CLF November 2010 Investor Presentation

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CLF November 2010 Investor Presentation

  1. 1. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs Natural Resources Inc. November 2010
  2. 2. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 2 “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995 This presentation includes predictive information that is intended to be made as “forward- looking” within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. Although the Company believes that its forward-looking information is based on reasonable assumptions, such information is subject to risks and uncertainties, which could cause materially different results. Important factors that could cause actual results to differ materially from those in the forward-looking information are set forth in the Company’s most recent Annual Report and reports on Form 10-K and 10-Q, and news releases filed with the Securities and Exchange Commission. All reports and news releases are available on Cliffs’ website www.cliffsnaturalresources.com.
  3. 3. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Overview of Cliffs Natural Resources Inc. 3  Cliffs Natural Resources (NYSE: CLF) (Paris: CLF) is an international mining and natural resources company. A member of the S&P 500, it is the largest producer of iron ore pellets in North America, a major supplier of direct-shipping lump and fines iron ore out of Australia and a significant producer of metallurgical coal  Cliffs is executing a strategy designed to increase scale and diversity and focused on serving the world’s largest and fastest growing steel markets  The Company boasts a conservatively managed balance sheet with low debt and strong liquidity  With core values of environmental and capital stewardship, our colleagues across the globe endeavor to provide all stakeholders operating and financial transparency as embodied in the Global Reporting Initiative (GRI) framework
  4. 4. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 4 Cliffs Natural Resources Global Footprint  Access to high-growth Asian markets  Pricing correlates to Australian benchmark for lump and fines  Largest iron ore producer in North America  Significant position in North American metallurgical coal  A developing project in a low-cost mining district
  5. 5. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs’ Strategic Imperatives 5 Scale Through Diversification Global Execution Operational Excellence Building scale through diversification  Multiple Revenue Streams  Product Diversification  Geographic Presence Operational excellence  Safety  Technical Competencies  Operating Efficiencies Global execution  Competencies of the Firm  Outlook of Personnel  Global Scalability Shareholder returns  Shareholder Value  Risk Management  “Earning the Right to Grow” Shareholder Returns
  6. 6. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP $0 $30 $60 $90 $120 $150 Jan 2004 Sep 2004 May 2005 Jan 2006 Sep 2006 May 2007 Jan 2008 Sep 2008 May 2009 Feb 2010 6 Impact of Strategic Execution ($ in Millions) StrategicmilestonesBusinessevolution Share price performance since January 2004 2005  Acquired 80% of Portman Limited, then the third largest iron ore mining company in Australia Sales: $1,203 2005 Sales: $1,740 2006 Sales: $1,922 North American Coal 10% Other 4% 2007 Sales: $2,275 2008 Sales: $3,609 2009 Sales: $2,342 2007  Acquired 30% interest in Amapá iron ore project in Brazil  Acquired 45% economic interest in Sonoma, hard coking and thermal coal mine in Queensland, Australia  Acquired PinnOak, Central Appalachian high-quality, low-volatile met coal mines 2008  Acquired remaining stake in Portman Limited (20%)  Acquired remaining stake in United Taconite (30%)  Acquired stake in Golden West, an Australian iron ore junior mining company Asia Pacific Iron Ore 24% North American Iron Ore 62% 2009  $347mm in net proceeds from equity offering executed in May  Added to S&P 500 Index 2004 2010E  Acquired remaining stake (73%) in Wabush Mines  Acquired Freewest Resources and Spider Resources, world-class chromite assets in Ontario, Canada  Acquired INR Energy, high-volatile met coal and thermal coal 2010E Sales: $4.4B
  7. 7. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 7 Track record of growth ($mm) Strong balance sheet Japan 7% United States 45% China 30% Canada 10% Other 8% Financial Overview Diverse end-market exposure (2004 – 2009) 1 Revenue EBITDA 2004 2009 United States 76% Canada 19% China 5% Other 1% Revenue by end-market
