Thomson Reuters






By Sneha Banerjee and Anannya Pramanick


Oct 28 (Reuters) - Shares of Cliffs Natural Resources Inc
shot up as much as 25 percent after the miner said it
had "more than enough" liquidity and that it was in talks with
three "big steelmakers" to invest in its Bloom Lake iron ore
mine in Quebec.


Cliffs also said it had settled with its bankers and was no
longer in breach of any debt covenants - a position that rose
earlier this month after the miner's plan to write down $6
billion in coal and iron ore assets.


Chief Executive Lourenco Goncalves told Reuters that Cliffs
was in "active talks" with three equity partners to invest in
the development of the second phase of the Bloom Lake mine.


"These are three high class international big steelmakers
and they would take their ore for their own use."


The aim was to finalize the documentation on the second
phase before the end of the year and Cliffs would scrap the
project if it did not come up with a viable option by then,
Goncalves said.


The company on Monday reported a third-quarter loss, hurt by
the writedown, the majority of which was related to Bloom Lake.


Cliffs bought Bloom Lake as part of its takeover of
Consolidated Thompson Iron Mines Ltd in 2010, but
higher-than-expected costs at the mine have weighed on Cliffs'
earnings.


The issues at Bloom Lake were among the reasons that hedge
fund Casablanca Capital, which owns 5.2 percent of Cliffs, waged
and won a proxy battle against the company in August.


Subsequently, Goncalves was made CEO and on Tuesday,
presiding over his first post-earnings call as Cliffs leader,
assured investors that the company did not need to sell assets
to raise funds.


Goncalves also told Reuters he was going to propose to the
company's board that it keep paying a dividend.


Cliff's comments on Tuesday likely led to some traders
scrambling to cover their short positions on the stock. After a
rapid 10 percent surge, the shares were halted. They jumped 26
percent to $11.61 when trading resumed a few minutes later.


About 45 percent of Cliffs shares were shorted as of Oct.
15, compared with a 1.9 percent of the broader basic materials
stocks.


Short-sellers borrow and sell shares, and once the price
falls, they buy and return them, pocketing the profit. If prices
rise, it leads to a short squeeze where borrowers scramble to
buy shares to cut their losses. That leads to higher demand,
pushing the price even higher.


Cliffs shares were up 19.6 percent at $11.05 at 1:43 p.m.
ET, with more than 2.6 million shares traded.


Up to Monday's close, they had lost nearly two-thirds of its
market value this year, compared with a 5.7 percent rise in the
broader Dow Jones U.S. Index.

(Writing by Sayantani Ghosh in Bangalore; Editing by Savio
D'Souza)