Market Overview

UPDATE: Casablanca Letter to Clliffs On Unacceptable Management Pay

Related CLF
Metal Stocks Rally, Gold Stocks Slumber
Mid-Day Gainers From November 21: Natural Grocers by Vitamin Cottage, Autodesk, Cliffs Natural Resources, Ross Stores, Marvell Technology

Fellow Cliffs Natural Resources Shareholders:

Casablanca Capital LP, one of the largest shareholders of Cliffs Natural
Resources (“Cliffs”), is seeking your support to elect a slate of six
experienced, highly-qualified Directors to the Cliffs Board at the Company's
2014 Annual Meeting of shareholders, to be held on July 29, 2014. Without
fundamental change at the Board and Executive levels, we believe Cliffs will
continue its pattern of value destruction.

Since July 2011, Cliffs shareholders have suffered an extraordinary loss of
85% in the value of their shares. For most of 2013, Cliffs was the "biggest
loser" in the S&P 500 (finishing the year in the #2 spot). In 2014, Cliffs'
share price has, so far, fallen another 40%.

While shareholders have suffered a massive loss, the current Directors and
management team, who in the aggregate own less than 0.3% of Cliffs shares,
appear to us to be focused on clinging to their positions rather than driving
real change. In contrast, Casablanca owns 5.2% of Cliffs' outstanding common
stock, and Lourenco Goncalves—an experienced metals and mining executive whom
Casablanca is proposing to lead Cliffs—has personally invested $1.5 million in
Cliffs shares.

We believe the Cliffs Board's tiny ownership interest and lack of economic
alignment has adverse consequences for shareholders. For example, the Board
has awarded, and continues to award, management with what we find to be
outrageous compensation for overseeing the precipitous decline in value at
Cliffs.

MANAGEMENT COMPENSATION IS UNACCEPTABLE

Cliffs' long history of underperformance coincides with steadily-increasing
management compensation as shareholder returns plummeted:

(SEE ADDITIONAL MULTIMEDIA)

In 2013, Cliffs' Board continued its track record of authorizing unacceptable
compensation. For instance, Gary Halverson was paid $2.6 million in 2013 for
43 days of work, and has a $6.8 million pay opportunity this year. Despite
being awarded approximately $60,000 a day in cash last year, Mr. Halverson has
yet to purchase a single share of Cliffs.

NO TRANSPARENCY IN COMPENSATION PRACTICES

Cliffs' Board uses an opaque bonus and review process for setting management
compensation. This has allowed the Board to reward senior management for a
failed diversification strategy. Specifically, Cliffs' short-term senior
executive incentive plan is based on secretive, undisclosed factors that are
based on “the Compensation Committee's subjective assessment of achievement”
(i.e., at the Board's sole discretion) and were used last year to reward
management for “the Bloom Lake expansion and Ferrochrome”,^1 both of which
have had disastrous consequences for the Company, in our view.

(SEE ADDITIONAL MULTIMEDIA)

^1 Source: Cliffs proxy dated June 10, 2014 describing methodology utilized in
determining the Corporate Strategic Objectives component of Company's EMPI
Plan.

CONTINUALLY TWEAKING STANDARDS TO MAXIMIZE BONUSES

In four out of the last five years, the Board has wildly altered the earnings
metric used to calculate bonuses. This appears to us to be an ongoing attempt
by the Board to find earnings metrics that justify management bonuses despite
severe underperformance.

(SEE ADDITIONAL MULTIMEDIA)

BURYING DETAILS OF EXECUTIVE CHAIRMAN'S COMPENSATION

Cliffs' former Executive Chairman (and current Chairman) James Kirsch was paid
$1.2 million in 2013 for leading Cliffs further down the path of value
destruction. Just as alarming, Mr. Kirsch stands to be paid as much as $4.5
million by Cliffs in 2014, a fact that was buried in an exhibit to one of
Cliffs' prior filings and was excluded from its latest proxy. It is no wonder
Mr. Kirsch remains focused on holding onto his Board seat.

PROTECT YOUR INVESTMENT --

ELECT NEW DIRECTORS WHO WILL ACT IN YOUR BEST INTERESTS

As an owner, why would you let these abuses continue when there is a solution?
You have a golden opportunity to unlock substantial value by electing a new
Board comprised of highly qualified Directors who have the experience and
sense of urgency required to drive meaningful change. We believe the choice is
clear — shareholders can't risk leaving Cliffs in the hands of an incompetent
Board. The time to act is now. We urge you to vote your shares FOR our
independent nominees on the enclosed GOLD proxy card.

If you have any questions or require assistance in submitting your GOLD proxy
card, please contact Okapi Partners at (212) 297-0720 or (877) 274-8654
(toll-free), or visit www.fixcliffs.com for further information.

We thank you for your continued support.

Very truly yours,

/s/   /s/   /s/
Donald G. Drapkin Douglas Taylor Gregory S. Donat
Chairman Chief Executive Officer Partner & Portfolio Manager

Posted-In: Press Releases

 

Related Articles (CLF)

Around the Web, We're Loving...

Get Benzinga's Newsletters