Cleveland-cliffs Inc. · NYSE:CLF
Cleveland-cliffs — Cliffs Natural Resources — Investor Day (June 2011)
123 slides from Cleveland-cliffs's investor day presentation, Jun 28, 2011
Slide 1: CLF Rocks NYC - Program Agenda
CLIFFS NATURAL RESOURCES INC . CLF ROCKS NYC TUESDAY JUNE 28 2011 THE NEW YORK STOCK EXCHANGE PROGRAM AGENDA 10:00 a.m. WELCOME Steve Baisden Vice President, Investor Relations and Communications 10:05 a.m. Cliffs’ Overall Strategy Joseph Carrabba Chairman, President and Chief Executive Officer 10:3
Slide 2: Please submit your electronic questions
PLEASE SUBMIT YOUR ELECTRONIC QUESTIONS TO: NYSE@CliffsNR.com
Slide 3: Safe Harbor Statement
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995 This presentation and accompanying oral remarks contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking stateme
Slide 4: Cliffs' Overall Strategy
Joe Carrabba CLIFFS NATURAL RESOURCES INC. CLIFFS’ OVERALL STRATEGY
Slide 5: Safety is a top priority
SAFETY IS A TOP PRIORITY • Safety has been and will always be at the core of Cliffs’ strategy • Continuing focus of investment • Safety approach and lower trending LTIFR position Cliffs as an employer of choice
Slide 6: The Cliffs journey has just begun
THE CLIFFS JOURNEY HAS JUST BEGUN... • Since 2004 Cliffs has transitioned from a geographically concentrated mine operator to a diversified mine owner • In the process we have created tremendous value for our shareholders by providing 36% returns annually – an achievement that puts us near the top o
Slide 7: Cliffs' long-lasting strategy
NEAR- & LONG-TERM TACTICS • Increase Seaborne Exposure • Enhance Project Pipeline • Customer & Mineral Diversification • Apply Technical Competencies CLIFFS WILL CONTINUE EXECUTING ITS SOUND STRATEGY SUPPORTED BY FUNDAMENTAL BELIEFS CLIFFS’ LONG-LASTING STRATEGY • Build Scale in Steelmaking Raw Mate
Slide 8: Our strategic imperatives remain the same
Building scale through diversification • Multiple Revenue Streams • Product Diversification • Geographic Presence Operational excellence • Safety • Technical Competencies • Operating Efficiencies Global execution • Competencies of the Firm • Outlook of Personnel • Global Scalability Shareholder retu
Slide 9: Strategy has resulted in significant growth
• Portman I 2011 sales based on Cliffs’ • Amapa • Sonoma • PinnOak • Portman II • United Taconite • Wabush • Freewest & Spider • INR Energy’s Coal Operations • Consolidated Thompson STRATEGY HAS RESULTED IN SIGNIFICANT GROWTH 2011E Revenue: $1.7 B Revenue: $1.9 B Revenue: $2.3 B Revenue: $3.6 B Reve
Slide 10: Since 2004 Cliffs has delivered significant shareholder value
Note: TSRs are from Dec 31, 2004 through Dec 31, 2010 SINCE 2004 CLIFFS HAS DELIVERED SIGNIFICANT SHAREHOLDER VALUE
Slide 11: Three key drivers of historic value creation
CLIFFS’ 36% TSR WAS ACHIEVED THROUGH STRONG EXECUTION OF STRATEGY 1. Volume • Volumes grew substantially, supported by strategic diversifying acquisitions 2. Price • Proactively managing our price realization ensured we could capitalize on strong industry demand 3. Margin Expansion • Aggressively ma
Slide 12: Portman acquisition and expansion
Cliffs bought 80% of Portman in 2005, and remaining 20% in 2008... ...Improved core infrastructure throughout our ownership ... Cliffs invested in infrastructure to enable growth • Rail • Mobile Fleet • Resources ...And delivered significant results mtpa mtpa $4 Billion PORTMAN ACQUISITION & EXPANSI
Slide 13: High-priority levers supporting organic growth
Operational Excellence Shareholder Returns Megatrends Ferroalloys Koolyanobbing Expansion Moving Toward World Prices North American Coal Eastern Canada Expansion Exploration Global Execution Building Scale through Diversification A NUMBER OF HIGH-PRIORITY LEVERS THAT SUPPORT ORGANIC GROWTH HAVE BEEN
Slide 14: Growth strategy (minerals and geographies)
NORTH AMERICA SOUTH AMERICA (BRAZIL) NORTH AMERICAN MET COAL IRON ORE SEABORNE MET COAL SEABORNE FERROALLOYS GROWTH STRATEGY (MINERALS AND GEOGRAPHIES) Integrate Consolidated Thompson’s operations 2011 Focus Execute Delivery of various capital projects Beyond 2011 gaining scale is important ASIA PAC
Slide 15: Continuing our historic strategy
LOOKING FORWARD, WE WILL CONTINUE PURSUING OUR HISTORIC STRATEGY SUPPORTED BY FUNDAMENTAL BELIEFS Our reasons for the chosen strategy have been consistent over the past several years • Guided by our understanding of the external environment (Megatrends) • Informed by Cliffs’ competitive position and
Slide 16: Emergence of Japan and China driving steel consumption
Source: Cliffs Natural Resources; World Steel Organization; The World Bank; World Steel Association Note: India comprises 4% of total steel consumption in EMERGENCE OF JAPAN AND CHINA HAVE DRIVEN GLOBAL STEEL CONSUMPTION GROWTH SINCE THE 1960s
Slide 17: US and China steel intensity curves
US AND CHINA: STEEL INTENSITY CURVES Source: Bloomberg, Worldsteel, IMF, USGS Although China has recently experienced strong growth in steel consumption, there is still potential for further growth.
