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| 8-K - CURRENT REPORT - CLEVELAND-CLIFFS INC. | d8k.htm |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
Building Scale
and
Providing Substantial Future Growth Opportunities
Exhibit 99 |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
1
“Safe Harbor”
Statement under the Private Securities
Litigation Reform Act of 1995
1
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
statements
may
be
identified
by
the
use
of
predictive,
future-tense
or
forward-looking
terminology,
such
as
“believes,”
“anticipates,”
“expects,”
“estimates,”
“intends,”
“may,”
“will”
or
similar terms. These statements speak only as of the date of this presentation or the date of
the document incorporated by reference, as applicable, and we undertake no ongoing obligation, other than
that imposed by law, to update these statements. These statements appear in a number of places
in this presentation, including the documents incorporated by reference, and relate to, among other
things, the successful completion of the proposed acquisition, our intent, belief or current
expectations of our directors or our officers with respect to: our future financial condition, results of operations
or prospects; estimates of our economic iron ore and coal reserves; our business and growth
strategies; and our financing plans and forecasts. You are cautioned that any such forward-looking
statements
are
not
guarantees
of
future
performance
and
involve
significant
risks
and
uncertainties,
and
that
actual
results
may
differ
materially
from
those
contained
in
or
implied
by
the
forward
looking
statements as a result of various factors, some of which are unknown, including, without
limitation: •
our ability to successfully complete the proposed acquisition;
•
our ability to successfully integrate Consolidated Thompson’s operations;
•
our ability to achieve the synergies of the proposed acquisition;
•
our ability to achieve the strategic and other objectives related to the proposed
acquisition; •
the impact of the current global economic crisis, including downward pressure on prices;
•
trends affecting our and/or Consolidated Thompson’s financial condition, results of
operations or future prospects; •
the outcome of any contractual disputes with our customers;
•
the
ability
of
our
customers
to
meet
their
obligations
to
us
on
a
timely
basis
or
at
all;
•
our ability to maintain good relationships with Consolidated Thompson’s customers following
consummation of the acquisition; •
our actual economic iron ore and coal reserves;
•
the success of our business and growth strategies;
•
our ability to successfully identify and consummate any strategic investments;
•
adverse changes in currency values;
•
the outcome of any contractual disputes with our significant energy, material or service
providers; •
the success of our cost-savings efforts;
•
our ability to maintain adequate liquidity and successfully implement our financing plans;
•
our ability to maintain appropriate relations with unions and employees;
•
uncertainties associated with unanticipated geological conditions related to underground
mining; •
the
potential
existence
of
significant
deficiencies
or
material
weakness
in
our
internal
control
over
financial
reporting;
and
•
the
risk
factors
referred
to
in
the
“Risk
Factors”
section
of
our
documents
filed
with
the
Securities
and
Exchange
Commission.
Reference is made to the detailed explanation of the many factors and risks that may cause such
predictive statements to turn out differently, set forth in the Company's Annual Report and Reports on
Form 10-K, Form 10-Q and previous documents filed with the Securities and Exchange
Commission, which are publicly available on Cliffs Natural Resources' website. The information contained in this
document speaks as of today and may be superseded by subsequent events.
We caution you that the foregoing list of important factors is not exclusive. In addition, in
light of these risks and uncertainties, the matters referred to in our forward-looking statements may not occur.
We undertake no obligation to publicly update or revise any forward-looking statement as a
result of new information, future events or otherwise, except as may be required by law.
The
information
concerning
Consolidated
Thompson,
including
Cliffs’
expectations
relating
to
the
impact
of
the
completion
of
an
acquisition
of
Consolidated
Thompson,
contained
in
this
release
has
been
taken
from
or
based
upon
publicly
available
documents
and
records
filed
with
the
Canadian
securities
regulatory
authorities
and
other
public
sources
at
the
time
of
this
release
and
has
not
been
independently
verified
by
Cliffs.
Cliffs
assumes
no
responsibility
for
the
accuracy
or
completeness
of
such
information,
or
for
any
failure
by
Consolidated
Thompson
to
disclose
publicly
facts,
events
or
acts
that
may
have
occurred
or
come
into
existence
or
that
may
affect
the
significance
or
accuracy
of
any
such
information
but
which
are
unknown
to
Cliffs.
