Why Cleveland-Cliffs Stock Popped Today
Key Points
Cleveland-Cliffs reported a loss and drop in revenue.
The company disclosed what it calls a new, "highly accretive" deal.
Cliffs will also be exploring the production of rare earth minerals.
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Steelmaker and mining company Cleveland-Cliffs (NYSE: CLF) reported third-quarter earnings today, but those results aren't what has the stock popping. Shares were trading at session highs, up by 24.5% as of 11:10 a.m. ET.
The company reported a net loss and a drop in revenue from the previous quarter. But two items of note came from the release that piqued investor interest.
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Cleveland-Cliffs wants to jump into critical minerals
Revenue of $4.7 billion missed estimates by $200 million. CEO Lourenco Goncalves highlighted strong demand from the more profitable automotive sector, however. Goncalves also disclosed the company has a new memorandum of understanding (MOU) with a major global steel producer that he says will be "highly accretive" to Cliffs shareholders. He indicated the agreement stems from its domestic footprint and recent trade-related announcements, without going into further detail.
But it was what Goncalves said about its mining operations that caught the market off guard. He stated, "Beyond steelmaking, the renewed importance of rare earths has driven us to refocus on this potential opportunity at our upstream mining assets." The company has two domestic mining sites it says show key indications they contain rare earth minerals. Shares soared on that news.
What investors should focus on
Investors shouldn't get caught up in the rare earths hype, though. Cleveland-Cliffs' mining operations are to support its steelmaking assets. While a rare earth mineral discovery would be a new development, that's all speculation at this point. The stock should trade on its steel business. Any forthcoming updates on the MOU news should be more impactful for Cleveland-Cliffs shareholders.
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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