Slide 18: Steel intensity and economic development
STEEL INTENSITY IS CLOSELY RELATED TO STAGE OF ECONOMIC DEVELOPMENT AND INCOME LEVELS Source: VCI Analysis; International Iron & Steel Institute; McKinsey; Rio Tinto; World Bank; “China Steel Outlook”; Citigroup; Deutsche Bank Research. Note: China regional consumption estimates are based on 2008 da
Slide 19: China infrastructure expansion
GROWING INFRASTRUCTURE CONGESTION: CHINA IS EXPECTED TO DRAMATICALLY EXPAND ITS INFRASTRUCTURE Source: McKinsey & Company Key assumptions for 2009-2013: 1) Rail and airport are estimated with central gov’t source as it is centrally planned; 2) Highway 2009-2010 is estimated with provincial gov’t sou
Slide 20: Urbanization in China, India and Africa
Source: McKinsey & Company THE URBANIZATION IN CHINA, INDIA AND AFRICA IS OF UNPRECEDENTED SCALE
Slide 21: New supply challenges
NEW SUPPLY CHALLENGES The barriers to entry are becoming higher as new supply is more challenging to bring into production Source: Macquarie
Slide 22: Growing deficit of skilled labor in mining
THERE IS A GROWING DEFICIT OF SKILLED LABOR IN THE MINING INDUSTRY GLOBALLY Source: Staffing the Supercycle: Labor Force Outlook in the Minerals Sector, 2005-2015 (Minerals Council of Australia); Canadian Mining Human Resources Council; McKinsey analysis
Slide 23: Governments playing a more active role
57 AS RESOURCES ARE BECOMING MORE SCARCE, GOVERNMENTS ARE PLAYING A MORE ACTIVE ROLE Governments are increasingly trying to reap benefits from domestic assets (Reuters) – Australia’s government angered its booming resources sector on Sunday by unveiling a new tax on mining projects from July 2012 un
Slide 24: Declining ore grades and thinner seams
DECLINING ORE GRADES AND THINNER SEAM THICKNESSES • We believe declining ore grades will be a new challenge for mining companies looking ahead • With the consolidation of the Chinese steel industry on the horizon, it is likely newer blast furnaces will be larger and more efficient, which will requir
Slide 25: Cliffs' pipeline of organic growth
CLIFFS’ PIPELINE OF ORGANIC GROWTH GLOBAL EXECUTION BUILDING SCALE THROUGH DIVERSIFICATION Moving Towards World Prices Coal Expansion APIO Expansion Eastern Canada Expansion Ferroalloys Exploration
Slide 26: Global Marketing
Don Gallagher Bill Hart Terry Mee CLIFFS NATURAL RESOURCES INC. GLOBAL MARKETING
Slide 27: Our global commercial focus
MAXIMIZING VALUE FOR SHAREHOLDERS TIGHT GLOBAL SUPPLY STRATEGIC MARKETING CAPABILITIES HIGH QUALITY PRODUCTS SUSTAINED DEMAND GROWTH OUR GLOBAL COMMERCIAL FOCUS • Sustained demand growth • Chinese urbanization and government policy • Indian growth • Tight global supply • Dependent upon capital avail
Slide 28: Cliffs' historic product flow 2005
1mt 20mt 5.9mt CLIFFS’ HISTORIC PRODUCT FLOW 2005
Slide 29: Cliffs' forecasted product flow 2013
26mt 33mt 2mt 2mt 2mt 2mt 3mt CLIFFS’ FORECASTED PRODUCT FLOW 2013
Slide 30: Example of Chinese urbanization - Shanghai
EXAMPLE OF CHINESE URBANIZATION - SHANGHAI Shanghai - Shanghai -
Slide 31: Chinese urbanization driving steel consumption growth
CHINESE URBANIZATION WILL CONTINUE TO DRIVE STEEL CONSUMPTION GROWTH Source: EIU; “Putting BRIC growth in perspective ” , Worldpress Note: US$4,600 equivalent to RMB30,000 cities with 1m or more people currently. Number is expected to grow to cities by 2025. NUMBER OF CITIES IN CHINA WITH AVERAGE DI
Slide 32: Chinese capital stock still low
Source: “The Confessions and Concerns Of A China Bull ” , Urandaline Investments; Andy Stoeckel, former Head of the Australian Bureau of Agricultural and Resource Economics; People’s Daily Online, February 2010 Reaching developed world capital stock levels would drive an immense increase in Chinese
