Cleveland-cliffs Inc. · NYSE:CLF
Cleveland-cliffs — Cliffs Natural Resources — Investor Presentation (April 2009)
47 slides from Cleveland-cliffs's investor presentation, Apr 6, 2009
Slide 1: Cliffs Natural Resources Inc. Corporate Presentation
Exhibit 99(a) OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs Natural Resources Inc. Corporate Presentation April 2009 JC
Slide 2: Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995 This presentation includes predictive information that is intended to be made as “forward-looking” within the safe harbor protections of the Private Securities Lit
Slide 3: Overview
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs Natural Resources Inc. Overview JC
Slide 4: Overview of Cliffs Natural Resources Inc.
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Overview of Cliffs Natural Resources Inc. Cliffs Natural Resources (NYSE: CLF) is an international mining and natural resources company. We are the largest producer of iron ore pellets in North America, a major supplier of direct-shipping lump an
Slide 5: Cliffs Natural Resources Global Footprint
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs Natural Resources Global Footprint 4
Slide 6: Current Market Information
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Current Market Information Metals & Mining Sector $3.6 Billion in 2008 Revenues $2 Billion Market Capitalization 113.5MM shares outstanding, ~5MM in NYSE average volume per day 2% Dividend Yield Over 80% institutionally held, 60% by top 25 instit
Slide 7: Cliffs' Strategic Imperatives
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs’ Strategic Imperatives Building Scale Through Diversification Global Execution Multiple Revenue Streams Competencies of the Firm Product Diversification Outlook of Personnel Geographic Presence Scale Global Scalability Through Global Diver
Slide 8: Cliffs' Strategy: Geographic and Mineral Diversification
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs’ Strategy: Geographic and Mineral Diversification MINERALS GEOGRAPHIES SEABORNE MET • MANGANESE COAL ASIA-PACIFIC LATIN OTHER LATIN • MOLYBDENUM SEABORNE IRON ORE NORTH • FERRO CHROME NORTH AMERICA (AUSTRALIA) AMERICA AMERICAN IRON ORE (BR
Slide 9: Cliffs' Strategy
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs’ Strategy Maintain the core: North American Iron Ore Expand globally and diversify products - North American Coal - Cliffs Asia Pacific Business Unit - Cliffs Latin American Business Unit Consistently exhibit leadership in sustainable deve
Slide 10: High Corporate Governance Standards
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP High Corporate Governance Standards Cliffs Management Team Cliffs Corporate Governance Performance outranked 98.2% of S&P 400 companies and 98.6% of materials companies in 2008* Strong and knowledgeable 10-person Board of Directors; 9 Directors a
Slide 11: Transformation into International Mining Entity & Merchant
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Transformation into International Mining Entity & Merchant Total revenue growth ($ b) Restructured in 2002 to better acquire & expand capacity domestically & seek opportunities in international markets Acquires Portman Limited, Australia’s then 3
Slide 12: Human Resources
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Human Resources Employees breakdown 5,711 employees worldwide 258 Strong commitment to continuous safety improvement (5%) reflected in corporate mission and core values 1322 In 2007, reported a company-low 1.93 Mine Safety & (23%) Health Admin. (
Slide 13: Sustainable Development Integral to Success in Industry
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Sustainable Development Integral to Success in Industry Mines managed by Cliffs interact with federal and state agencies to ensure operations meet or exceed land, air & water quality standards Consistently and uniformly evaluates performance agai
Slide 14: 2008 Consolidated Results Overview
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs Natural Resources 2008 Consolidated Results Overview LB
Slide 15: 2008 Consolidated Profit & Loss
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 2008 Consolidated Profit & Loss P&L Year Highlights 2008 2007 Full-Year revenues increase 59% to $3.6 billion REVENUES 3,609.1 2,275.2 SALES MARGIN 1,159.7 462.0 Earnings per diluted share increase 85% to $4.76 OPERATING INCOME 938.9 381.6 EARNIN
Slide 16: Strategies – What we have already accomplished: Asia Pacific
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Strategies – What we have already accomplished Asia Pacific Strategy 1st Step: In 2005, purchased 80% of Portman Limited Cockatoo Island Created Growth Options • Added Portman Koolyanobbing Reserves • Bought GoldenWest Stake (16.96%) Sonoma • Coc
