UPDATE 2-U.S. miner Cliffs seeks creditor protection in Canada
(Adds details on filing, union comment)
By Euan Rocha
TORONTO Jan 27 (Reuters) - Iron ore and coal miner Cliffs Natural Resources has become the third major U.S. company in the past six months to seek creditor protection for its Canadian arm to try to isolate losses and protect shareholders.
The miner said it had commenced restructuring proceedings in Montreal on Tuesday. The move mirrors the route taken by U.S. Steel, which sought creditor protection for its money-losing Canadian operations in September, and by U.S. discount retailer Target Corp, which announced this month it was abandoning its Canadian expansion.
The long-anticipated move by Cliffs will help insulate the publicly listed U.S. parent company from the vast majority of the $650 million to $700 million in closure costs tied to its mothballed assets in Canada.
In November, Cliffs moved to cease production at its Bloom Lake iron ore mine in Quebec after its attempts to sell a 30 percent stake in the mine failed to pan out. Cliffs CEO Lourenco Goncalves told Reuters at the time that a creditor protection filing in Canada to protect the U.S. parent from liabilities related to its Canadian operations was absolutely on the table.
Some $450 million of the closure costs are tied to a contract with the Quebec North Shore and Labrador Railway, a unit of Iron Ore Co of Canada (IOC), which in turn is controlled by global miner Rio Tinto.
Chinese steelmaker Wuhan Iron & Steel, known as Wisco, owns a minority stake in Bloom Lake. IOC and Wisco were not immediately reachable for comment.
JPMorgan analyst Michael Gambardella has estimated that Cliffs could trim its closure costs at Bloom Lake to under $100 million by seeking creditor protection in Canada. Continued...