Slide 33: India's demand growth correlates to China
Source: The World Bank; UN World Population Prospects Note: T = for China, for India based on assumed start of modern “reformed” period (see Morgan Stanley 2010) INDIA’S DEMAND GROWTH CORRELATES CLOSELY TO CHINESE GROWTH TO DATE
Slide 34: Capacity expansions unlikely on time or budget
CAPACITY EXPANSIONS ARE UNLIKELY TO BE DELIVERED ON TIME OR ON BUDGET Source: Cliffs Natural Resources; AME; Company announcements and data; “African Iron Ore Supply: Potential For New Projects”, RBC Capital Markets; Engineering and Mining Journal.
Slide 35: Higher-quality iron ore attracting premium
HIGHER-QUALITY IRON ORE IS ATTRACTING AN INCREASED PREMIUM OVER LOWER QUALITY Source: Cliffs Natural Resources; “Australian Iron and Steel Review”, Credit Suisse; 4 months of daily spot trade data (Platts) Note: *Based on a trend line for actual spot
Slide 36: Iron ore quality trending lower
IRON ORE QUALITY TRADED BY MAJOR PRODUCERS IS TRENDING LOWER Quality was exceptionally stable between 1994 and 2003. Recent declines are likely driven by no availability of quality and “ship anything” response. CONTAINED IRON BY PRODUCT (%Fe) Ongoing quality declines increase production requirements
Slide 37: High-quality producer in decreasing quality market
Ore Producers Steel Mills HIGH-QUALITY IRON ORE PRODUCER IN A MARKET OF DECREASING QUALITY Source: Cliffs Analysis Note: Steelmaker inputs are pre-sinter Relative Quality of Iron Ore Producers Grade (% Fe) Robe Yandi FMG PBF Koolyanobbing Mt N Vale IOC Cockatoo Wabush Increasing demand for quality C
Slide 38: Metallurgical coal prices expected to increase
Source: VCI Analysis Note: Analysis is illustrative only METALLURGICAL COAL PRICES CAN BE EXPECTED TO INCREASE FURTHER GIVEN RELATIVE COST OF NEW SUPPLY AVAILABILITY AND COST OF NEW COMMODITY SUPPLY
Slide 39: Seaborne met coal favorable industry structure
SEABORNE METALLURGICAL COAL HAS A FAVORABLE INDUSTRY STRUCTURE WHICH HELPS DRIVE STRONG RETURNS Source: VCI Analysis; Citigroup; BMA; BHP Billiton; McKinsey; Cliffs Natural Resources Note: Estimated ROCE for 15 years to 2003 based on publicly available data, Manganese is based on a weighted average
Slide 40: Stainless steel drives chromite and FeCr markets
STAINLESS STEEL DRIVES CHROMITE AND FeCr MARKETS Source: Heinz Pariser
Slide 41: Stainless exceeding carbon steel growth
Source: Cliffs Analysis STAINLESS EXCEEDING CARBON STEEL GROWTH AND CHINA IS THE DRIVER
Slide 42: Maturing Chinese economy demands more chromite
42 42 MARKET METRICS GDP per Capita, Indexed A MATURING CHINESE ECONOMY WILL CONTINUE TO DEMAND INCREASING AMOUNTS OF CHROMITE Source: Heinz Pariser
Slide 43: 2010 chromite and ferrochrome production and consumption
2010 CHROMITE ORE AND FERROCHROME PRODUCTION AND CONSUMPTION Note: Map above excludes production and consumption from ROW Source: Metal Bulletin, Heinz Pariser
Slide 44: Targeting sales through technical, commercial, strategic process
TARGET LIST TOP 20 GO, NO-GO DECISIONS DETAILED ASSESSMENT PURSUE DEVELOP TARGET LIST 1. PRIORITIZATION MODEL 2. INTERNAL ASSESSMENT 3. CUSTOMER VISITS Top 100 mills in China Key mills in Japan & Korea Technical models Commercial models Strategic synergies Site visits Contract performance Strategic
Slide 45: Sales and marketing delivering positive pricing
CLIFFS’ SALES & MARKETING PROCESS IS DELIVERING POSITIVE PRICING OUTCOMES Source: Cliffs analysis, ABS 2010 ASIA PACIFIC IRON ORE
Slide 46: Moving North American contracts to world market pricing
MOVING NORTH AMERICAN IRON ORE CONTRACTS TO WORLD MARKET PRICING Analysis of North American Iron Ore legacy contracts shows opportunity to achieve World Market Pricing 23 million tons 29 million tons 29 million tons 2011E 2014E Assumes current production capacity of 29.5 million long tons and exclud
