New York-based hedge fund Casablanca Capital LP announced today that they have acquired a 5.2 percent stake in Cliffs Natural Resources and urged the iron ore producer to spin off of international assets and double its annual dividend.
Casablanca also said Cliffs should convert its U.S. assets to a master limited partnership and "significantly" cut costs.
Cleveland-based Cliffs is among the largest players in Minnesota's taconite iron ore operations. It owns and operates the North Shore Mining and United Taconite mining operations and is co-owner and operator of Hibbing Taconite. The company also owns and operates the Tilden-Empire operation in Michigan's Upper Peninsula.
But Cliffs also owns significant iron ore holdings in Canada and Australia, and part of the Casablanca push is for Cliffs to separate those assets and sell them off.
"By taking these steps, we believe Cliffs can highlight and enhance the unique strengths of its businesses and unlock significant shareholder value," Casablanca wrote in a letter made public today.
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As an MLP, Casablanca derives most of its cash flows from real estate, natural resources and commodities.
Cliffs responded quickly today releasing a statement that company leaders welcome "open communications with all of its shareholders" and that they had already made some changes, including adding four new directors and a new chairman.
"Cliffs expects to continue making progress on reducing costs, strengthening its balance sheet with cash flows from operations, and taking a disciplined approach to capital spending," the company said in the statement.
Cliffs reduced its 2013 dividend to 60 cents per share in 2013 from over $2 in 2012. Cliffs shares have nearly halved in value in the past year, compared with a 19 percent rise in the S&P 500 index. Shares in Cliffs jumped more than 12 percent, to $21.84, in premarket trading on Tuesday.
News Tribune Staff Contributed to this report.
