Cleveland Cliffs Gains After Raising Iron-Ore Prices

June 30, 2008

June 30th (Bloomberg) – Cleveland-Cliffs Inc., North America’s largest producer of iron-ore pellets, rose to a record in New York after Deutsche Bank said the company’s price increases will boost earnings.

Cleveland-Cliffs gained $7.87, or 7.1 percent, to $119.19 at 4:01 p.m. on the New York Stock Exchange. The shares earlier touched $121.95, the highest ever, and have tripled in the past year.

Portman Ltd., the Cliffs-controlled unit that’s Australia’s third-largest iron-ore mining company, said June 27 it will charge Chinese customers as much as 97 percent more for iron ore next year. The price increases follow competitor Rio Tinto Group’s iron-ore price settlement with Chinese steelmakers.

“We are upping our 12-month price target for Cleveland- Cliffs to $150 a share from $115 following significant revisions to our estimates for Cliffs’ realization prices for both iron ore and coal,” Deutsche Bank analyst Ted Tabasso wrote today in a note to investors. Tabasso reiterated his “buy” recommendation and increased his estimate of 2008 earnings to $6.69 a share from $5.77.

Cliffs supplies about 28 percent of the iron-ore pellets used in North America. Much of the iron ore it doesn’t supply is held by producers such as U.S. Steel Corp., the largest U.S.-based steel company. Benchmark prices traditionally are set for the 12 months starting April 1 after talks between steel mills and major suppliers such as Rio Tinto and BHP Billiton Ltd..

Cliffs’ contracts with customers in North America are based on a formula that includes the world price, steel prices and inflation indicators, while those from its mines in Australia follow the negotiations by Rio Tinto with Chinese steelmakers.

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