Slide 47: Eastern Canada Integration & Expansion
Dave Blake CLIFFS NATURAL RESOURCES INC. EASTERN CANADA INTEGRATION & EXPANSION
Slide 48: Bloom Lake operations
BLOOM LAKE OPERATIONS • Established access to Asian markets • Excellent infrastructure with power, rail and port access capable of supporting growth profile • Attractive development opportunities at Lamêlée and Peppler Lake • Low-cost production A WORLD-CLASS MINING OPERATION
Slide 49: Bloom Lake operations
BLOOM LAKE OPERATIONS Mining Processing Logistics • Open pit • Drill and blast • Load and haul • Primary crushing • Grinding • Screening • Spiral classification • Filter de-watering • Eastern Canada location • Load-out facility • Additional rail capacity • Adjacent port at Sept-Îles
Slide 50: Bloom Lake integration overview
BLOOM LAKE INTEGRATION OVERVIEW • Secured key operations management responsible for ramp up and expansion • Back office (accounting, IT, HR and brand) integration well underway • Attraction and retention of skilled employees – over 7,000 applications currently on file • Continue Bloom Lake’s best pr
Slide 51: Application of theory of constraints
MINE CONCENTRATOR LOGISTICS BUFFER MANAGEMENT CRUSHER STOCKPILE AG MILL SCREEN SPIRALS FILTERS SILO TAILINGS APPLICATION OF THEORY OF CONSTRAINTS Subordinate Subordinate Exploit
Slide 52: Results of improved operational parameters
RESULTS OF IMPROVED OPERATIONAL PARAMETERS 2011 MONTHLY CONCENTRATE PRODUCTION (IN THOUSANDS OF METRIC TONS)
Slide 53: Bloom Lake Phase II expansion
BLOOM LAKE PHASE II EXPANSION - 16 MTPA CAPITAL SPEND - 100% BASIS 8mtpa 16mtpa Bloom Lake’s expansion to 16mtpa is a mirror image of the current operation $300 M $350 M PHASE I – RAMP UP Anticipated annual production rate in millions of tons PHASE I – STABILIZED, PHASE II BUILD PHASE II - COMMISSIO
Slide 54: Achievable synergies
ACHIEVABLE SYNERGIES Cliffs anticipates achieving approximately $75 million in annual synergies Transportation – 80% • Shared rail track at Arnaud Junction • Modify existing ship loader operations to load at overall faster rates • Cliffs’ Pointe Noire will accommodate larger vessels to transport Blo
Slide 55: Phase III Eastern Canada expansion to 24mtpa
• Cliffs intends to expand concentrate operations in Eastern Canada to 24mtpa by 2015 - • Crude ore to be sourced from Bloom Lake western resources and main pit to be extended • Current year drilling campaign of West Bloom Lake deposit indicated significant resource exists • Anticipated capital cost
Slide 56: Production outlook including Phase III
PRODUCTION OUTLOOK INCLUDING PHASE III BLOOM LAKE’S INCREASING PRODUCTION PROFILE (IN MILLIONS OF METRIC TONS)
Slide 57: Asia Pacific Iron Ore & North American Coal
Duncan Price CLIFFS NATURAL RESOURCES INC. ASIA PACIFIC IRON ORE & NORTH AMERICAN COAL
Slide 58: Asia Pacific iron ore current operations
100% ownership of Koolyanobbing • 8.5mtpa total production and growing • Expansion plans to 11mtpa by second quarter 2012 50% ownership of Cockatoo Island • 1.5mtpa total production (to EO3Q 2012) CLIFFS’ ASIA PACIFIC IRON ORE CURRENT OPERATIONS – WESTERN AUSTRALIA
Slide 59: Koolyanobbing operations
RD PARTY RAIL (575KM) RD PARTY PORT ROAD HAUL MINING KOOLYANOBBING OPERATIONS Infrastructure network is central to operations ORE PROCESSING PLANT
Slide 60: Reserve growth the cornerstone of expansions
RESERVE GROWTH THE CORNERSTONE OF EXPANSIONS
Slide 61: Asia Pacific iron ore expansion to 11mtpa
Rail – A$152M • New locomotives and wagons • Upgrade of rail yards and maintenance facilities • Extension of passing loops Plant Upgrade – A$63M • Primary crushing and screening facilities • Update of secondary crushing circuit • New interconnecting conveyors Mining Capacity – A$39M • Mobile fleet •
