Slide 1: A World Leader in Iron Ore and Metallurgical Coal
Laurie Brlas Senior Vice President CFO and Treasurer Steve Baisden Director, Investor Relations and Corporate Communications KeyBanc Capital Markets Basic Materials and Packaging Conference Boston, MA September 19, 2007 A WORLD LEADER IN IRON ORE AND METALLURGICAL COAL Exhibit 99(a)
Slide 2: Forward-Looking Statements
This presentation includes predictive information that is intended to be made as “forward-looking” within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. Although the Company believes that its forward- looking information is based on reasonable assumptions, such
Slide 3: Agenda
Strategy Overview and Transformation of Cliffs 3 AGENDA Cliffs Latin America Cliffs North American Coal Summary Cliffs Asia-Pacific Cliffs North American Iron Ore Industry: Iron Ore and Coal
Slide 4: Vision of Cliffs: Four Strategic Imperatives
Growth and Diversification Shareholder Returns Global Execution Operational Excellence Growth and Diversification • Revenue Growth • Product Diversification • Geographic Growth Operational Excellence • Safety • Technical Competencies • Operating Efficiencies Global Execution • Competencies of the Fi
Slide 5: Cliffs' Strategy
Strategy CLIFFS’ STRATEGY • Maintain the core – North American Iron Ore • Expand globally and diversify products – Cliffs Asia-Pacific – Cliffs Latin America – PinnOak Acquisition • Capitalize on Cliffs’ unique technological expertise – Concentrating and processing lower-grade ores into high-quality
Slide 6: Minerals Review
Coal–Domestic Metallurgical Coal–Domestic Thermal Platinum Group Metals Nickel Iron Ore Diamonds Coal–Seaborne Metallurgical Manganese Coal–Seaborne Thermal Molybdenum Strategy MINERALS REVIEW Attractive Bentonite Kaolin Silver Zeolites Uranium 0-3% Aggregates Cobalt Gold Lithium Rare Earths Talc Ti
Slide 7: First Priority – Iron Ore
1. Analysis proves it to be an attractive market – Strong demand driven by world growth in steel production – Geologic shortage of quality ore in Asia – Attractive supply/demand dynamics 2. Acquisition opportunities that do not interest “Big Three” 3. Opportunities to partner – Steel mills seek stab
Slide 8: Target Markets: Met and Thermal Coal
Business Environment Supply Dynamics Demand Growth Good fit with current operations Historically holds a cost advantage over natural gas Stable pricing over the long term Good fit with operational competencies and existing customer base Opportunity to serve high-growth emerging markets from low-risk
Slide 9: New Iron Technology
• Continue technology innovation and leadership in turning low-grade ores into high-quality products – Commercialization of Kobe ’ s ITmk3 technology • Opens EAF market to Cliffs • Use the technology to reduce transportation cost in remote locations • Plans for a 500,000 ton commercial-scale plant a
Slide 10: Transformation to an International Mining Entity
TRANSFORMATION TO AN INTERNATIONAL MINING ENTITIY Cliffs acquires Portman Limited, Australia’s then third-largest iron ore miner Selects Michigan site for iron nugget plant Acquires PinnOak Resources, premium-quality metallurgical coal producer Cliffs agrees to sell Wabush Mines, Canada Cliffs trans
Slide 11: Cleveland-Cliffs Business Units
Cliffs North American Iron Ore Australia Iron Ore Other North American Coal CLEVELAND-CLIFFS BUSINESS UNITS Transformation
