Feb. 14--Cliffs Natural Resources, a recent target of the hedge fund Casablanca Capital, issued a statement Friday about its dealings with the investor, saying it has tried to maintain a dialogue with the group but has been disappointed with its response.
"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 relating to Casablanca's proposal," Cliffs Chairman James Kirsch wrote in an open letter to shareholders.
Casablanca has argued that the company's international assets are weighing on its cash-generating U.S. business and should be spun off. The New York-based fund wants to install a new chief executive at Cliffs as well as a majority of hand-picked directors.
On Thursday, Cliffs reported fourth-quarter and full-year results for 2013, including a 3 percent decrease in revenues from 2012.
Cleveland-based Cliffs reported full-year revenues of $5.7 billion, down $181 million, saying results were "driven by slightly lower global iron ore sales volumes and significantly lower market pricing for metallurgical coal products."
For the full year, Cliffs recorded net income attributable to Cliffs' shareholders of $414 million, or $2.37 per diluted share, compared with a net loss of $899 million, or $6.32 per diluted share, in 2012.
The company also announced that Gary B. Halverson, 55, formerly president and chief operating officer, had been appointed as president and chief executive officer, effective immediately. He also serves as a director on Cliffs' board of directors. Halvorson said the company is working to cut costs and increase shareholder value.
"The first step in this process is significantly cutting our capital spending and idling and or exploring alternatives for underperforming assets in our portfolio," Halvorson said in the Thursday earnings statement.
Casablanca responded to the appointment, saying Halverson has never run a public company does not have the relevant experience to refocus the company.
In the letter, Cliffs said the hedge fund's proposals would put Cliffs credit rating at risk.
Last month Casablanca, which owns about 5.2 percent of Cliffs, urged the iron ore and coal miner to spin off its international operations, form a master limited partnership from its U.S. assets and double its dividend.
On Wednesday, Casablanca said it was launching a proxy campaign and backing Lourenco Goncalves, former chief executive of Metals USA, to take over as chief executive.
Asked on Wednesday whether he would carry out Casablanca's detailed proposals as chief executive, Goncalves said the fund's plan offered "good alternatives, but they are alternatives, they are possibilities."
Weakness in the steel market has hit relatively high-cost iron ore suppliers like Cliffs hard. In recent quarters, the company's earnings have also been weighed down by higher-than-expected costs at its Bloom Lake mine in Canada.
After months of uncertainty, Cliffs earlier this week decided to indefinitely suspend a planned expansion at Bloom Lake, and idle Wabush, another Canadian mine, slashing capital spending and cutting some 500 jobs.
Looking ahead, Halverson said increasing shareholder value must drive the company's capital allocation plans.
"The first step in this process is significantly cutting our capital spending and idling and or exploring alternatives for underperforming assets in our portfolio," he said.
Cliffs is one of Minnesota's major taconite iron ore producers. It owns and operates Northshore Mining in Silver Bay and Babbitt and United taconite in Eveleth and Forbes. It also is co-owner and operator of Hibbing Taconite and owns and operates the Tilden/Empire taconite operation in Michigan'sUpper Peninsula.
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