Face off: Cliffs and major shareholder in public debate over company's future
Cliffs Natural Resources (NYSE:CLF), the US' biggest iron ore producer, announced Tuesday that 500 Canadians would lose their jobs as a result of the company's decision to idle its iron ore mine in Newfoundland and Labrador.
Now, the miner's negotiations with one of its major shareholders has turned ugly. In a statement issued Wednesday activist investment firm Casablanca Capital, which owns 5.2% of Cliffs, called Tuesday's move a "knee-jerk" reaction to its earlier call for change, referring to a letter Casablanca wrote to Cliffs last month.
Casablanca also said it was backing Lourenco Goncalves, former CEO of Metals USA, to step in as Cliffs' CEO – a position that's currently open. Goncalves has personally invested approximately $1 million in Cliffs shares.
The New York-based investment firm has also delivered a letter to the company declaring its intention to nominate a majority of directors for election to Cliffs' board at the 2014 annual meeting of shareholders.
"In spite of its public statements, Cliffs hasn't engaged us in any meaningful dialogue on the issues we've raised or provided a timetable for doing so," Donald Drapkin, chairman of Casablanca said in a statement.
This is the second time in less than two weeks that Casablanca has lashed out at Cliffs.
Late last month the firm published a lengthy public letter calling on Cliffs to spin off its international assets and to immediately double dividend payments.
With iron ore prices suffering due to weak Chinese demand and an oversupplied market, Casablanca believes the US-based miner needs to separate its domestic operations from its international ones.
Cliffs' US assets are, according to the investment firm, insulted from the Chinese slow down and other factors affecting global iron ore prices.
Casablanca's decision to try and reshuffle Cliffs' Board of Directors comes as a surprise considering that in its January letter the investment company wrote that it recognized that the current "management team and many Board members were not responsible" for the decisions that led Cliffs to being the S&P's third-words performing stock of 2013.
Cliffs reacted to Wednesday's statements with a much sterner tone than in January.
"Casablanca's overall proposal fails to provide a sustainable, long-term value enhancing alternative," Cliffs wrote.
"The Company is disappointed that 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."
Cliffs also stood firm on its intention to make Gary Halverson, the current chief operation officer, the company's CEO. Halverson previously headed Barrick Gold Corp's US operations and stood in as interim COO.
"The choice of Mr. Halverson as incoming CEO follows an exhaustive search by the Board … Following a comprehensive search, the Board determined that Mr. Halverson was the right leader given his deep international and large scale mining industry leadership experience," Cliffs wrote.