  8. 8. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 2010 Financial Highlights 8  Record-breaking first-half results: - Revenues of $1.9 billion, up 124% - Net income of $354 million, up 830% - Free cash flow of $173 million, up 178%  $1 billion in acquisitions: - Wabush remaining stake $88 million - Freewest acquisition $186 million - INR Energy’s coal operations $757 million  First-half North American Iron Ore shipments total 11 million tons, up 154%  North American Coal contributes $23 million to second-quarter sales margin  Asia Pacific Iron Ore first-half revenue reaches $469 million, up 95%  The Company achieved investment grade rating from Standard and Poor and Moody’s
  9. 9. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Business Segment Overview 9 North American Iron Ore  Manage and operate six North American mines located in Michigan, Minnesota, and Eastern Canada  Annual equity production capacity of 29.5mm tons of iron ore pellets  Over 90% of 2010 volume committed under contract North American Coal  Own and operate five metallurgical coal mines and one thermal coal mine in West Virginia and Alabama  2011 production capacity in excess of 7mm tons  A significant portion of revenue comprised of exports Asia Pacific Iron Ore  Operations include 100%-owned Koolyanobbing complex and 50% equity interest in Cockatoo Island  9mm tonnes of current capacity, with upgrade underway to reach 11mm tonnes by 2012  Direct-shipping lumps and fines ore sold on the seaborne market North American Iron Ore 62% Asia Pacific Iron Ore 23% North American Coal 9% Other 6% 2009 Revenue 1 Partial year
  10. 10. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 10 M&A and Development Strategy  Diversify business into other end-markets and other steel-related minerals  Expand geographically into low-political- risk geographies  Objective is to strike a balance among cash-flow positive, profitable, commercial- stage businesses and targets in the early stage of development NORTH AMERICA ASIA PACIFIC (AUSTRALIA) SOUTH AMERICA (BRAZIL) NORTH AMERICAN MET COAL SEABORNE IRON ORE IRON ORE SEABORNE MET COAL Cliffs’ strategy: geographic and mineral diversification Minerals Geographies SEABORNE FERROALLOYS
  11. 11. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 11 INR Energy's Coal Operations Acquisition  Demonstrates Cliffs’ commitment to further diversify its business into coal  $757 million acquisition funded through available liquidity, including cash on hand and Cliffs’ $600 million credit facility  Transaction will increase Cliffs’ total global coal equity production capacity to nearly 11 million tons by 2012, from today’s current annualized equity production of approximately 7 million tons  Significant metallurgical coal reserves  Expands global reserve base to over 232 million tons  Southern West Virginia multi-mine complex with features that are complementary to our North American Coal operations  Two underground continuous mining operations and one open surface mine  Assets include several metallurgical coal development mines  Increases Cliffs’ products portfolio through the addition of high-volatile metallurgical coal and thermal coal
  12. 12. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 12 INR Energy's Coal Operations Southern West Virginia Mining Complex Metallurgical Coal Operations Thermal Coal/ PCI Operations Developmental Projects • Two operating underground mines: 1. Powellton 2. Chilton-Dingess • One operating surface mine: 1. Toney Fork #2 • Two additional underground metallurgical coal mines in active development • Several additional metallurgical coal mines in permitting phase Operations located in near proximity to Cliffs Pinnacle Mine
  13. 13. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 13  Freewest Resources and Spider Resources Acquisitions position Cliffs to become the leading North American primary chromite and ferrochrome producer and exporter  Customers would include global stainless steel producers  World-class chromite deposits within the “Ring of Fire” in Northern Ontario, Canada – 100% Black Thor – 100% Black Label – 73.5% Big Daddy  Anticipate mining 1 million to 2 million tonnes of high-grade chromite ore to produce 400,000 to 800,000 tonnes of ferrochrome annually with a >30-year mine life  Prefeasibility studies and initial First Nation discussions are underway; production anticipated to commence around 2015  Financed with stock and cash Ring of Fire – Chromite Project
  14. 14. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 14  Estimated capex of $800mm required to develop the site  Options for financing capex include: – Internal cash flow – Joint-venture partner – Other financial options  Capex will be deployed only after certain project milestones are satisfactorily achieved  Cliffs has the opportunity to evaluate proceeding with the development of the assets over the next 5 years – Majority of capex spending would occur in 2013 and 2014 Ring of Fire – Chromite Project Capex Requirements
  15. 15. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 15 Ring of Fire – Chromite Project World-Class Assets CHROMITE DEPOSITS BLACK THOR BLACK LABEL BIG DADDY