Slide 17: Strategies – What we have already accomplished: Latin America
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Strategies – What we have already accomplished Latin America Strategy Amapa Reserves Nearby Prospects Manganese Opportunities 1st Step: Took 30% Interest in Amapa Project Amapa Project Opened Rio Business Development Office Created Growth Options
Slide 18: Central Appalachian Metallurgical Coal Strategy
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Strategies – What we have already accomplished Central Appalachian Metallurgical Coal Strategy Operational execution has been disappointing However, acquisition provided solid platform in a mineral with attractive fundamentals A scarce resource S
Slide 19: Strategies – What we have already accomplished: Diversification
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Strategies – What we have already accomplished Diversification Asset Market Investment Industry Geography Customer Value Cap Revenue EBITDA Cliffs in 2003 $ 882 $ 535 $825 -- 2005 Portman 80% $ 433 2007 Sonoma 120 2007 Amapa 280 2007 PinnOak 497
Slide 20: Value of Diversification
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Value of Diversification $123 $346 Revenue in millions $770 $2,370 $825 $53 Sales Margin $349 Sales Margin in millions was ($10) $804 2003 2008* NA Iron Ore AP Iron Ore NA Coal AP Coal * In 2008 North American Coal had a sales margin loss of $46
Slide 21: Strategic Direction Set in 2003 has Significantly Paid off for Shareholders
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Strategic Direction Set in 2003 has Significantly Paid off for Shareholders Comparison of 5 Year Cumulative Total Return Assumes Initial Investment of $100 December 2008 900 800 700 600 500 400 300 200 100 0 Dec-2003 Dec-2004 Dec-2005 Dec-2006 De
Slide 22: 2008 Year End Balance Sheet
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 2008 Year End Balance Sheet Select Balance Sheet Items Year Highlights 2008 2007 ASSETS $179.0 million of cash and equivalents at year end Cash and Equivalents $ 179.0 $ 157.1 No borrowing drawn on $600 million credit facility Inventories 265.4 2
Slide 23: North American Iron Ore
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs Natural Resources North American Iron Ore LB
Slide 24: North American Iron Ore Segment
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP North American Iron Ore Segment Business Overview Geographic Overview North America’s largest supplier of iron ore pellets Northshore Mining Hibbing Taconite Customer base includes nearly all U.S.-based, integrated Wabush Mine United Taconite ste
Slide 25: North American Iron Ore Shipping Routes
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP North American Iron Ore Shipping Routes 24
Slide 26: North American Iron Ore Pellet Process
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP North American Iron Ore Pellet Process 1. Use explosives, giant electric drills, shovels and industrial trucks to open-pit mine <30% iron content ore 2. Crush and screen (reduce raw ore from the size of a Peugeot automobile to the consistency of
Slide 27: North American Iron Ore Business Model and Pellet Contracts
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP North American Iron Ore Business Model and Pellet Contracts NAIO Business Model Market is comprised of 38 blast furnaces in North America (29 United States, 7 Canada and 2 Mexico) Customer consolidation: ArcelorMittal, SeverStal, Algoma (Essar) a
Slide 28: North American Iron Ore Reserves
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP North American Iron Ore Reserves (Million Tons) 350 308 300 280 Magnetite 250 Hematite Combination of Hematite, 200 and Magnetite 144 150 114 100 75 50 33 0 Empire Hibbing Northshore Tilden Wabush United Taconite 27
Slide 29: North American Iron Ore Equity Production
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP North American Iron Ore Equity Production (Million Gross Tons) 40 Cliffs' NA Equity Production NA Non-Equity Production 35 30 13.8 12.3 12.7 12.8 12.8 25 12.2 13.2 20 17.6 15 21.7 22.1 21.8 22.9 10 20.8 18.1 14.7 5 7.8 0 2001 2002 2003 2004 2005*
Slide 30: North American Iron Ore Results & Outlook
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP North American Iron Ore Results & Outlook 2008 Results Year Highlights 2008 2007 Equity production reached 23 million tons SALES VOLUME (Long tons in millions) 22.7 22.3 REVENUE PER TON $ 92.56 $ 66.01 Revenues per ton up 40% COST PER TON 57.12 4
Slide 31: North American Coal
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs Natural Resources North American Coal JC
Slide 32: North American Coal Segment
