The iron-ore market has been a fickle mistress as of late, and it has caused shares of Cliffs Natural Resources (NYSE:CLF) to bounce all over the place during the past year. This past quarter, the company saw some relief on one side of the business, only to see another part get crushed by low commodity prices. The one thing that has been steady throughout, though, is management's strategic plan to get the most value from the U.S. iron-ore market.

Here's a look at the company's most recent earnings results; we'll examine why two seemingly interconnected businesses are headed in opposite directions, and see what the company has in store in the coming years.

Iron-ore mine

Image source: Getty Images.

By the numbers

Metric Q2 2017 Q1 2017 Q2 2016
Revenue $569.3 million $461.6 million $496.2 million
Operating income $114.6 million $131.7 million $74.7 million
Net income $31.8 million ($28.1 million) $12.8 million
Earnings per share $0.11 ($0.11) $0.07

Data source: Cliffs Natural Resources earnings release.

Cliffs second-quarter earnings told a tale of two iron-ore markets. On one side, you have a U.S. iron-ore market that is doing surprisingly well. The per-ton selling price for U.S. iron ore increased from $78 this time last year to $97 per ton in the most recent quarter. Even though cash costs per ton sold did increase by $3.00 a ton, Cliffs still pulled in a $33-per-ton sales margin on all iron ore sold stateside.

Its Asia Pacific operations are an entirely different story. Per-ton prices declined to just $38 per ton compared to $42 a ton this time last year. This meant that Cliffs was only netting $0.38 per ton from its Australian mine. Granted, its Asia Pacific operation mostly sells lump ore and fines, versus pellet in the U.S., so lower prices can be expected. However, it goes to show that the iron-ore market has a lot of regional disparity that can drastically impact earnings.

CLF adjusted EBITDA by business segment for Q2 2016, Q1 2017, and Q2 2017. Shows strong gains for U.S. Iron ore and sharp declines for Asia Pacific iron ore.

Data source: Cliffs Natural Resources earnings releases. Chart by author. Note: EBITDA = earnings before interest, taxes, depreciation and amortization.

After the company made several financial moves in the prior quarter to shore up the balance sheet, the second quarter was a relatively quiet one. Cliffs ended the second quarter with $321 million in cash and $1.29 billion in net debt. Management said it wants to get this number below $1 billion by the end of the year.

This quarter was more about operations, and the next steps forward for Cliffs. Back in April, it announced that it had completed construction of its Mustang pellet plant at its United Taconite mine. These high-grade pellets are the kind of material that steel plants in the U.S. need, and they will earn a higher sales price.

Cliffs also announced it will break ground on a new hot briquetted iron (HBI) plant in Toledo, Ohio. Like the pellets it manufactures, HBI is a more refined product used in electric arc furnaces. This type of steelmaking furnace is now used more than traditional blast furnaces in the U.S. So if Cliffs wants to remain a major player in the American steel market, it has to start producing a product these furnaces can handle. According to the press release, this new facility will cost $700 million and will be complete by mid-2020.

What management had to say

CEO Lourenco Goncalves' press statement emphasized the company's impressive results in the U.S. and Cliffs' new HBI plant:

Our second quarter results clearly demonstrate the true power of our U.S. Iron Ore business, in which we have unrivaled operational, commercial, logistical, and quality advantages. Even as iron ore prices in Asia dropped substantially during the second quarter, these unique advantages enabled us to achieve EBITDA margins that are at the peak of the industry in the United States. Going forward, we will further expand on our unquestionable strength as a supplier of customized iron units in the Great Lakes, with the development of our HBI production plant in Toledo, Ohio. The new plant will enable Cliffs to supply high-quality, customized HBI as feedstock to select Electric Arc Furnace steelmakers. As EAF's become Cliffs' clients, we expect the earnings power of U.S. Iron Ore will carry over to this new business.

What a Fool believes

Even though Cliffs did produce impressive results in the American market, its Asia Pacific results dragged it down. The company also revised its EBITDA guidance down again, from $700 million to $650 million. It should be noted that management says these EBITDA expectations are based on where iron-ore prices are today. If iron-ore prices decline, then guidance will likely be revised down again. Commodity prices are out of management's control, though, so investors shouldn't spend too much time fretting about them.

The long-term message is that the company's financial foundation is in much better condition than it has been in a long time, and it's getting back to generating free cash flow to reinvest in the business. Who knows when the international iron-ore market will ever get to a point where Cliffs makes a decent profit on it? Thanks to its exposure to the American market, though, it has time to wait.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.