  16. 16. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Industry Overview 16
  17. 17. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP U.S. Canada Mexico Brazil EU 27 CIS Japan China S. Korea India Oceania 0 200 400 600 800 1,000 1,200 0 10 20 30 40 50 60 2009Kg/CapitaSteelConsumption 2009 GDP Per Capita ($US 000s) Steel Is a Large, Growing, Global Business BRIC economic growth is substantial and appears inevitable.  In 2009, China’s steel consumption was nine times that of the U.S.  As countries industrialize, per capita steel consumption increases as GDP per capita expands through the maturing process Note: Size of bubbles represents size of absolute 2008 finished steel consumption in each respective country Source: Metals Strategies, CIA World Factbook 17
  18. 18. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 18 The Long-Term Outlook Remains Strong World steel demand (millions of tonnes) Source: Metal Strategies % of crude steel production Growth in global steel production using blast furnaces 2010-2015 CAGR 3.4% Source: Metal Strategies 2010-2015 CAGR 2.6% (millions of tonnes) 0 500 1,000 1,500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 0% 25% 50% 75% 100% 400 600 800 1,000 1,200 1,400 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E
  19. 19. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Source: Metal Strategies Net imports as a % of consumption 17% 12% 19% 11% 9% 10% 9% 10% 10% 11% 11% 11% 19 U.S. steel supply/demand (mm tons) North American Steel Producers Are Particularly Well-Positioned to Participate in an Economic Recovery ’09 – ’15 Consumption CAGR +5.4% 110 105 108 108 101 66 92 98 107 111 114 116 133 119 135 122 110 65 89 101 113 118 123 127 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E Production Consumption
  20. 20. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Source: Metal Strategies Months supplyTons (mm) 20 Service center inventories Steel Center Inventories Remain Low Relative to Historical Levels 1 2 3 4 5 0 2 4 6 8 10 12 14 16 18 2005 2006 2007 2008 2009 2010
  21. 21. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 21  Iron ore – New projects commissioned in countries with medium to high sovereign risk – High-end of cost curve requiring significant capital deployment – Suppliers farther inland from deep-water ports, economic logistics – Further tightening of Indian supply as increased export regulatory pressure has emerged  Metallurgical coal – At top of cycle in 2008, Appalachian supplies declined (mines deeper, seams thinner) – Environmental and safety regulations make permitting more difficult to secure – Other global metallurgical coal basins in challenging political geographies (Mongolia, Mozambique, etc.) Steelmaking Raw Materials Supply-Side Considerations
  22. 22. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 22 Pricing for Core Products Has Corrected Sharply Metallurgical coal prices ($/metric ton) 0 50 100 150 200 250 300 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E Source: Metal Strategies, equity research, Company estimates $209 * 62% Iron ore prices ($/metric ton based on 64% iron content) 0 25 50 75 100 125 150 175 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E Pellets Lumps Fines $73 (48%) $62 (33%) $85 (44%) Source: Cliffs and various industry publications/reports $149 75% $153 109% $129 108% $129 (57%) ($ price and % change) ($ price and % change) * Latest quarterly Settlement
  23. 23. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Business Unit Overview 23
  24. 24. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 24 Source: Company data Cliffs Managed 45% % capacity U.S. Steel 25% Iron Ore Co. of Canada 16% Arcelor Mittal 14%  Firmly established as a critical supplier to the leading U.S.-based integrated steelmakers  Virtually 100% of sales volume is committed under long-term supply agreements  Formula-based supply agreements capture steel prices, iron ore prices and wholesale inflation while mitigating volatility  Cost effectively increased production base during most recent cycle  Over 900 million tons of proven and probable reserves North American Leader in Iron Ore Financial overview Equity production (MM gross tons) North America pellet production
  25. 25. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 25 Source: Company data The North American Market Is Geographically Protected ArcelorMittal Mines
  26. 26. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP  Virtually all pellet capacity under long-term contracts  Annual price adjustments are based on a variety of factors including: — Seaborne pellet prices — Various PPI indices — Hot-band steel prices — Contractual-based price increases, lag-year adjustments and capped pricing  A 48% decrease in pricing in 2009 resulted in average prices for Cliffs decreasing only 11%  2010 guidance: 27 million tons of sales volume, $98 - $103 per ton — Assumes 96% increase in seaborne pellet prices, $600 - $650 hot band steel 26 North American Iron Ore Pellet Contract Pricing