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP North American Coal Segment Business Overview Geographic Overview Domestic producer of high-quality, low-volatility metallurgical coal with significant production sold to international markets Three underground mines: Pinnacle Complex in West Vir
Slide 33: North American Coal Business Model
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP North American Coal Business Model Customers include U.S. and international steel producers with a historic split of 50/50% Coal typically sold on one-year contracts starting Jan. 1 for U.S. customers and April 1 for international customers Trans
Slide 34: North American Coal Results & Outlook
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP North American Coal Results & Outlook 2008 Results Year Highlights 2008 2007 Acquired in July 2007 SALES VOLUME (Short tons in millions) 3.2 1.2 REVENUE PER TON $ 92.95 $ 70.77 Revenues per ton up 31% COST PER TON 107.27 97.83 SALES MARGIN PER TO
Slide 35: Asia Pacific Iron Ore
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs Natural Resources Asia Pacific Iron Ore LB
Slide 36: Asia Pacific Iron Ore Segment
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Asia Pacific Iron Ore Segment Business Overview Geographic Overview Asia Pacific Iron Ore operations located in Western Cockatoo Island Australia: – Koolyanobbingmine (100% owned) – Cockatoo Island Joint Venture (50% owned) Serves the Asian iron
Slide 37: Asia Pacific Iron Ore Business Model
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Asia Pacific Iron Ore Business Model Diverse customer baseincludesteel producers in China and Japan with a 2008 split of 74/26% No single customer accounted for more than 10% of APIO sales in 2008 Contracts are five-year term supply agreements wi
Slide 38: Asia Pacific Iron Ore Results & Outlook
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Asia Pacific Iron Ore Results & Outlook 2008 Results Year Highlights 2008 2007 Sales volume of 7.8 million tonnes, despite limited SALES VOLUME (Metric tons in millions) 7.8 8.1 REVENUE PER TON $ 98.69 $ 54.59 production from Cockatoo Island join
Slide 39: Amapá Project
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Amapá Project Business Overview Geographic Overview 30% owned by Cliffs, 70% owned by Anglo American Consists of a significant iron ore deposit, a 192-kilometer railway connecting mine to port, and 71 hectares of real estate for a loading termina
Slide 40: Sonoma Project
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Sonoma Project Business Overview Geographic Overview 45% economic interest, ramped up in 2008 Sonoma 2008 equity sales volume: 933M tonnes ~27 million tonnes of reserves Mix of hard coking and thermal coal Supply agreements in place with JFE, Chi
Slide 41: Macro Economic Dynamics
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs Natural Resources Macro Economic Dynamics JC
Slide 42: Strong Coal Pricing Trends
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Strong Coal Pricing Trends Met coal prices ($/metric ton) Steam coal prices ($/ton) 300 140 120 250 100 200 80 150 60 2009E 2009E ~ Mid $60s 100 $129 -50% -57% 40 50 20 0 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 1990 1992 1994 1996 199
Slide 43: Iron Ore Trends Recently Strong, Though Expected to Be Pressured in 2009
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Iron Ore Trends Recently Strong, Though Expected to Be Pressured in 2009 Iron ore prices ($/metric ton based on 64% Iron Content) $141 150 86.6% Pellets Lump Fines $129 96.5% 125 $93 100 79.9% $99* $91* 5.8% 2009E 86% -3% -30% 75 9.5% 19% $65* 71
Slide 44: Long-Term Steel Demand Will Drive Our Business
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Long-Term Steel Demand Will Drive Our Business Global steel demand (millions of tonnes) 2,000 BRIC cycle CAGR 1995-2015: 4.4% 1,500 Post-oil crisis slowdown Post-World War II 1,000 reconstruction and Japanese CAGR 1973-1995: 0.4% industrializatio
Slide 45: Cliffs Response to the Current Environment
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs Response to the Current Environment At the onset of the current global macroeconomic recession in the fall, Cliffs acted quickly: Oct. 2008 – Idled pellet production and furnaces at Northshore Mining and United Taconite Nov. 2008 – Enacted
Slide 46: In Summary
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP In Summary Steel and the raw materials to make it are extremely important Building block of society Essential to modernization of Brazil, Russia, India and China (BRIC) Raw materials will continue to be scarce in the long-term Very few meaningful
Slide 47: Cliffs Natural Resources
OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs Natural Resources Corporate Presentation April 2009
Cliffs Natural Resources — Investor Presentation (April 2009) on 6ix