Slide 12: Cliffs Executive Management
CLIFFS EXECUTIVE MANAGEMENT “DEEPENING THE BENCH” Transformation • Laurie Brlas, SVP, Chief Financial Officer and Treasurer, December 2006 An extensive accounting and financial career spanning more than 20 years, most recently as senior vice president, chief financial officer of sterilization system
Slide 13: Agenda
Industry: Iron Ore and Coal 13 AGENDA Cliffs Latin America Cliffs North American Coal Summary Cliffs Asia-Pacific Cliffs North American Iron Ore Strategy Overview and Transformation of Cliffs
Slide 14: Global Iron Ore Industry Profile
• Very few steel producers have vertically integrated • 1.8 billion metric tons of iron ore production capacity • Limited new discovery of large deposits • Pricing is negotiated and set annually among the largest buyers and sellers – 2007 settlements • 9.5% increase for lump and fines ore • 5.8% inc
Slide 15: North American Integrated Steel
NORTH AMERICAN INTEGRATED STEEL Market Participants Mittal 39% U.S. Steel 40% AK Steel 7% Other 7% Algoma 4% Severstal 3% Industry: Iron Ore Market Participants U.S. Steel 20% Bethlehem 15% Other 13% LTV 11% National 10% Stelco 10% Ispat 6% Weirton 5% Algoma 4% Rouge 3% Dofasco 3%
Slide 16: Global Steel: Concentration vs Fragmentation
Iron Ore Producers by Company Metalloinvest 2% Kumba 2% NDMC 2% Cliffs 2% Other 57% Rio Tinto 10% CVRD 15% CVG 1% LKAB 1% U.S. Steel 1% GLOBAL STEEL Steel Producers by Company Arcelor Mittal 10% Other 72% Shandong 2% Nucor 2% U.S. Steel 2% Corus 2% Baosteel 2% Anben 2% JFE 3% Nippon 3% Posco 3% Conc
Slide 17: Iron Ore Producer and Consumer Countries
IRON ORE PRODUCER AND CONSUMER COUNTRIES Consumers by Country China 51% Japan 8% Middle East & Africa 3% North America 5% South America 5% Commonwealth of Independent States 9% Europe 11% Other Asia & Oceania 8% Producers by Country China 32% Brazil 18% Australia 17% Other 8% India 8% Commonwealth o
Slide 18: China's Impact on the World Steel Industry
1,000 1,250 2007E Rest of World (5-YR CAGR 3%) China (5-YR CAGR 27%) CHINA’S IMPACT ON THE WORLD STEEL INDUSTRY MM Tonnes (Production) 1,067 1,130 1,240 1,190 CAGR: 8% Industry: Iron Ore
Slide 19: Global Iron Ore Historic Market Prices
$0 $10 $20 $30 $40 $50 $60 $70 $80 Pellets Lump Fines Pellet Prices $DMT Based on Eastern Canadian Pellet Price With 64% Iron Lump and Fines $DMT for Australian Iron Ore Shipments to Japan +86% +5.8% +19% +71.5% -3% +9.5% +71.5% +19% +9.5% Industry: Iron Ore GLOBAL IRON ORE HISTORIC MARKET PRICES
Slide 20: Coal Market Dynamics
COAL MARKET DYNAMICS • 2006 global coal production: 6.3B short tons – Vast majority used for electric generation – 820MM tons (13%) met coal • 2006 U.S. total coal production: 1.16B tons – Vast majority used for electric generation – Coking plant consumption: 23.0MM tons (2% of total) – U.S. is net
Slide 21: Coal Market Dynamics
COAL MARKET DYNAMICS • Supply constraints continue to impact the met coal market • Weaker dollar making U.S. exports more attractive • Increased use of pulverized coal injection (PCI coal) driving demand for higher-quality coals • Economic growth in China and India continuing to drive demand Industr
Slide 22: Recent Coal Prices
RECENT COAL PRICES Industry: Coal $0 $25 $50 $75 $100 U.S. Met Coal Thermal Coal Source: US Energy Information Administration, 2006 Review: U.S. Coal Supply and Demand.
