Cliffs Natural Resources; Poised to Produce an Anticipated $1.9B in Cash Flow from Operations in 2012

Cliffs Natural Resources Inc.

today provided an update on its 2011 expected results by business segment, along with its business segment outlook for 2012. Cliffs will report its complete fourth-quarter and full-year results on Feb. 15, 2012, and hold a conference call with the investment community at 10 a.m. on Feb. 16, 2012 (additional conference call information below). U.S. Iron Ore Cliffs expects to report full-year 2011 revenue per ton in its U.S. Iron Ore business segment at the low end of its previous 2011 revenue per ton outlook of $135 - $140, with a rate of approximately $120 per ton in the fourth quarter. The fourth quarter rate was driven by sales mix and retroactive pricing adjustments recorded for specific contracts during the quarter. The Company expects to report full-year sales volume and cash cost per ton in line with its previous outlook of 24 million tons and $63 per ton, respectively. Eastern Canadian Iron Ore Cliffs expects to report full-year 2011 sales volume of 7.4 million tons in its Eastern Canadian Iron Ore segment, down from its previous outlook of 8 million tons. The lower-than-anticipated sales volume was driven by lower pellet sales volume resulting from operational challenges at Wabush Mine. During the fourth quarter, Wabush experienced a number of crusher, dryer and other equipment outages, resulting in lack of pellet availability. In addition, Cliffs expects to report 2011 revenue per ton in Eastern Canadian Iron Ore slightly below its previous outlook of $160 - $165. Full-year cash cost per ton in the segment are expected to be at the high end of Cliffs' previous outlook of $90 - $95. Higher cash costs per ton were primarily driven by the challenges at Wabush, which included a $4 per ton impact from lower fixed cost leverage and unplanned fourth-quarter repair spending. North American Coal Cliffs' Pinnacle Mine generated strong results in the fourth quarter, with production of over 600,000 tons of low-volatile metallurgical coal expected to be reported. In addition, Oak Grove Mine achieved year-end inventory of approximately 1.9 million tons of raw coal (or 740,000 tons of clean coal equivalent) in the fourth quarter. As a result, Cliffs anticipates reporting full-year 2011 production in its North American Coal segment of over 5 million tons and sales volume of approximately 4.2 million tons, slightly higher than its previous outlook. Full-year 2011 revenue per ton in North American Coal is expected to be at the high end of Cliffs' previous outlook of $115 - $120, with cash costs per ton expected to be approximately $112 per ton. Other 2011 Expectations Cliffs anticipates reporting 2011 cash flow from operations of approximately $2.3 billion and capital spending of $880 million for the year. The Company noted it anticipates recording a $28 million pre-tax, goodwill impairment charge in the fourth quarter related to its coal operations that were acquired from INR Energy in 2010. Cliffs also noted that its fourth-quarter effective income tax rate is expected to be approximately 36%. For the full year, the effective tax rate is expected to be approximately 19%, slightly above Cliffs' previous outlook of 18%. Cliffs' 2012 Outlook In 2012, Cliffs anticipates selling approximately half of its over 45 million tons of expected global iron ore sales volume to seaborne customers in Asia, with remaining volumes sold to North American customers. The Company expects modest 2012 growth in the U.S. economy, supporting healthy demand for Cliffs' U.S. Iron Ore business. Conversely, the Company expects meaningful growth in emerging economies, specifically China, where crude steel production and iron ore imports are anticipated to reach record annual levels. Given these expectations, Cliffs anticipates an average 2012 spot price for 62% Fe seaborne iron ore of approximately $150 per ton (C.F.R. China), a price serving as the basis for the iron ore business outlook below.