Profile: Cliffs Natural Resources Inc. (CLF)

Cliffs Natural Resources Inc. (Cliffs), formerly Cleveland-Cliffs Inc, is an international mining and natural resources company. The Company is a producer of iron ore pellets in North America, a supplier of direct-shipping lump and fines iron ore out of Australia, and a producer of metallurgical coal. Cliffs is organized according to product category and geographic location: North American Iron Ore, North American Coal, Asia Pacific Iron Ore, Asia Pacific Coal and Latin American Iron Ore. In North America, it operates six iron ore mines in Michigan, Minnesota and Eastern Canada, and two coking coal mining complexes located in West Virginia and Alabama. Its Asia Pacific operations include full ownership of Portman, which is comprised of two iron ore mining complexes in Western Australia, serving the Asian iron ore markets with direct-shipping fines and lump ore, and a 45 % economic interest in Sonoma, a coking and thermal coal mine located in Queensland, Australia. In Latin America, it has a 30 % interest in Amapa, a Brazilian iron ore project, as well as a number of smaller greenfield projects not yet in production. In January 2010, the Company announced the completion of acquisition of Freewest Resources Canada Inc.

In July 2008, the Company, through a wholly owned subsidiary, completed the acquisition of United Mining Co. Ltd.’s (United Mining) 30% interest in United Taconite LLC, an iron ore mining and pelletizing joint venture located in Eveleth, Minnesota (UTAC). The Company previously owned a 70% interest in UTAC, and after completing the acquisition, has 100% ownership. The acquisition is effective as of June 30, 2008.

North American Iron Ore

Cliffs is a producer of iron ore pellets in North America and primarily sells its production to integrated steel companies in the United States and Canada. It manages and operates six North American iron ore mines located in Michigan, Minnesota and Eastern Canada that has a rated capacity of 38.1 million tons of iron ore pellet production annually, representing approximately 46 % of total North American pellet production capacity. Based on its percentage ownership of the North American mines it operates, its share of the rated pellet production capacity, which is 25.5 million tons annually, representing approximately 31 % of total North American annual pellet capacity.

During the year ended December 31, 2008, the Company produced a total of 35.2 million tons of iron ore pellets, including 22.9 million tons for its account and 12.3 million tons on behalf of steel company owners of the mines. Cliffs produces 13 grades of iron ore pellets, including standard, fluxed and high manganese, for use in its customers’ blast furnaces as part of the steelmaking process. Each of its North American Iron Ore mines is located near the Great Lakes or, in the case of Wabush, near the St. Lawrence Seaway, which is connected to the Great Lakes. The majority of its iron ore pellets are transported via railroads to loading ports for shipment via vessel to steelmakers in the United States or Canada.

The Company’s North American Iron Ore revenues are primarily derived from sales of iron ore pellets to the North American integrated steel industry, consisting of eight major customers. Generally, it has multi-year supply agreements with its customers. During 2008, Cliffs sold 22.7 million tons of iron ore pellets from its share of the production from its North American Iron Ore mines. The segment’s five largest customers together accounted for a total of 84 % of North American Iron Ore product revenues for the years 2008.

North American Coal

Cliffs is a supplier of metallurgical coal in North America. It owns and operates two North American coking coal mining complexes located in West Virginia and Alabama that has a rated capacity of 6.5 million short tons of production annually. During 2008, it sold a total of 3.2 million tons. North American Coal’s production is sold to global integrated steel and coke producers in Europe, South America and North America. Approximately 84 % of its 2008, production was committed under one-year contracts. Exports and domestic sales represented 56 % and 44 %, respectively, of its North American Coal sales during 2008.

Asia Pacific Iron Ore

The Company’s Asia Pacific Iron Ore segment is comprised of Portman, an Australian iron ore mining company, of which it owned 100 % as of December 31, 2008. Its Asia Pacific Iron Ore operations are located in Western Australia and include its 100 % owned Koolyanobbing complex and its 50 % equity interest in Cockatoo Island. Cliffs serves the Asian iron ore markets with direct-shipping fines and lump ore. Production during 2008, (excluding its 0.4 million ton share of Cockatoo Island) was 7.3 million tons. These two operations supply a total of four direct-shipping export products to Asia via the global seaborne trade market.

Koolyanobbing produces a standard lump and fines product, as well as a low grade fines product. Cockatoo Island produces and exports a single premium fines product. Portman lump products are directly charged to the blast furnace, while the fines products are used as sinter feed. The variation in Portman’s four export product grades reflects the inherent chemical and physical characteristics of the ore bodies mined, as well as the supply requirements of the customers. During 2008, the Company sold 7.8 million tons of iron ore from its Western Australia mines. Sales during 2008, were to 16 Chinese and three Japanese customers. No customer comprised more than 10 % of its consolidated sales in 2008.

The Company competes with Iron Ore Company of Canada, ArcelorMittal Mines Canada and U.S. Steel, Alpha Natural Resources, Inc., Patriot Coal Corporation, CONSOL Energy Inc., Arch Coal, Inc., Massey Energy Company, Jim Walter Resources, Inc., Peabody Energy Corp., United Coal Group Company, CONSOL, Massey, Peabody, Alpha and Alliance Resource Partners, Anglo American, Vale, BHP Billiton, Fortescue Metals Group Ltd., Mount Gibson Iron Limited, Murchison Metals Limited, Anglo American, Rio Tinto, Macarthur Coal, Teck Cominco and Xstrata.