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Why You Should Look at Cliffs Natural Resources

Dan Caplinger
December 5, 2012

Cliffs Natural Resources (NYSE: CLF  ) has a long, illustrious history, tracing its origins back 165 years to its formation as the Cleveland Iron Mining Company. With the discovery of iron ore in Michigan's Upper Peninsula in the mid-19th century and the opening of a navigable canal linking Lake Superior to the lower Great Lakes, the company became a key supplier for new steel mills on the south shore of Lake Erie.

More than a century and a half later, the company has survived numerous challenges, and having acquired its first U.S. coal mine in 2007, changed its name from Cleveland-Cliffs to Cliffs Natural Resources shortly thereafter. The company is now a key supplier not just to U.S. steelmakers but around the world, opening up the full potential of the global economy but also leaving it vulnerable to slowdowns in key areas around the world. My premium report on Cliffs Natural Resources goes into more detail on this natural-resources company and includes the following description of the substantial opportunity that the company has to grow in the future.

The Opportunity
Over the past decade, the appetite from emerging market for infrastructure improvements has dramatically increased. Booming economies in China, India, Brazil, and elsewhere around the world have driven massive construction projects, and that in turn has driven demand for steel. As a longtime producer of iron ore, Cliffs already had a strong position in supplying one of the key ingredients for steel production.

But when CEO Joseph Carrabba took the helm in 2006, he started a move toward Cliffs reaching a more global scope. By acquiring metallurgical coal resources, Cliffs became a one-stop shop for both of the major ingredients in steel. And rather than remaining content with its roots in the Great Lakes, Cliffs took steps to acquire assets in foreign markets that were closer to the new sources of steel demand, with Brazilian properties serving the South American emerging economy and assets in Australia meeting demand from the Asian market. With the purchase of Freewest Resources in early 2010, Cliffs added chromite, a necessary ingredient in producing a steel-strengthening anti-corrosive alloy, to its offerings.

In recent years, though, Cliffs has faced some huge challenges. During the financial cris