A hand full of iron ore. Image Source: Cliffs Natural Resources

What: Cliffs Natural Resources Inc.'s (NYSE:CLF) shares fell nearly 20% last month. That said, the stock was still up over 150% through the first five months of the year. And even within the month of May, there were two big moves, with a drop of 45% by the middle of the month followed by a recovery that left the stock down "only" 18.9%.

So what: On April 28, Cliffs reported first-quarter earnings. For the most part, the reading was fairly good, with progress made on debt reduction and results solidly in the black. Moreover, leading up to that point, commodity prices had been on something of a roll since mid-January, lifting pretty much all boats in the commodity industry, including Cliffs, which is really why the stock was up over 200% by the end of April.

That said, Cliffs counts North American mills as big customers. And there's been some solid news on that front, with punitive tariffs imposed on low-cost imports and reasonably strong demand from the local mills. In fact, in mid-May, the U.S. government announced a new round of tariffs, which helps explain why Cliffs' shares picked up at about that point to pare some of its losses in the month. Part of the rally in iron ore, though, was related to what some believed was a pricing bubble building in China on the back of rampant investor speculation. That bubble deflated in a big way in May, with iron ore prices falling nearly 24% in the month, helping explain why Cliffs' shares hit a downdraft.

Now what: Iron ore is a commodity, and there remains a supply/demand imbalance, so expect continued wide price swings. Add to this that Cliffs is still working hard to get its business and balance sheet in fighting shape for today's competitive market, and you start to get a picture of a company that has great potential upside, but also a lot of risk. Conservative investors should probably avoid Cliffs and stick to more financially stable diversified miners.

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