Boardroom battle leaves Cliffs on edge – by Barry Fitzgerald (The Australian – June 30, 2014)

OWNERSHIP of the $1 billion-plus Koolyanobbing iron ore operation in Western Australia could be up for grabs as a result of a bitter boardroom proxy battle at Cliffs Natural Resources.

The ownership issue for the 11 million-tonne-a-year Koolya¬nobbing operation — 50km north of Southern Cross — comes to a head on July 29 at the annual meeting of owner Cliffs, which is based in Cleveland, Ohio.

New York activist hedge fund and 5.2 per cent Cliffs shareholder Casablanca Capital is behind a boardroom shake-up push at the meeting which, if successful, would see Cliffs move to quit its Australian operation. Casablanca wants Cliffs, which is also a coal producer, to focus on its larger and domestic market-based US iron ore business. It wants the seaborne market-exposed Australian assets, and Cliff’s Canadian assets, to go.

The hedge fund argues that Cliffs is too small to compete head to head with the iron ore majors of Rio Tinto, BHP Billiton and Brazil’s Vale in the seaborne markets for iron ore. It has said there are many potential mechanisms for an exit, including a spin-off and a partial or total sale.

The Australian operation should be sold now, it said, as it held the greatest strategic value “today’’ because of its relatively short mine life of about seven years, based on current reserves.

Another option canvassed by Casablanca is to combine Kool¬yanobbing with the Canadian interests, with the resultant Cliffs International said to have strategic appeal to selected potential buyers. It says the proceeds from a sale of the international assets can be put to better use at “home’’.

Casablanca’s attack comes as Cliffs’ value has plunged in line with weaker iron ore and coal ¬prices. The stock has lost 44 per cent of its value so far this year, falling from $US26.21 to $US14.67. In July 2011, it was a $US100 stock.

Cliffs, chaired and run by Joseph Carrabba, has hit back at the Casablanca attack, saying the hedge fund’s purported “plan’’ was value-destructive and irresponsible.

For the rest of this article, click here: