What: Shares of Cliffs Natural Resources Inc (CLF -0.69%) jumped 16% in the first few minutes of trading Wednesday after the company completed the sale of coal assets. The stock has settled in at an 11% gain mid-morning.
So what: The company sold coal mines in West Virginia and Alabama to Seneca Coal. The deal was valued at $268 million, including all liabilities of the coal business. Cliffs Natural also has an earn out of up to $50 million if the mines perform well through 2020. The sale is part of a "US iron ore pellet-centric, environmentally compliant strategy" for Cliffs Natural Resources.
Now what: Getting out of the coal business is probably the right move for Cliffs Natural Resources, but it doesn't end the company's challenges. Even after the sale, it will have nearly $3 billion in debt and shrinking iron ore margins in the U.S.
I see today's pop as a short-term bounce; for long-term investors, the operational trend is still downward. That will keep me out of the stock today, even if selling the coal business is an incremental positive.