A New York hedge fund proclaims it’s won a bitter proxy fight with Cliffs Natural Resources to achieve majority control of the Ohio iron ore and coal miner’s board of directors.
Casablanca Capital said it was successful in convincing Cliffs’ shareholders to elect all six of its nominees at the miner’s annual general meeting in Cleveland, July 29.
The final results are subject to independent inspection over the next three days.
If Casablanca is right, it means Cliffs’ hold on its Ring of Fire chromite properties in the James Bay region is tenuous at best.
Casablanca, which acquired 5.2 per cent of Cliffs’ shares, wants to break off Cliffs’ international assets, including its Ring of Fire properties, from its core U.S. iron and coal divisions.
“We are grateful to our fellow Cliffs shareholders for their careful consideration of the issues and gratified that they have sent a resounding message of support for our efforts to drive meaningful change at Cliffs, bring true accountability to the company’s leadership, and restore shareholder value,” said Casablanca fund chairman Donald Drapkin in a statement.
In a reply, Cliffs stated: “We look forward to receiving the final results of today’s vote, and the board and management team remain deeply committed to continuing to create long-term value for all of our shareholders. We appreciate the support of the Cliffs shareholders who supported the company’s slate and the hard work every day by Cliffs’ more than 6,000 employees.”
The meeting was the climax of a much-anticipated showdown that started with Casablanca launching a bitter battle with Cliffs last March, claiming that the Ohio mining giant was destroying shareholder value.
Casablanca also wants to oust Cliffs CEO Gary Halverson and replacing him Lourenco Goncalves, a former CEO at Metals USA.
The fund claims Cliffs has made some poor decisions in its global expansion plans in spending more than $6 billion acquiring and expanding its troubled Bloom Lake iron mine in Quebec.
In Northern Ontario, Cliffs spent $500 million on its chromite properties in the Ring of Fire before deciding to shut down the project indefinitely last November. The company pinned much of the blame on the Ontario government for its lack of commitment toward building infrastructure to reach its stranded Black Thor deposit.
Cliffs then sold off its exploration camp assets at McFaulds Lake in the Ring of Fire to Noront Resources in May. At that time, Noront president and CEO Alan Coutts expressed a definite interest in acquiring Cliffs’ chromite claims if the company was considering shedding its Black Thor, Big Daddy and Black Label discoveries.
In a letter to its own shareholders, KWG Resources – a Cliffs adversary in the Ring of Fire and an uneasy 30 per cent partner with Cliffs on its Big Daddy chromite deposit – said the new board nominees will “usher in some changes in how Cliffs will in (the) future go about realizing the value of its assets.”
In what may be a moot issue, a court ruling still awaits Cliffs’ appeal of a provincial tribunal decision allowing it overland access to the Ring of Fire.
Both Cliffs and KWG are at odds over a ruling last September by Ontario’s mining and land commissioner which denied Cliffs overland access to its chromite deposits atop the claims of its development partner.
It’s not known when a ruling will be made from the two-day hearing in an Ontario Divisional Court in Toronto in mid-June.