Slide 23: Agenda
Cliffs North American Iron Ore 23 AGENDA Cliffs Latin America Cliffs North American Coal Summary Cliffs Asia-Pacific Industry: Iron Ore and Coal Strategy Overview and Transformation of Cliffs
Slide 24: 2006 Cliffs' Sales by Segment
79% 21% North America Asia-Pacific 2006 CLIFFS’ SALES BY SEGMENT Cliffs North American Iron Ore
Slide 25: Cliffs North America
• Largest supplier of iron ore pellets to the integrated steel industry in North America • Cliffs led the consolidation of the North American iron ore industry and obtained a larger share of the market CLIFFS NORTH AMERICA Cliffs North American Iron Ore
Slide 26: Cliffs' Production
7.8 14.7 18.1 21.7 27 28.3 17.6 13.2 12.2 12.7 8.9 5.3 5.2 7.7 *Includes minority interest. (Million Gross Tons) CLIFFS’ PRODUCTION 2005* 2006* Cliffs' NA Equity Production NA Non-Equity Production AP Production Cliffs North American Iron Ore
Slide 27: North American Pellet Producers: 2006
NORTH AMERICAN PELLET PRODUCERS: 2006 4% 11% 15% 24% 46% U.S. Steel Quebec Cartier Mining Company (Arcelor Mittal) Minorca (Arcelor Mittal) Cliffs Iron Ore Company of Canada (Rio Tinto) Cliffs North American Iron Ore
Slide 28: Cliffs North American Pellet Customers: 2006
CLIFFS NORTH AMERICAN PELLET CUSTOMERS: 2006 Severstal 13% Algoma 20% Mittal Steel USA 44% WCI 9% Other 9% Stelco 5% Cliffs North American Iron Ore
Slide 29: Cliffs North American Iron Ore Shipping Routes
CLIFFS NORTH AMERICAN IRON ORE SHIPPING ROUTES Cliffs North American Iron Ore
Slide 30: Northshore Expansion
• Repair and restart of idled Northshore Mining Furnace No. 5 commencing in 2008 – Expected to increase 2008 capacity by 800,000 tons – Augments Cliffs ’ ability to satisfy customers ’ current and future requirements according to long-term contracts – Helps replace tonnage from Wabush Mine – Cost: $
Slide 31: Cliffs Pellet Contract Pricing
• Virtually 100% of current annual pellet capacity is committed under long-term contracts • Weighted average term of North American contracts is seven years • Annual price adjustments based on a variety of factors including: – International benchmark pellet price – Various PPI indices - Industrial C
Slide 32: Agenda
Cliffs North American Coal 32 AGENDA Cliffs Latin America Summary Cliffs Asia-Pacific Cliffs North American Iron Ore Industry: Iron Ore and Coal Strategy Overview and Transformation of Cliffs
Slide 33: North American Coal: PinnOak Resources
NORTH AMERICAN COAL: PINNOAK RESOURCES STRATEGIC ACQUISITION • Domestic producer of high-quality, low-volatility metallurgical coal – 80% slated for international markets • Three underground mines – Pinnacle and Green Ridge in West Virginia – Oak Grove in Alabama Cliffs North American Coal
Slide 34: North American Coal: PinnOak Resources
• Capacity in excess of seven million tons annually • Anticipated production – Second-half 2007: two million tons – 2008: five million tons • Reserves: 140 million tons • Price: $450 million cash, $160 million debt – $112.5 million of cash payment deferred until end of 2009 NORTH AMERICAN COAL: PINN
Slide 35: North American Coal: PinnOak Contract Pricing
• Contract pricing – Currently, one-year contracts negotiated annually • Export contracts reset April to April • Domestic contracts reset by calendar year – Potential opportunity to transition consumers into long-term contracts NORTH AMERICAN COAL: PINNOAK RESOURCES Cliffs North American Coal
Slide 36: North American Met Coal Producers
NORTH AMERICAN MET COAL PRODUCERS PinnOak provides Cliffs with a strong industry position and platform for further growth CONSOL 7% Jim Walter Resources 11% Peabody Energy 10% United Coal Corp. 6% Massey Energy 18% Alpha Natural Resources 21% Arch Coal 4% Cliffs 9% Foundation Coal Holdings 3% Sun Co
Slide 37: Agenda
Cliffs Asia-Pacific 37 AGENDA Cliffs Latin America Cliffs North American Coal Summary Cliffs North American Iron Ore Industry: Iron Ore and Coal Strategy Overview and Transformation of Cliffs
Slide 38: Cliffs Asia-Pacific
Cliffs Asia-Pacific CLIFFS ASIA-PACIFIC Portman: Cockatoo Island Perth Esperance Portman: Koolyanobbing Sonoma Project Sydney Abbot Point Terminal
Slide 39: Portman Limited