We
also
strongly
urge
you
to
not
rely
on
any
single
financial
measure
to
evaluate
our
business.
Please
see
refer
to
the
appendix
for
important
information. |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
2
Joseph
Carrabba
Chairman,
President
&
Chief
Executive
Officer
Laurie
Brlas
Executive
Vice
President,
Finance
and
Administration
&
Chief
Financial
Officer
Steve
Baisden
Senior
Director,
Investor
Relations
&
Communications |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
$0
$30
$60
$90
$120
$150
Jan 2006
Jul 2006
Jan 2007
Jul 2007
Jan 2008
Jul 2008
Jan 2009
Jul 2009
Jan 2010
Jul 2010
Jan 2011
3
2006
Sales: $2.0
Cliffs’
Strategic Execution –
Diversifying, Building
Scale, and Adding Shareholder Value
($ in billions, except share price data)
2007
Sales: $2.3
2008
Sales: $3.6
2008
Acquired remaining
stake in Portman
Limited (15%)
Acquired remaining
stake in United
Taconite (30%)
Acquired stake in
Golden West, an
Australian iron ore
junior mining
company
2009
Sales: $2.3
Sales¹: $4.4
2010E
2007
Acquired 30% interest in
Amapá
iron ore project in
Brazil
Acquired 45% economic
interest in Sonoma, hard
coking and thermal coal
mine in
Queensland, Australia
Acquired PinnOak, Central
Appalachian high-quality,
low-volatility
met coal mines
2010
Acquisition of INR
Energy’s West
Virginia coal assets
Control of Big Daddy
chromite
deposit
consolidated
2009
Announced acquisition
of remaining stake in
Wabush
Mines (73%)
Announced acquisition
of Freewest
Resources
Added to
S&P 500 Index
3
North
American
Iron Ore
62%
North
American
Coal
10%
Other
4%
Asia
Pacific
Iron Ore
24%
1
Company
guidance
as
per
December
2010
Investor
Presentation
2011
2011
Announced
Consolidated
Thompson
acquisition |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
Diversifying Cliffs’
Product Mix
(by metric tons)
4
2009
Cliffs product mix
North American
Iron Ore
62%
Asia Pacific
Iron Ore
32%
North American
Coal
6%
North American
Iron Ore
54%
Asia Pacific
Iron Ore
18%
North American
Coal
12%
Seaborne
Concentrate to Asia
16%
2011E
Cliffs product mix
Beyond 2013E
Cliffs product mix
North American
Iron Ore
45%
Asia Pacific
Iron Ore
18%
Seaborne
Concentrate to Asia
27%
1
Based on Cliffs’
2009 From 10-K reported tons sold by product segment (all figures converted to metric
tons) 2
Assumes
(a)
completion
of
the
acquisition;
(b)
Cliffs’
2011
guidance
disclosed
within
its
3
rd
quarter
2010
Form
10-Q
and
(c)
Consolidated
Thompson’s
June
2010
Feasibility
Study
3
Assumes
(a)
completion
of
the
acquisition;
(b)
Cliffs’
2011
guidance
used
for
2013
production
and
(c)
completion
of
Consolidated
Thompson’s
expansion
projects
disclosed
in
June
2010
Feasibility
Study
with
total
capacity
reaching
16
million
metric
tons
Note: Excludes Cliffs’
Asia Pacific Coal and Amapà
North American
Coal
10%
1
2
3 |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
5
Consolidated Thompson
An Emerging World-Class Iron Ore Producer
5
One of the fastest developing iron ore producers in
North America with over 580 million tonnes
of reserves
Access to Asia market
Profitable and positive operating cash flow in its
second quarter of production
Excellent infrastructure with power, rail and port
access capable of supporting growth profile
Expected to double its annual iron ore capacity to
an annualized 16 million tons
Attractive development opportunities at Lamêlée
and
Peppler
Lake with approximately 935mt of indicated
iron ore resources
Expected to be a low-cost producer |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
Significant Synergy Potential
6
Conveyor, dock and loading
—
Leverage Wabush
port and loading capacity
—
Lower loading costs
—
Increase loading rates and potential annual shipping tonnage
Capture pellet premium margin
—
Potential to feed currently idled furnace capacity at Wabush
Parts, supplies and warehouse efficiencies
