Slide 1: Meaningful Change Needed for Value Creation at Cliffs Natural Resources
MEANINGFUL CHANGE NEEDED FOR VALUE CREATION AT CLIFFS NATURAL RESOURCES March 6, 2014
Slide 2: Disclaimer
Disclaimer 1 This presentation with respect to Cliffs Natural Resources, Inc. ("Cliffs" or the "Company") is for general informational pur pos es only. It does not have regard to the specific investment objective, financial situation, suitability or particular need of any specific person who may rec
Slide 3: Overview: Executive Summary
Overview 2 Executive Summary • Casablanca is nominating six highly - qualified candidates for election to Cliffs’ Board at the annual meeting scheduled for May 13, 2014 • Funds managed by Casablanca own approximately 5.2% of Cliffs , making us one of its largest shareholders • Casablanca is committe
Slide 4: Casablanca Director Nominees
Overview 3 Casablanca Director Nominees Nominee Key Qualifications Lourenco Goncalves Hired as CEO of Metals USA in February 2003; took the company private in November 2005; IPO’d the company in April 2010 and sold the company to Reliance Steel & Aluminum in April 2013 CEO of California Steel In
Slide 5: Majority of Current Board Presided over an 80% Decline in Value
Overview 4 Majority of Current Board Presided over an 80% Decline in Value… [ a] 2012 Annual Meeting: Company sponsored proposal to allow the Board to amend bylaws without shareholder approval, failed to pass. [ b] 2013 Annual Meeting: Company sponsored proposals to allow the Board to amend bylaws w
Slide 6: Economic Exposure of Board
Economic Exposure of Board (a) Shares Shares Purchased Granted for Cash Executive Chairman 39,975 0 CEO 97,560 0 Other Board Members (Aggregate) 91,651 3,460 Total 229,186 3,460 Lourenco Goncalves 50,000 Casablanca 7,906,520 Overview 5 …and Demonstrated Little Faith in Cliffs, Given de Minimis Econo
Slide 7: Underperforming Benchmarks
Overview 6 Underperforming Benchmarks Note : CLF stock price change calculated using closing price beginning on January 3, 2011 and ending on March 4, 2013. [ a] Reflects S&P Metals & Mining ETF. - 20 40 60 80 100 120 140 160 1/9/11 5/4/11 8/27/11 12/20/11 4/13/12 8/6/12 11/29/12 3/24/13 7/17/13 11/
Slide 8: Corporate Governance
—_— oa Pe Corporate Governance
Slide 9: Majority of Existing Board Is Responsible for Failed Bloom Lake Acquisition
Corporate Governance 8 Majority of Existing Board Is Responsible for Failed Bloom Lake Acquisition The directors who approved the transaction, and those who permitted additional investment, should not continue to serve on the Cliffs Board Directors Cliffs Director Since Richard K. Riederer 2002 Susa
Slide 10: Bloom Lake Is Part of a ~$9 Billion Value-Destroying Diversification Strategy
Sitting Directors Est. Aggregate Responsible for Approving: Amount Invested Further Project ($ millions) Project Status Acquisition Investment Chromite (a) $500 Suspended in 2Q 2013 5 / 6 8 Coal (b) 1,230 Expected breakeven in 2014 6 10 Amapá (c) 500 Divested for “nominal” amount in 3Q 2013 3 8 Wabu
Slide 11: Board Has Repeatedly Engaged in Entrenchment Tactics
Corporate Governance 10 Board Has Repeatedly Engaged in Entrenchment Tactics Annual Meeting Company - Sponsored Proposals to Strip Shareholders of Important Rights Result 2012 Remove shareholder right to approve bylaw amendments Failed 2013 Remove shareholder right to approve bylaw amendments Failed
Slide 12: Board Has Repeatedly Engaged in Entrenchment Tactics (cont'd)
Corporate Governance 11 Board Has Repeatedly Engaged in Entrenchment Tactics (cont’d) Summary Actual Language “Change in Control” triggered if Incumbent Board is replaced… “‘Change in Control’ means: … (ii) individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease fo
Slide 13: Hurried and Defensive CEO Appointment
Corporate Governance 12 Hurried and Defensive CEO Appointment The rushed manner in which Mr. Halverson was appointed to the CEO position represents a poor exercise of the Board’s fiduciary duties [ a] Announced October 25, 2013. Mr. Halverson assumed the President and COO position effective November
Slide 14: Who is Running Cliffs?