• Provided immediate presence in Australia and Asia • Access to fastest growing steel markets and relationships where Cliffs’ iron ore competencies can be levered • Capacity increased from 6MM to 8MM tonnes in 2006 • Portman has 88 million tonnes of proved reserves and an active exploration program
Slide 40: Sonoma Coal Project
• Partnered with QCoal for a 45% interest in the Sonoma Project • At the northern limit of Queensland’s Bowen Basin coalfields • Initial production beginning in late 2007 – Approximately half coking coal and half thermal coal • Production ramping to between three million and four million tonnes by e
Slide 41: Agenda
Cliffs Latin America 41 AGENDA Cliffs North American Coal Summary Cliffs Asia-Pacific Cliffs North American Iron Ore Industry: Iron Ore and Coal Strategy Overview and Transformation of Cliffs
Slide 42: Cliffs Latin America: Amapá Project
• Cliffs purchased 100% of the shares of Centennial Asset Mining Fund LLC, an affiliate of MMX Mineração e Metálicos SA, whereby it acquired 30% of the Amapá Project. CLIFFS LATIN AMERICA: AMAPÁ PROJECT Cliffs Latin America
Slide 43: Cliffs Latin America
• Opened regional office in Rio de Janeiro February 2007 • Active business development program evaluating numerous deposits • Amapá provides an attractive opportunity in Latin America and, over time, is anticipated to serve as a platform for further expanding Cliffs’ presence in the region CLIFFS LA
Slide 44: Amapá Project
• Acquisition of 30% interest in Brazilian iron ore project Amapá • Includes: iron ore deposits, 192 kilometer railway, 71 hectares of real estate • Estimated annual production 2007: 0.4 Mt 2008: 4.8 Mt 2009 and beyond: 6.5 Mt • Long-term supply agreement with Bahrain in place, oversight by Cliffs R
Slide 45: Amapá Geological Resources and Reserves
• Measured/Indicated: 73.6 Mt • Inferred: 104.5 Mt • Conceptual: 150.0 Mt – Re-certification of resources and reserves planned for the end of 2007 Note: Data as of March 2006; Source: MMX, NI 43-101 reports AMAPÁ GEOLOGICAL RESOURCES AND RESERVES Cliffs Latin America
Slide 46: Agenda
Summary 46 AGENDA Cliffs Latin America Cliffs North American Coal Cliffs Asia-Pacific Cliffs North American Iron Ore Industry: Iron Ore and Coal Strategy Overview and Transformation of Cliffs
Slide 47: Focused on Shareholder Value
FOCUSED ON SHAREHOLDER VALUE • Repurchased 3.2 million (split-adjusted) shares in 2006, using $121 million in cash – 1.3 million shares remaining under authorization as of June 30, 2006 • 25% increase in common share dividend • CLF stock price up 112% from September 2006 to September 2007 Summary
Slide 48: Cliffs' Stock Performance
Cleveland-Cliffs’ Stock Price: Sept. – Sept (Adjusted for stock splits) Summary CLIFFS’ STOCK PERFORMANCE $0 $20 $40 $60 $80 $100
Slide 49: New Five-Year Credit Agreement
• Unsecured $800MM agreement includes: – $200MM term loan – $600MM revolver – $200MM accordion feature for future expansion – Enables Cliffs to maintain requisite liquidity to seize opportunities – Supports Cliffs ’ continuing objectives of optimizing capital structure, reducing the cost of capital,
Slide 50: 2006 Financial Highlights
Summary 2006 FINANCIAL HIGHLIGHTS Full-Year Results: Change 10.4% $ 1,740 $ 1,922 Revenue 2.5% $ 357 $ 366 Operating Income 0.7% $ 278 $ 280 Net Income 2.2% 27.2 27.8 Sales Tonnage: (Gross Tons) 58% $ 0.30 $ 0.475 Cash Dividends Paid Per Common Share (In Millions Except Per Share) 0% 0% Debt to Tota
Slide 51: Year-to-Date Financial Highlights
YEAR-TO-DATE FINANCIAL HIGHLIGHTS Summary (In Millions, Except Per Share) 4% $ 2.20 $ 2.29 Diluted EPS First-Half Ended: Change June 30, June 30, 10% $ 793 $ 873 Revenue (1%) $ 121 $ 119 Net Income 8% 11.1 12.0 Sales Tonnage (Gross Tons) 0% 10% Debt to Total Capitalization At June 30, 2006 At June 3
Slide 52: Vision of Cliffs – Combine into Our Vision of a New Cliffs
Growth and Diversification Shareholder Returns Global Execution Operational Excellence VISION OF CLIFFS - Summary Growth and Diversification • Revenues Doubled • 50% of Revenues From Outside of North America • Up to 25% of Revenues From Outside of Iron Ore Operational Excellence • MSHA Frequency Rat
Slide 53: Laurie Brlas
Laurie Brlas Senior Vice President CFO and Treasurer Steve Baisden Director, Investor Relations and Corporate Communications KeyBanc Capital Markets Basic Materials and Packaging Conference Boston, MA September 19, 2007 A WORLD LEADER IN IRON ORE AND METALLURGICAL COAL