Casablanca Capital Takes Action on Cliffs Natural Resources

Cliffs Natural Resources
Cliffs Natural Resources has tapped out on the Ring of Fire

Ring of Fire Map. Cliffs has suspended Ring of Fire Operations and now sources say the Company will leave Canada completely.
Ring of Fire Map. Cliffs has suspended Ring of Fire Operations and now sources say the Company will leave Canada completely.
NEW YORK, THUNDER BAY – MINING – For over a year, Cliffs Natural Resources has been backing away from the Ring of Fire mining development in Northwestern Ontario. The company was selling off assets in its northern base camp last April as reported by NNL.

The move from Northern Ontario might now become a sprint.

Casablanca Capital LP, (“Casablanca”) the beneficial owner of approximately 5.2% of Cliffs Natural Resources (“Cliffs”) shares, announced on Tuesday that that all six of Casablanca’s nominees have been
elected to the Cliffs Board of Directors according to preliminary estimates by its proxy solicitor of the voting results at the company’s Annual Meeting of Shareholders.

Donald Drapkin, Chairman of Casablanca, said, “We are grateful to our fellow Cliffs shareholders for their careful consideration of the issues and gratified that they have sent a resounding message of support for our efforts to drive meaningful change at Cliffs, bring true accountability to the Company’s leadership, and restore shareholder value.”

The price of a share of stock is a measure of investor confidence. Here is the two year chart for Cliffs Natural Resources.
The price of a share of stock is a measure of investor confidence. Here is the two year chart for Cliffs Natural Resources.

The price of Cliffs Natural Resources shares has fallen over the past 12 months.

Lourenco Goncalves, one of the Casablanca nominees who was elected, said on behalf of all the newly-elected Casablanca nominees, “The conclusion of this proxy contest marks not an end but a beginning. We look forward to working collaboratively with the continuing members of Cliffs’ Board and the Company’s hardworking, dedicated and talented employees to set Cliffs on a course to improve performance and restore shareholder value. Cliffs has tremendous inherent value and we are confident there is much we can and will do to refocus Cliffs and steer it in a new strategic direction.”

In addition to Goncalves, the other Casablanca nominees newly-elected to the Board are Robert P. Fisher, Jr., Joseph Rutkowski, James Sawyer, Gabriel Stoliar, and Douglas Taylor. Subject to certification of the final results by the independent inspector of elections, the newly elected directors begin their terms immediately and will serve through the Company’s 2015 Annual Meeting of shareholders.

Executive Compensation at Issue

This is the text of a letter Casablanca sent to Cliffs shareholders earlier in July:

Casablanca Capital LP, one of the largest shareholders of Cliffs Natural Resources (“Cliffs”), is
seeking your support to elect a slate of six experienced, highly-qualified Directors to the Cliffs Board
at the Company’s 2014 Annual Meeting of shareholders, to be held on July 29, 2014. Without
fundamental change at the Board and Executive levels, we believe Cliffs will continue its pattern of value destruction.

Since July 2011, Cliffs shareholders have suffered an extraordinary loss of 85% in the value of their
shares. For most of 2013, Cliffs was the “biggest loser” in the S&P 500 (finishing the year in the #2
spot). In 2014, Cliffs’ share price has, so far, fallen another 40%.

While shareholders have suffered a massive loss, the current Directors and management team, who in
the aggregate own less than 0.3% of Cliffs shares, appear to us to be focused on clinging to their positions rather than driving real change. In contrast, Casablanca owns 5.2% of Cliffs’ outstanding common
stock, and Lourenco Goncalves—an experienced metals and mining executive whom Casablanca is proposing to lead Cliffs—has personally invested $1.5 million in Cliffs shares.

We believe the Cliffs Board’s tiny ownership interest and lack of economic alignment has adverse consequences for shareholders. For example, the Board has awarded, and continues to award, management with what we find to be outrageous compensation for overseeing the precipitous decline in value at Cliffs.

About Casablanca Capital LP
Casablanca Capital is an Event Driven and Activist investment manager based in New York, founded in 2010 by Donald G. Drapkin and Douglas Taylor. Casablanca invests in high quality but underperforming public companies that have multiple levers to unlock shareholder value. The firm seeks to engage with the management, Boards, and shareholders of those companies in a constructive dialogue in order to enhance shareholder value through improved operational efficiencies, strategic divestitures, capital structure optimization and increased corporate focus. In 2011, Casablanca successfully initiated a campaign at Mentor Graphics Corporation to improve profitability and enhance value at the company, working with shareholders to elect three nominees to Mentor’s Board

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