Slide 62: Timeline overview
TIMELINE OVERVIEW Q2 Q3 Q4 Q1 Q2 9mtpa 11mtpa Mining Upgrade Plant Upgrade Rail Upgrade Port Upgrade
Slide 63: Eastern Front potential next growth platform
APIO resources Other regional resources • Western Arc will be depleted by 2020 • “Phase I” drilling for conceptual direct shipping ore targeting 50-150mt commenced May 2011 at Mt Richardson • Potential development options include: • Sequential operation • Parallel development with expanded total cap
Slide 64: North American Coal
CLIFFS NATURAL RESOURCES INC. NORTH AMERICAN COAL
Slide 65: Strategic entry into metallurgical coal
STRATEGIC ENTRY INTO METALLURGICAL COAL… BMA Benchmark Prices
Slide 66: Secured long life met coal assets
Reserves 1 Metallurgical Coal Thermal Coal ...SECURED LONG LIFE MET COAL ASSETS Reserve review due at end of 2011 Premier low vol, low sulfur metallurgical coal Low vol metallurgical coal High vol metallurgical coal Oak Grove 42.1mt Pinnacle 62.2mt INR Coal Operations 58.9mt 61.8mt
Slide 67: Challenges beyond expectations
CHALLENGES BEYOND EXPECTATIONS DEWATERING CHALLENGES GLOBAL FINANCIAL CRISIS (GFC) NATURAL DISASTER ADVERSE GEOLOGY HIGH CO READINGS
Slide 68: Tornado damage at Oak Grove Mine
TORNADO DAMAGE AT OAK GROVE MINE • Damaged overland conveyer system • 2.5 miles of 5-mile system connecting Oak Grove Mine to the Concord Preparation Plant rendered inoperable • Requires stockpiling of crude coal until repairs are completed and recommissioning occurs • Concord Preparation Plant rend
Slide 69: Carbon monoxide readings at Pinnacle Mine
CARBON MONOXIDE READINGS AT PINNACLE MINE • Regulatory agencies have denied initial remediation plan • Production not expected to resume before fourth quarter • Considering appeal of decision • Remediation effort includes: • Assessment of various options • Prospective installation of seals to allow
Slide 70: Operational highlights...against the tide
OPERATIONAL HIGHLIGHTS…AGAINST THE TIDE • Integrated INR’s coal operations into North American Coal business segment...bolted on a 35% capacity increment without a glitch • INR’s coal operations are delivering tons and costs at expected rates • New longwall machine at Pinnacle Mine • Preparation pla
Slide 71: Delivering capital projects
DELIVERING CAPITAL PROJECTS • Pinnacle preparation plant upgrade - $25M • Delivered on budget, 6 months ahead of schedule • Demonstrated efficiency uplift - plant yield up to 86-95% from 63-70% organic efficiency • Portal set for August 2011 delivery • Permitting/weather delays partially recovered t
Slide 72: Overall growth ahead of plan
OVERALL GROWTH AHEAD OF PLAN GREEN RIDGE (LOW VOL METALLURGICAL COAL) • Well ahead of plan ... 117kt production in 2011 • Costs well below initial expectation LOWER WAR EAGLE (HIGH VOL METALLURGICAL COAL) • Slope completed in Q1; continuing to staff up • Ramping up in 2011 (40kt); up to 540kt in 201
Slide 73: Growth target: 9mtpa by 2015
GROWTH TARGET: 9MTPA BY 2015 Outlook as of June 2, 2011. On June 24, 2011 Cliffs reported that regulators denied a remediation plan at its Pinnacle Mine, which will likely delay production into the fourth quarter of 2011. Prior to this event, Cliffs expected Pinnacle Mine to produce more than 1mt of
Slide 74: North American Coal's operations strategy
NORTH AMERICAN COAL’S OPERATIONS STRATEGY SHORT-TERM DELIVERY… • Consolidate and leverage current initiatives • Drive continuous improvement • Recovery from tornado • Pinnacle Mine up and running GROWTH & RENEWAL… • Maintain the momentum on current growth projects • Explore RGSS and coal shipment op
Slide 75: What's next?