Technical expertise, management and administrative tasks
Expect to realize ~$75mm in pre-tax annual operating synergies |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
Strategic Diversification in Cliffs’
Core Product
7
Significantly increases exposure to seaborne customers
Major
diversification
of
Cliffs’
client
base
–
Substantially all of Consolidated Thompson’s production sold
into Asian markets
–
Long-term contracts with Wuhan Iron and Steel (Group)
Corporation (“WISCO”) and others
Establishes a strategic relationship with one of the leading
Chinese steel producers
–
WISCO, China’s 3 largest steel maker is Consolidated
Thompson’s largest customer and 25% partner in Bloom Lake
Significantly enhances Cliffs’
growth profile
–
Consolidated Thompson expected to double production from
current run rate
–
Potential further development of reserve base
Expected to be a low-cost producer and globally competitive
Low operating risk and achievable synergies
—
Adjacent to Cliffs’
Wabush
operation
—
Cliffs has mined in Quebéc
for 45 years
—
Consolidated Thompson has attractive technical characteristics
—
Sound regulatory environment
rd |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
Transaction Overview
8
Cliffs Natural Resources to acquire all of the common shares of Consolidated Thompson Iron
Mines Ltd. The total transaction value is approximately C$4.9 billion (including net
debt) Consolidated Thompson’s Board has recommended that its shareholders approve
the transaction Consolidated Thompson’s existing off-take agreement with WISCO
is expected to continue with Cliffs –
WISCO will continue to hold a 25% partnership interest in Bloom Lake
Transaction
Under the terms of the transaction, Consolidated Thompson’s shareholders will receive
C$17.25 per share, C$4.9 billion in aggregate, consisting of all cash
The transaction represents an implied premium of 30% to Consolidated Thompson’s closing
share price as of January 10, 2011.
Bridge financing for the transaction has been committed by J.P. Morgan
Cliffs expects to access capital markets to arrange permanent financing
It is Cliffs’
objective to maintain current BBB-/Baa3 ratings
Financing
Significant
synergy
potential
with
Cliffs’
Eastern
Canadian
operations
Transaction
is
expected
to
be
modestly
accretive
to
earnings
and
cash
flow
in
2011
and
2012
Financial Impact
The transaction is expected to close in early second quarter, subject to satisfaction or
waiver of customary closing conditions
Anticipated Closing
Consideration |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
Maintaining a Strong Financial Position
9
Committed Financing
—
Committed 364-day bridge facility
—
Available liquidity
Targeted Permanent Financing
—
Expect to access capital markets
Strong Pro Forma Balance Sheet
—
Ample liquidity
—
Manageable debt maturity profile
—
Strong cash flow generation
—
It is Cliffs’
objective to maintain current BBB-/Baa3 ratings |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
10
Source: Cliffs Management Estimates, Technical Reports, Company
Filings, Anglo American Annual Report 2009
= CLF Iron Ore Capacity
= CLM Iron Ore Capacity
US Iron Ore
Production Capacity:
24.5Mt
Canadian Iron Ore
Production Capacity:
5.6Mt + 16.0Mt
Australian Iron Ore
Production Capacity:
11.0Mt
Brazilian Iron Ore
Production Capacity:
1.5Mt
Expanding Cliffs’
Global Reach at Seaborne Rates
= CLF Coal Capacity
Australian Coal
Production
Capacity:
1.5Mt
US Coal Production
Capacity:
7.9Mt (3.5Mt shipped
to Europe)
Notes: Tonnage in metric tonnes. Reflects attributable portion of
total production capacity as stated in public filings, adjusted for
subsequent public announcements regarding CT and Cliffs’
Australia capital expenditure projects. Capacity figures are estimated at
2013 equity levels. |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
11
Why Consolidated Thompson?
