(Adds Cliffs' response, updates share price to close)
By Allison Martell
Feb 12 The activist investor squaring off with
Cliffs Natural Resources Inc named its preferred
candidate for chief executive officer on Wednesday and said it
plans to nominate enough new directors to form a majority of the
iron ore miner's board.
Hedge fund Casablanca Capital, which owns about 5.2 percent
of Cliffs, said it is backing Lourenco Goncalves, former CEO of
Metals USA, to take the top job at hard-hit Cliffs.
Last month Casablanca publicly urged Cliffs to spin off its
international operations and form a master limited partnership
from its U.S. assets, but the fund declined to say what its next
steps would be if Cliffs refused.
Cliffs defended its incoming chief executive Gary Halverson
in a release on Wednesday afternoon, saying the former Barrick
Gold Corp executive was chosen for "deep international
and large scale mining industry leadership experience."
In an interview with Reuters, Goncalves said he would focus
on supplying U.S. steelmakers rather than selling into the
competitive global iron ore market. He was particularly critical
of Cliffs' Bloom Lake Mine in Quebec, saying he would never have
bought the mine.
Asked whether he would carry out Casablanca's proposals as
chief executive, Goncalves said the fund's plan offers "good
alternatives, but they are alternatives, they are
Cliffs, a relatively high-cost producer, has been battered
by weak iron ore prices. Operational issues and
worse-than-expected costs have plagued Bloom Lake, once seen by
analysts as a key growth project.
After months of uncertainty, the company said on Tuesday it
has decided to indefinitely suspend a planned expansion at Bloom
Lake, and idle Wabush, another Canadian mine, slashing capital
spending and cutting some 500 jobs.
"If you are in a hole and you are digging the hole, the very
first move you should make is, stop digging," said Goncalves.
"Yesterday they stopped digging. It doesn't mean that they are
getting out of the hole."
On Wednesday, Cliffs said its board has previously
considered "key elements" of Casablanca's proposal and found
that they would not offer value over the long term. It
reiterated that it is considering strategic alternatives for
"The Company is disappointed that Casablanca seems intent on
waging a public campaign rather than continuing its private
engagement with our chairman and management to address our
doubts and concerns," it said.
Cliffs shares closed higher on Wednesday, but little changed
from where they were trading in the premarket before
The company is set to report its fourth-quarter results
after the close on Thursday.
The Cliffs campaign is Casablanca's first foray into mining.
Founded in 2010 by former investment bankers Drapkin and Douglas
Taylor, the fund is best known for pushing, along with activist
investor Carl Icahn, for a board shakeup at electronic design
automation company Mentor Graphics in 2011.
But Goncalves is a metals industry veteran - he led Metals
USA for 10 years, until the steel service center operator sold
to Reliance Steel and Aluminum Co last year.
He was also chief executive of steelmaker California Steel
Industries, and from 1981 to 1998 worked for Brazilian
steelmaker Cia Siderúrgica Nacional SA, which has its
own iron ore operations.
Cliffs supplies steelmakers with iron ore, and has a smaller
coal mining business.
The miner is in the midst of an unusual leadership
transition. Its last chief executive, Joseph Carrabba, retired
in November, and Halverson was named to succeed him.
But Halverson's current title is president and chief
operating officer. While Cliffs executives report to Halverson,
he is not yet chief executive.
Executive chairman James Kirsch has been helping with the
transition as Halverson develops "a deep understanding of the
business at an operating level" Cliffs said in October.
Cliffs shares closed up 2.3 percent at $21.99 on the New
York Stock Exchange on Wednesday.
Cliffs said it is being advised by J.P. Morgan and Bank of
America Merrill Lynch, as well as law firm Wachtell, Lipton,
Rosen & Katz.
(Additional reporting by Nicole Mordant in Vancouver; Editing
by Meredith Mazzilli)