• Recovery from the tornado • Remediate Carbon Monoxide Challenge • Translate the portal & sealing investments into outcomes • Consolidate & leverage early wins at Pinnacle • Maintain growth momentum...and pursue next generation growth ... and continuously evaluating our direction WHAT’S NEXT?
Slide 76: Ferroalloys
Bill Boor CLIFFS NATURAL RESOURCES INC. FERROALLOYS
Slide 77: Acquisition of Cliffs' ownership
Q3 Q2 ACQUISITION OF CLIFFS’ OWNERSHIP KWG Purchased 19% for $7.5 million Freewest Resources Purchased 7% for $11 million Completed acquisition for $200 million Spider Resources Completed acquisition for $120 million • Cliffs’ Chromite project represents the start of Ferroalloys, a new business for
Slide 78: Chromite project and future customers
CHROMITE PROJECT AND FUTURE CUSTOMERS OPEN-PIT MINE (~4mtpa crude ore) PROCESSING FACILITY (~1.3mtpa Concentrate to FeCr Facility) FeCr PRODUCTION FACILITY CONCENTRATE TO MARKET (1mtpa) Asia Europe North America FeCr TO MARKET (600ktpa)
Slide 79: Cliffs Chrome Project video clip #1
CLIFFS CHROME PROJECT VIDEO CLIP #1
Slide 80: Black Thor deposit benchmarks vs world-class chromite mines
Cr:Fe Location Seam Thickness (meters) Open Pit or Underground ROM Grade (Cr2O3) Cliffs (Black Thor) Xstrata Samancor Outokumpu ENRC Cliffs’ Black Thor deposit compares very well with world-class benchmarks CLIFFS’ BLACK THOR DEPOSIT BENCHMARKS VERY WELL RELATIVE TO WORLD-CLASS CHROMITE MINES Canada
Slide 81: Core samples from Black Thor deposit
CORE SAMPLES FROM BLACK THOR DEPOSIT
Slide 82: Cliffs Chrome Project video clip #2
CLIFFS CHROME PROJECT VIDEO CLIP #2
Slide 83: Chromite project overview - ferrochrome facility
CHROMITE PROJECT OVERVIEW Ferrochrome Production Facility • Final step in Project is to refine ore and concentrate into metal to be sold for use in stainless-steel manufacturing • The facility requires approximately 300 MWH to process the material in an electric arc furnace • Multiple technology opt
Slide 84: Chromite project overview - site location
CHROMITE PROJECT OVERVIEW Ferrochrome Production Facility • Site location studies on-going anticipated need for 1-2 km site (brownfield preferred) • Power cost and grid stability are key drivers for selection • Canada relies on hydroelectric power which offers clean electric energy with long-term pr
Slide 85: World chromite ore production
85 85 WORLD CHROMITE ORE PRODUCTION
Slide 86: Chromite project timeline
86 Construction Production Complete Feasibility Permitting Complete Prefeasibility Acquired Control of Deposits 86 CHROMITE PROJECT TIMELINE PROJECT MILESTONES • Investigations of environmental baseline conditions underway • Submitted a “Project Description” in May – First step in EA process • Permi
Slide 87: In closing
• Cliffs chromite mine will be world class, positioned in a AAA country and with very low mining costs • Cliffs is working to develop an efficient transportation network and build a state-of-the-art furnace operation to supply world markets with both chromite ore and ferrochrome • Ferrochrome proces
Slide 88: Global Exploration
Cliff Smith CLIFFS NATURAL RESOURCES INC. GLOBAL EXPLORATION
Slide 89: Exploration budget and active countries
Budget: Approximately $50 - $55 million North America; Peru, Brazil, Chile, Argentina; Mongolia and Australia ACTIVE COUNTRIES
Slide 90: Typical stages of exploration projects
TYPICAL STAGES OF EXPLORATION PROJECTS EXPLORATION PIPELINE STUDIES EXPLORATION ACTIVITIES EXPLORATION DEAL STRATEGIC FIT DISCOVERY POTENTIAL RESOURCE LOI / TERM SHEET LEGAL AGREEMENT TARGET IDENTIFICATION PRE-FEASIBILITY STUDY FEASIBILITY STUDY SCOPING STUDY
Slide 91: Canada drilling programs
Altius Minerals • December Strategic Alliance Agreement targeting ferroalloys in Eastern Canada First Point Minerals • November option agreement to earn 51% JV interest to advance Decar nickel alloy property • Currently funding year two of earn-in agreement Zenyetta Minerals • January 2010 option ag
