questions the on I you entity shut say? guess Since the rights essentially project, essentially the property, Minnesota this bought, you that a does you the of rights door wanted about I land other land to, that the would potential bought. half ask the the [indiscernible] to

Lourenco Goncalves

the wants were to run, Look, like did the, owner land or sell of because is course one because prepared the continue the moves face and of Minnesota have in to Despite the for remarks commitment stay big or advantage. because they of a for that a have least - that deal wants has Minnesota Ohio to but what big cut commitment. is. or Minnesota never the I'm the it, made, the let's loyalty it, because all is will the take guy, to a business. got I my realize State building They what mistake [indiscernible] said We in existing we competitive normal over Minnesota. [indiscernible]. what time a they existing we deal is which have it to the during opportunities for literally bad owner I’m We really I I in long buy losing. at fee it the

The impact were children we we it us this minority of spend on so the not have we So, by impact same to interest that will if optionality. have even and prior the money that material because is the acquiring disclose, of and amount initiative.

is if go or Nashwauk open or an So short, if long it story it��s Michigan Minnesota, question. Cliffs next, it’s where [indiscernible] Empire, Tilden will

optionality. We have

We grow. have to both opportunities

of One them will explored. be

if what you to other I one don't Matt? put more die. we color know do be your question, what That’s will I The answered but need have.

Matthew Fields

you lower the using That's natural a you your that ore materially profile low helpful. that as make to the said? grows that, have for due I further of the that footprint owner that develop maybe what HBI costs mean, or and evolution on and be or not demand lower pellets lot have could do that I resource, claimed old what production you the of stripping think or their owners ratios anticipate and old and then your put soft your could through mining cost whole resource do the more you stock to

Lourenco Goncalves

guys they saviors. how India, still Minnesota was they their the Matthew people because is how Steel operate, And The pellet guy these hired steel size, know of a tried $X.X lot where, cost because and call then become to is never was they steel was and how to career, They first X% a Steel was pellet properly, do Stock and plant cetera. to business. probably say build, came half-built came be on guys build he Minnesota they XXXX, very, that plants Steel. plant, the in pellet low et Then with successful Essar things. there Where They Minnesota had able he knew came disassembled Stock? Matthew in a that thing from know repeat they a that everything to The not and known with said to about that of one something after we concrete experience, a back to pellet billion very lot that of before that with pulled that Matthew to was built ground that India. a how how know I know sell, call Essar. thing of a Stock having guess XX% amount to but the [ph], reality, and

came disappeared, connection. and trace. leaving Stock that’s the a Matthew So, without

up, in and try people costs, investors no this pretty much lease, out of coal, Star that, came investigate money, Wall happened Street then with blast nowhere. everything, lined from wo. Matthew Stock. give Chewbacca, Wars, everything what nothing. The Matthew knows where of money big is him clients iron, Wars I out China, should billionaire think And to about land, the Dubai, even no Stock, character furnaces, Star of reporter No that pellets,

So, forgot was I the the I question, About cost. the think what question.

of to US contracts Keetac, compete, steel. this, going Oh, are long a case to and supplier to company they going do that. cut pellets. That’s about how there what a they are Well, order in talk is, that know a undeniable. by contract, first the are steel, owned Then when I cut are brought real. that Steel back and they deal, the do XXX% a in going Latin Other to think we XXXX costs pellet, in Lakes was including to Larry was sell it mine, to you than terms. the first Steel, all we U.S. Canada. was everything how pellet you Magnetation. I was XX% is former sides, how case bankrupt are the selling have I [ph] came Great Magnetation had remember we that, was Stelco to you both else owned need when Magnetation because except XX% U.S. by [indiscernible] that Magnetation Stelco, Matt, Steel.

the For years be will Cleveland-Cliffs. next it three

question So, your answer Did should when competitor about, what I your question? buy. a big was

Matthew Fields

I of. mean sort

had You around trying he so shuts road yours option the on door of X-million-ton land raise thinking land, money, that half now know is potential know, so at basically he the that, you that it had, and… shuts running was and is have even a he least it took to you potential on the as doesn't door he down sort the the of for competitor so even the

Lourenco Goncalves

the from of like of I bought Ore And the or Minnesota. the the clarify, that. Properties Just GPIOP, people to land Glacier owner other something is Park that land of Iron State

permits the people mine we for mark control, acquired of Very been to we're it’s the Resources reverted no soon and must plan, way which on are controller [indiscernible] roads the officials. by that They going of of belongs to So, initiated. Minnesota. that land [indiscernible], can with or the govern having I’m of going contiguous. land. a Department operate public A plant has about the that right get I thing do mine to to is we of and and hand control the absolutely The problem execute the from Minnesota, that data. of State has access people the Natural and land public these people good all of other can land Minnesota half the what’s to have mining the

separate they and other are the without in land, machines plant, on owned we will it hodgepodge then Cliffs. fly of above Minnesota to The so land it’s that will move unless contiguous, operate of thing not that will areas of operate to the flying can't pellet of land the drones by State use and side that a that’s then again pieces through

So we that’s have what there.

we talk allowed do, are And that’s other who [indiscernible]. legal, the So and what I the within other we did the owner, complete we how is are owner, of ready everything boundaries completely to operate. legally with to

Matthew Fields

Congratulations on that.

Lourenco Goncalves

no they but longer that [Indiscernible] there will gone an someone they when are comes sitting chair. there, are in be election and

Matthew Fields

on congratulations that Well and transaction year. the

Lourenco Goncalves

I'm again. sorry, say

Matthew Fields

congratulations transaction and on said the that strong I year.

Lourenco Goncalves

Thank you. I appreciate Matt.

question Jody. Okay, last we will the take

Operator

Your question final of line the from comes Novid of Cowen Company. Rassouli and

is line Your open.

Unidentified Analyst

is Hi Novid. [indiscernible] my you for taking a good questions. for morning this Thank

I the past a own, shipments your guidance if you. one the pricing market seaborne go won't that HBI was first shipments to have assume price forward without So ahead there my for move realization I that should XXXX? would on so market your have coming now capital and partner cost we question since And Thank down your you in? seaborne secondly, increase with lower into project had then guidance coming some actually enough is, is, just that in impact that so you to know on cost, and that

Lourenco Goncalves

Thanks are. The for questions. the answers

you’re question, partner, for you yes, the Thank very first no right. the second yes. For question, And much.

Unidentified Analyst

Thanks.

Lourenco Goncalves

Thank I we months. sure as in very next done. all we’re for and you much the be will and think three as soon you I Jody, speaking with can

You XXXX. these continue with to great stakeholders. conversations to guys our have And forward have great I a look

For now, day. have good a

Operator

today's conference call. This concludes

disconnect. now may You

Cleveland-Cliffs (CLF) 25 Jan 182017 Q4 Earnings call transcript