TORONTO (miningweekly.com) – US iron-ore and coal producer Cliffs Natural Resources on Tuesday said at least two of dissident shareholder Casablanca Capital’s proposed slate of nominees would be appointed to the company’s board after shareholders vote during its annual general meeting (AGM), scheduled for July 29.

Included in Cleveland, Ohio-based Cliffs’ list of nominees are CEO Gary Halverson, chairperson James Kirsch and directors Barry Eldridge, Mark Gaumond, Susan Green, Janice Henry, Stephen Johnson, Richard Riederer and Timothy Sullivan.

Casablanca had on March 6 nominated Lourenco Goncalves, Rip Fisher, Patrice Merrin, Joseph Rutkowski, Gabriel Stoliar and Douglas Taylor as its candidates for the Cliffs board.

Casablanca had not yet filed its definitive proxy detailing its slate with the Securities and Exchange Commission (SEC).

Cliffs on Tuesday filed its definitive proxy materials with the SEC regarding the AGM, saying that based on discussions with various shareholders, the board believed that it was in the best interest of all Cliffs shareholders to nominate a slate of nine directors for its 11-person board.

"As a result … we believe that at least two of Casablanca’s proposed nominees will be elected to the Cliffs board, assuming that Casablanca continues its proxy contest,” the company said.

The board said it did not currently intend to nominate Susan Cunningham or Andrés Gluski for re-election as directors, nor to nominate replacement candidates, soliciting proxies for only the nine nominees.

Casablanca, which owns and manages about 5.2% of Cliffs, in January launched a proxy fight, seeking to install its own CEO and directors, and suggested the spin-out of certain of Cliffs’ international operations.

The New York-based fund manager highlighted what it termed “Cliffs’ failed expansion strategy” and the resultant loss of more than 80% of the company’s market value, which it alleged was being overseen by a majority of the current 11-member board.

Casablanca also outlined its proposal for a new strategy focused on Cliffs’ core US assets, which it believed would restore value for shareholders, and reiterated its support for 30-year metals and mining veteran Goncalves as its chosen leader to assume the position of CEO of Cliffs.

The activist was advocating Cliffs to spin off its Bloom Lake iron-ore project, in Quebec, together with its Asia Pacific assets, to create ‘Cliffs International’.

Cliffs operates two distinct iron-ore businesses with very different risk/reward profiles. The Cliffs International assets are directly exposed to the competitive ‘seaborne’ iron-ore market and the large Bloom Lake project is still in the development stage.

In contrast, the ‘Cliffs USA’ iron-ore assets benefit from unique supply and demand characteristics, and barriers to entry in the Great Lakes generate strong cash flow and ensure long-term contracts, which provide volume and price visibility.

Activist Casablanca last month threatened Cliffs with legal action over a 'proxy put' that could result in cash-flow problems if the hedge fund’s slate of six board nominees were elected.

On May 30, Cliffs said in a proxy filing that should Casablanca’s nominees be elected at the AGM, it could trigger a 'change of control' under the indenture governing Cliffs’ senior notes, potentially compelling it to repurchase the notes.

This mandatory repurchase, or proxy put, would result in a cash-flow crisis for Cliffs, which Casablanca said it regarded as a threat by Cliffs' board to shareholders not to vote for its set of board nominees. However, the proxy put could be defused by the Cliffs board approving the nominees proposed by Casablanca – not as an endorsement, but merely for the narrow purpose of not triggering the proxy put.