Photo by: Bloomberg
TORONTO (miningweekly.com) – The NYSE-listed stock of US coal and iron-ore producer Cliffs Natural Resources spiked just after noon on Tuesday by as much as $1.12 a share after initial results showed that shareholders had voted all six of dissident shareholder Casablanca Capital’s nominees to the board.
The New York-based fund manager, which owns about 5.2% of Cliffs, would now be able to implement its agenda to change the way the company operated, having obtained majority representation on the board.
Mining veteran Lourenco Goncalves, one of the Casablanca nominees who was elected, said on behalf of all the newly-elected Casablanca nominees that the conclusion of this proxy contest marked “not an end but a beginning”.
“We look forward to working collaboratively with the continuing members of Cliffs’ board and the company’s hard-working, dedicated and talented employees to set Cliffs on a course to improve performance and restore shareholder value. Cliffs has tremendous inherent value and we are confident there is much we can and will do to refocus Cliffs and steer it in a new strategic direction,” he said.
In addition to Goncalves, the other Casablanca nominees elected to the board were Robert Fisher, Joseph Rutkowski, James Sawyer, Gabriel Stoliar and Douglas Taylor.
Subject to certification of the final results within the next three days by the independent inspector of elections, the newly elected directors would start their terms immediately and would serve through to the company's 2015 annual meeting of shareholders.
PROPOSITION FOR CHANGE
Casablanca in January launched the proxy contest, accusing the incumbent board of shareholder value destruction, seeking to install its own CEO and directors, while suggesting the spin-out of certain of Cliffs’ international operations.
The 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 previous 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 advocated the spin-off of Cliffs' 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.