Mining company Cliffs Natural Resources (NYSE: CLF) said last Friday that hedge fund Casablanca Capital has rebuffed its offer of additional Board seats, which was made in an effort to end a proxy war. The New York-based activist investment firm is one of Cliffs' biggest shareholders with a 5.2% stake.
Cliffs, on Mar 7, offered to allow Casablanca to appoint two new independent Directors to the company's Board and a third mutually agreed upon Director to be named later. The Ohio-based company noted that the decision was made in an attempt to avoid a costly and distracting proxy battle.
Cliffs also postponed the record date of its annual shareholders' meeting, originally scheduled to be held on May 13, 2014, in order to accommodate Casablanca's request. The record date of the meeting will be announced later.
Cliffs, in a separate statement, said that Casablanca is nominating 6 director candidates for election to its 11-member Board at its annual shareholders' meeting.
However, Casablanca rejected Cliffs' settlement offer and stated that it continues to seek full control of the company's Board and replacement of its Chief Executive Officer Gary Halverson through a proxy contest. Cliffs said that it is ready to engage with Casablanca to resolve the matter.
JPMorgan (NYSE: JPM) and Bank of America Merrill Lynch, a division of Bank of America (NYSE: BAC), are acting as financial advisors to Cliffs while Jones Day and Wachtell, Lipton, Rosen & Katz are serving as legal counsel.
Cliffs' shares fell as much as around 3% in the trading session last Friday. The stock is down roughly 28% year-to-date and around 23% over a year.
Cliffs came under pressure in Jan 2014 after Casablanca urged it to spin off its overseas assets (including the Bloom Lake Mine in Quebec), significantly cut costs and double its dividend to bump up shareholder value. Casablanca noted that Cliffs has significantly underperformed both its peer group and the broader market in recent years.
Cliffs said last month that it would curtail Phase II expansion at its Bloom Lake project amid an uncertain iron ore pricing environment and high costs. The move will lead to a more than 50% year-over-year reduction in capital spending for 2014. The decrease will also result from Cliffs' decision to idle production at its Wabush Scully Mine in Newfoundland and Labrador by the end of first-quarter 2014.
Cliffs sees accelerating economic growth in the U.S. to support domestic steel production and demand for steelmaking raw materials. However, it expects pricing of its commodities to remain volatile. The company remains committed to look for alternative strategic options to boost shareholder value in the long term.
Cliffs is a Zacks Rank #3 (Hold) stock.
Another mining company that is worth considering is BHP Billiton Limited (NYSE: BHP), sporting a Zacks Rank #1 (Strong Buy).
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