Seaborne iron ore
Strategic relationship with
leading global steel producer
Builds on platform in Eastern
Canada
Strategic
High-quality concentrate
Open-pit mining
Proximity to Cliffs’
existing
Eastern Canadian operating
Constructive mining jurisdiction
Excellent health, safety and
environmental record
Operational
Meaningful earnings and cash
flow potential
Strong growth profile
Accretive
Significant and achievable
synergy opportunities
Financial |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
Building Scale
and
Providing Substantial Future Growth Opportunities |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
13
Appendix |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
14
The Acquisition Is at the Core of Cliffs’
Growth Strategy
14
NORTH
AMERICA
ASIA PACIFIC
(AUSTRALIA)
SOUTH
AMERICA
(BRAZIL)
NORTH
AMERICAN
MET COAL
SEABORNE
IRON ORE
IRON ORE
SEABORNE
MET COAL
SEABORNE
FERROALLOYS
Cliffs’
strategy: Geographic and mineral diversification
Minerals
Geographies
Diversify into other end-markets and
other steel-related minerals
Expand geographically into
low-political-risk geographies
Emphasize cash-flow positive,
profitable, commercial-stage
businesses
Also evaluate opportunities in the early
stage of development |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
Increasing Exposure to High Growth Seaborne Customers
(by metric tonnes)
15
Cliffs’
2009
Iron
Ore
Markets
served¹
North American
Pellets
60%
Seaborne to Europe and the
Middle East
4%
Seaborne to
Asia
36%
Cliffs’
2009
Iron
Ore
markets
served
+
Consolidated
Thompson’s
markets
served
1
Based
on
Cliffs’
2009
10K
reported
annual
capacity
for
North
American
Iron
Ore
and
Asia
Pacific
Iron
Ore;
Assumes
Wabush,
Koolyanobbing,
and
Cockatoo
Island
capacity
is
sold
to
seaborne
customers
in
Asia;
Amapà
capacity
is
sold
to
Europe
and
the
Middle
East;
Empire,
Tilden,
Hibbing,
Northshore,
and
United
Taconite
capacity
is
sold
as
pellets
into
the
North
American
market;
Production
figures
above
represent
Cliffs’
equity
capacity
2
Assumes
completion
of
Consolidated
Thompson’s
expansion
projects
disclosed
in
June
2010
Feasibility
Study
with
total
capacity
reaching
16mm
metric
tons
per year
North American
Pellets
43%
Seaborne to Europe and the
Middle East
3%
Seaborne to
Asia
54%
1
2 |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
16
Attractive Commercial Relationships with
Leading Asian Players
16
8
2011E
Beyond 2013
Wuhan Iron & Steel (Group) Corporation (“WISCO”)
China’s
3
rd
-largest
steel
producer
–
produced
more
than
30mm
metric tons of steel in 2009
WISCO affiliate to purchase minimum of 50% of total annual
production for first 8 million tons of iron ore produced each year
by Consolidated Thompson
Worldlink
Resources (“Worldlink”)
A leading integrated commercial company that imports and
exports iron ore, coal, and other bulk solids
Agreement to purchase 7 million metric tons of iron ore
concentrate per year over a seven-year period
SK Networks (“SKN”)
Subsidiary
of
SK
Group,
South
Korea’s
3
rd
-largest
conglomerate
operating in trading, information technology, energy distribution,
and overseas resource development
Agreement to purchase one million metric tons of iron ore
concentrate from the Bloom Lake mine
Consolidated Thompson’s est. production (metric tons mm)
Source: Consolidated Thompson June 2010 Feasibility Study |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
17
Cliffs Natural Resources’
Global Footprint
Access to high-growth Asian markets
Pricing correlates to Australian pricing for
lump and fines
Largest iron ore producer in North America
Significant position in North American
metallurgical coal
A developing project in a low-cost
mining district
Asia Pacific
North America
Latin America |
 OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP
Cliffs’
Strategic Imperatives Going Forward
18
Scale
through
diversification
Global
execution
Operational
excellence
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 returns
Shareholder Value
Risk Management
“Earning the Right to Grow”
Shareholder
returns |