Slide 92: Access to emerging, proprietary technology
ACCESS TO EMERGING, PROPRIETARY TECHNOLOGY • November 2010 Strategic Agreement provides Cliffs global access to Gedex’s HD-AGGTM™ airborne subsurface mapping system: • Used in airborne platform, outperforms gravimeters by order of magnitude • 3D spatial gradient of gravity vectors • For exploration
Slide 93: Focus on Decar nickel alloy property
• Geology indicates potentially large resource conducive to an open-pit operation • Products could include a low-grade nickel with simple process flowsheet and 30-55% Fe magnetite concentrate with 3% nickel, 2% chromite • Successful resource definition and studies needed to lead to an actual mine, b
Slide 94: Mexico exploration activity
Riverside Resources • June 2010 Alliance Agreement for iron oxide copper gold (IOCG) exploration in Mexico • Exploration for IOCG projects in Northwest Baja California State and along the Pacific Coast from Western Sinaloa State to Oaxaca State, Mexico • Focus on identifying major target areas using
Slide 95: South America exploration activity
SOUTH AMERICA EXPLORATION ACTIVITY Estrella Gold (Peru) • February 2011 Exploration Alliance Agreement targeting IOCGs AusQuest Peru • IOCG earn-in agreement Mariana Resources (Chile) • June 2010 Alliance and JV agreement targeting IOCGs Other Chile and Argentina Drilling Programs • Number of additi
Slide 96: Mongolia exploration activity
MONGOLIA EXPLORATION ACTIVITY • Private target generation focused on chromite, nickel and molybdenum • A new frontier – combination of great geology, historically underexplored and attractive investment climate • Most other mining companies focused on vast metallurgical coal projects, but Cliffs see
Slide 97: Australia drilling programs
AUSTRALIA DRILLING PROGRAMS AusQuest • September 2008 Cliffs strategic alliance, subscription and option agreement Reedy Lagoon • February 2011 JV to explore for magnetite iron ore in Southwest Yilgarn, Western Australia
Slide 98: Sustainability
CLIFFS NATURAL RESOURCES INC. SUSTAINABILITY Kelly Tompkins
Slide 99: Sustainability at Cliffs
SUSTAINABILITY AT CLIFFS Sustainability is the Cliffs’ social license to operate SOCIAL • Safety • Diversity • Labor Relations • Community Engagement • Aboriginal Relations ENVIRONMENTAL • Energy • Climate Change • Waste, Emissions • Water • Land Use/Reclamation ECONOMIC • Economic Development • Com
Slide 100: Stakeholders increasingly aware of sustainability
KEY STAKEHOLDERS ARE INCREASINGLY AWARE OF SUSTAINABILITY • Investors demand more transparency and comparability • Regulators hold industry participants to tighter and additional standards • Communities are increasingly aware, skeptical and active • Employees want to know their employer has high sus
Slide 101: Words in action
WORDS IN ACTION Land Reclamation Operations Impacts & Efficiency • Cliffs has demonstrated reclamation plans to return former mine sites to beneficial public use long after the economic benefits are derived • Unique Cliffs-led-tree-planting initiative with community, government and public interest g
Slide 102: Words in action
WORDS IN ACTION Koolyanobbing Expansion Aboriginal Relationships • Unique collaboration between Cliffs and government agencies, interest groups and Aboriginal communities • Improved relationships and benefits for all parties • Conservation of rare flora and fauna and flexibility and certainty in acc
Slide 103: Public policy outlook
PUBLIC POLICY OUTLOOK • Greenhouse Gas • % Depletion • MSHA • Water quality regulations • Air quality regulations • Environmental permitting • Fisheries Act - Metal Mining Effluent Regulations • Air quality regulations • Permitting and Approvals • Plan du Nord – (Plan North) • Energy and Infrastruct
Slide 104: Awards and recognition