Corporate Governance 13 Who is Running Cliffs ? Cliffs cannot afford obfuscated leadership and needs a proven leader to take decisive action Casablanca’s Interpretation Date Event Comments Senior - Most Executive July 9, 2013 Company announces CEO Carrabba’s pending retirement Kirsch named Non -
Slide 15: James Kirsch Presided over 86% Value Destruction at Ferro
0.00 5.00 10.00 15.00 20.00 25.00 $30.00 3/4/04 3/4/06 3/4/08 3/4/10 3/4/12 3/4/14 Corporate Governance 14 James Kirsch Presided over 86% Value Destruction at Ferro [ ] of 11 approved subsequent investment in Bloom Lake (additional ~$1.5 billion) $ 13.55 +413% Oct 2004: Kirsch joins Ferro Corp as Pr
Slide 16: Lack of Economic Alignment with Shareholders
Corporate Governance 15 Lack of Economic Alignment with Shareholders (a) [ a] Based on aggregate share ownership of 232,646 shares held by directors and 371,145 shares top executives, and 137,535 shares held by both groups in aggregate. Shares attributed to Mr. Kirsch (39,975) and Mr. Halverson (97,
Slide 17: Our Concerns about Cliffs' Strategy
Our Concerns about Cliffs’ Strategy 16
Slide 18: Committed to a Failed Expansion and Diversification Strategy
Our Concerns about Cliffs’ Strategy 17 Committed to a Failed Expansion and Diversification Strategy 80% loss of value & 76% dividend cut With the value destruction that has transpired at Cliffs, how can it continue to pursue an expansion and diversification strategy? Has yet to be demonstrated, in o
Slide 19: Kick the Can(ada)
Our Concerns about Cliffs’ Strategy 18 Kick the Can(ada) • Idling the Bloom Lake expansion should have happened a long time ago and is not a new strategy, in our view Company “Strategy” Casablanca’s Concerns Preferred Bloom Lake JV or sale Difficult to execute in a reasonable time frame and on reaso
Slide 20: Asia Pacific: Not Enough to Anchor an International Strategy
Our Concerns about Cliffs’ Strategy 19 Asia Pacific: Not Enough to Anchor an International Strategy (suspended) Amapá (divested) (idled) (“indefinitely suspended”) With so much on its plate at home, additional work needed at Bloom Lake and no synergies, how is Asia Pacific a core asset? Asia
Slide 21: "Reducing Net Debt" or Just Hoarding Cash?
$497 $1,059 $699 $790 0 200 400 600 800 1,000 $1,200 2014 2015 2016 2017 2018 2019 2020 2021 2040 Our Concerns about Cliffs’ Strategy 20 “Reducing Net Debt” or Just Hoarding Cash? Is the Board truly committed to capital reallocation when cash balances can be redeployed at any moment towards the next
Slide 22: Beyond the Current Dividend, No Return of Capital for Shareholders
Our Concerns about Cliffs’ Strategy 21 Beyond the Current Dividend, No Return of Capital for Shareholders • The dividend was originally cut primarily to fund Bloom Lake’s expansion : “ Our Board of Directors recently approved a reduction to our quarterly cash dividend rate by 76 percent to $0.15 per
Slide 23: A New Strategy Focused on Cliffs' Core U.S. Assets
A New Strategy Focused on Cliffs’ Core U.S. Assets 22
Slide 24: Casablanca Plan
A New Strategy Focused on Cliffs’ Core U.S. Assets 23 Casablanca Plan : Install new l eadership : Board and CEO Refocus on core U.S. business Sell Asia Pacific Address cost structure Return capital to shareholders Explore second - stage value creation — by MLP, sale or otherwise
Slide 25: Refocus on Core U.S. Business
A New Strategy Focused on Cliffs’ Core U.S. Assets 24 Refocus on Core U.S. Business • We believe Cliffs ’ U.S. assets remain its greatest opportunity • Close to 60% of the iron ore production capacity in the geographically protected Great Lakes region • Largest iron ore producer in the United States
Slide 26: Extract Value through Immediate Divestiture of Asia Pacific
A New Strategy Focused on Cliffs’ Core U.S. Assets 25 Extract Value through Immediate Divestiture of Asia Pacific • Unsolicited expressions of interest in Asia Pacific • A sale of Asia Pacific can capture an attractive valuation, in our opinion • Alternative to our prior spin - off proposal and dove
Slide 27: Address Cliffs' Bloated Cost Structure; Return More Capital
A New Strategy Focused on Cliffs’ Core U.S. Assets 26 Address Cliffs’ Bloated Cost Structure • Reduce cost structure far more aggressively, as in our opinion: • Proposed cuts are insufficient • Corporate is oversized • Cash costs remain too high • Refocused Cliffs should have capacity to increase it
Slide 28: Second-Stage Value Creation: MLP, Sale or Otherwise
A New Strategy Focused on Cliffs’ Core U.S. Assets 27 Second - Stage Value Creation — by MLP, Sale or Otherwise • MLP: • Casablanca has conducted significant research with both MLP capital markets bankers and investors • Believe an MLP can be executed successfully • Potential sale of the Company: •
Slide 29: Proposed Leadership Changes
Proposed Leadership Changes 28
Slide 30: Lourenco Goncalves
29 • Metals USA • Served as President and Chief Executive Officer from February 2003 until the sale of Metals USA to Reliance Steel & Aluminum in April 2013 • Metals USA was one of the largest metals service center businesses in the United States, operating 48 locations • California Steel Industries
Slide 31: Lourenco Goncalves and Metals USA: A Case Study for Value Creation
30 Lourenco Goncalves and Metals USA: A Case Study for Value Creation February 2003 • Lourenco Goncalves joins Metals USA as its President and CEO • Stock price: $3.08 January / July 2007 • Metals USA pays a total of $275 million in dividends to its shareholders August 2012 • Apollo completes a $59
Slide 32: Casablanca's Board Candidates Are Highly Qualified
Proposed Leadership Changes 31 Casablanca’s Board Candidates Are Highly Qualified Financial/Transactional Metals & Public Company Experience Experience Mining Other Investment Principal Name Experience CEO Executive Board Banking Investing Lourenco Goncalves x x x x Rip Fisher x x x x Patrice Merrin
Slide 33: Conclusion
Proposed Leadership Changes 32 Conclusion • As a significant shareholder, Casablanca is troubled by the value destruction that has occurred under this Board's watch • Cliffs desperately needs a new strategy and leadership with a fresh perspective — the status quo is unacceptable in our view and shar