  27. 27. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Source: Company data Overview Reserves by Mining Complex Cliffs North American Coal Production (millions of tons)  Cliffs will produce primarily high-volatile and low-volatile metallurgical coal, with some thermal coal production  Reserve base of 225 million tons contains some of the highest quality metallurgical coal in the world  NAC capacity will be over 9 million tons in 2012  Coal is sold in both domestic and export markets Oak Grove 19% INR Met 30% 27 Geographic overview Oak Grove Mine Pinnacle Complex  Pinnacle Mine  Green Ridge Mine North American Coal Financial overview 1 Partial year INR Mines:  Powellton Mine  Chilton-Dingess Mine  Toney Fork #2 Mine 225 mm tons INR Thermal 23% Pinnacle 28% 1.74 4+ 7+ 0 2 4 6 8 10 2009 2010E 2011E
  28. 28. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 28 Source: Company data Business overview  Asia Pacific iron ore operations located in Western Australia: – Koolyanobbing mine (100% owned) – Cockatoo Island Joint Venture (50% owned)  Serves the Asian iron ore markets with direct-shipping fines and lump ore, with 2012 capacity to reach 11mtpy  88mm tonnes of proven and probable reserves  Near mine drilling program targeting substantial reserve additions China 85% Customer overview (2009) Financial overview Cockatoo Island Koolyanobbing Complex Japan 15% Asia Pacific Iron Ore Geographic overview Production (millions of tonnes)
  29. 29. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 29 Business overview  45% economic interest, shipments commenced in 2008  2009 equity sales volume: 1.4mm tonnes  21.6 million tonnes of reserves  Mix of metallurgical and thermal coal  Supply agreements in place with JFE, China Steel (metallurgical) and a Korean utility (thermal)  Moves by rail to the Abbot Point Bulk Coal Terminal for export  $142 million investment has returned a total sales margin of $82 million since operations commenced two years ago Geographic overview Sonoma Sonoma Coal Source: Company data
  30. 30. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 30 Source: Company data Business overview  30% owned by Cliffs, 70% owned by Anglo American  Consists of a significant iron ore deposit, a 192-kilometer railway connecting mine to port, and 71 hectares of real estate for a loading terminal  Majority of production committed under long-term supply agreement with operator of an iron oxide pelletizing plant in Bahrain  $62 million equity loss in 2009 and expectations of profitability in 2010 Geographic overview Amapá Project Amapá Project
  31. 31. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP In Summary  Steel and the raw materials to make it are extremely important — Building block of society — Essential to modernization of Brazil, Russia, India and China  Raw materials will continue to be scarce in the long-term — Very few meaningful iron ore or metallurgical coal projects came online at the top of the last cycle — Worldwide economic recovery is resulting in increased demand  Cliffs is well positioned in its current markets and to benefit from the current environment — Active business development targeting program — Strong balance sheet and significant financial flexibility 31
  32. 32. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Cliffs Natural Resources Inc.
  33. 33. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP Appendix – 2010 Outlook Summary
  34. 34. OPERATIONAL EXCELLENCE | A WORLD LEADER | STEWARDSHIP 2010 Outlook Summary 34 Sonoma Coal - Equity sales and production of 1.5 million tonnes - 60%/40% thermal-met mix - Average revenue per tonne of $120 - $125 - Average cost per tonne of $80 - $85 Amapá Iron Ore Project - Profitable in 2010 for Cliffs’ equity interest SG&A Expenses and Other Expectations - SG&A expenses of approximately $200 million - Global Exploration costs of $30 million to $35 million - Chromite project costs of approximately $15 million - Full year tax rate approximately 30% - Depreciation and amortization approximately $325 million Cash from operations - More than $1.3 billion Capital expenditures - Approximately $275 million 2010 Outlook Summary North American North American Asia Pacific Iron Ore (1) Coal (2) Iron Ore Current Previous Current Previous Current Previous Outlook Outlook Outlook Outlook Outlook Outlook Sales volume (million tons/tonnes) 27.0 27.0 3.6 3.9 9.0 8.8 Revenue per ton/tonne $98 - $103 $107 - $112 $115 - $120 $115 - $120 $115 - $120 $110 - $115 Cost per ton/tonne $65 - $70 $65 - $70 $120 - $125 $115 - $120 $55 - $60 $55 - $60 (1) Assumes a range of hot band steel pricing of $600 - $650 per ton. (2) North American Coal outlook includes the impact from INR Energy's coal operations.

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