AWARDS AND RECOGNITION • Earned LEED certification • Selected finalist for Golden Gecko Award, Western Australia • Conservation Award from Marquette County, Michigan • Inclusion in Maplecroft Climate Innovation Indexes • Named Global 1000 Sustainability Performance Leader • Awarded Mincom Innovation
Slide 105: Building on the fundamentals
OPERATIONAL EXCELLENCE SHAREHOLDER RETURNS SUSTAINABILITY ENVIRONMENTAL SOCIAL ECONOMIC GOVERNANCE BUILDING ON THE FUNDAMENTALS
Slide 106: Capital Structure & Asset Allocation
CLIFFS NATURAL RESOURCES INC. CAPITAL STRUCTURE & ASSET ALLOCATION Laurie Brlas
Slide 107: Considerations for uses of cash and excess cash flow
Considerations for uses of cash and excess cash flow STRATEGIC CAPITAL DECISIONS – A COMPREHENSIVE CAPITAL MANAGEMENT AND DISTRIBUTION PROCESS DESIGNED TO DRIVE TOP QUARTILE TSR Business Investments • Re-invest in business – organic growth and capital expenditures • Mergers & Acquisition – focus on
Slide 108: Cliffs' current balance sheet structure
CLIFFS’ CURRENT BALANCE SHEET STRUCTURE • Increased scale provides ability to support higher leverage metrics, while remaining investment grade • Active management positions Cliffs to capitalize on growth and distribution opportunities • Average duration of current funded debt is ~9 years • Currentl
Slide 109: Financial flexibility to fund future growth
FINANCIAL FLEXIBILITY TO FUND FUTURE GROWTH TARGETED LEVERAGE PARAMETERS DEBT TO TOTAL CAPITAL 30% to 40% DEBT TO EBITDA 2x to 2.5x HISTORICAL DEBT TO TOTAL CAPITAL & DEBT TO EBITDA
Slide 110: Annual dividends per share and historical total spend
ANNUAL DIVIDENDS PER SHARE AND HISTORICAL TOTAL SPEND Based on shares outstanding of approximately 147 million
Slide 111: Current dividend payout and policy
CLIFFS’ CURRENT DIVIDEND PAYOUT AND POLICY Cliffs employs a progressive philosophy that steadily increases or maintains dividend levels Current objective is to consistently migrate toward yields similar to comparable companies
Slide 112: Acquisition scorecard
ACQUISTION SCORECARD – THROUGH The figures above for the loss at Amapá depict cumulative equity loss since date of initial investment 2005/2008 Year Acquired (in millions)
Slide 113: Projected capital spending related to volume growth
PROJECTED CAPITAL SPENDING RELATED TO VOLUME GROWTH
Slide 114: Projected capital spending related to volume growth
PROJECTED CAPITAL SPENDING RELATED TO VOLUME GROWTH Assumes 1mt of chromite concentrate and 600kt of ferrochrome Assumes production from Amapá and Bloom Lake Mine and excludes Bloom Lake Mine’s ramp up to 24mtpa
Slide 115: 2014 nearly 80% of iron ore volume priced at world market
IN 2014, NEARLY 80% OF CLIFFS’ GLOBAL IRON ORE VOLUME IS EXPECTED TO BE PRICED WITH THE WORLD MARKET Assumes 29.5mt of iron ore pellets, 11mt of iron ore lump and fines iron ore and 16mt of iron ore concentrate 2011E 2014E
Slide 116: Breaking out U.S. and Canadian iron ore segments
BREAKING OUT U.S. IRON ORE AND CANADIAN IRON ORE SEGMENTS (in millions) 2011E
Slide 117: With execution of growth plans, value creation will occur
WITH EXECUTION OF GROWTH PLANS, VALUE CREATION WILL OCCUR Reuters 5/27/11
Slide 118: Summary and Conclusion
Joe Carrabba CLIFFS NATURAL RESOURCES INC. SUMMARY AND CONCLUSION
Slide 119: The Cliffs journey has just begun
• Megatrends within the commodities space are underpinning our industry: New supply delays, increasing demand and degrading ore quality • As a business, Cliffs has transformed: • Positioned to become a nearly 60mtpa iron ore, 10mpta coal and 1mpta ferroalloy producer • Seaborne exposure and customer
Slide 120: Cliffs Executive Leadership Team Q&A
CLIFFS NATURAL RESOURCES INC. CLIFFS EXECUTIVE LEADERSHIP TEAM QUESTION & ANSWER SESSION
Slide 121: Please submit your electronic questions
PLEASE SUBMIT YOUR ELECTRONIC QUESTIONS TO: NYSE@CliffsNR.com
Slide 122: Appendix
CLIFFS NATURAL RESOURCES INC. APPENDIX
Slide 123: Cliffs Analyst and Investor Day
FS CLIFFS ANALYST AND INVESTOR DAY