Cleveland-Cliffs to keep deal with Alpha over Harbinger objections

By Aaron Hochman-Zimmerman

New York, July 31 - Cleveland-Cliffs Inc. management will forge ahead with its proposed merger with Alpha Natural Resources Inc. despite the wishes of nearly-20% stakeholder Harbinger Capital Partners.

During Cleveland-Cliffs' second quarter investment call senior management spoke highly of the deal and insisted it will see the transaction through to completion.

"We don't have any thoughts but pursuing this," said Joseph Carrabba, Cliff's chairman, president and chief executive officer.

In a July 17 filing with the Securities and Exchange Commission, Harbinger said it was opposed to the merger.

Harbinger said it may take positions with respect to potential changes in the operations, management, board composition, ownership, capital structure, strategy and future plans of the company to enhance shareholder value.

It reported owning 16,616,472 Cleveland Cliffs shares or 18.36% of the company.

Carrabba also said that many shareholders disagree with Harbinger.

"I think they're happy to see us executing on a strategy that we've been touting for weeks and months," he said.

"I think it's been a bullish response, but we're letting the numbers and the data do the talking."

The new entity "Cleveland Natural Resources is expected to have a very strong credit profile," said Laurie Brlas, chief financial officer of Cleveland-Cliffs.

Brlas expects "$200 million in synergies from 2010 forward, primarily due to our ability to enhance processing and blending efficiencies and opportunities at our coal facilities," she said.

Cliff's management acknowledged that their stock has traded as though the market disapproves of the merger, but "I think with the results of this week and the '09 guidance people can dust off their models and redo this," said Carrabbas.

Carrabbas refused to speculate on the strategic value of the company if it did not choose to pursue Alpha.

"We're not not going to pursue the ANR acquisition," he said, adding that the company's strategic value continues to be enhanced by the execution of our strategy.

In the industry, Teck Conminco Ltd.'s deal with Fording Canadian Coal Trust and Cliff's deal with Alpha are just the beginning of a larger trend, Carrabbas said.

"This is one of the few mining districts in the world that is left that hasn't been consolidated," he said.

"I think as the world goes forward and the scarcity of the minerals particularly minerals you can use domestically and export with this weak U.S. dollar; yes, it's certainly the beginning," he said.

Mining company Cleveland-Cliffs produces iron ore pellets in North America and supplies metallurgical coal to the steelmaking industry. The company is based in Cleveland.

Alpha Natural Resources, located in Abingdon, Va., supplies Appalachian coal to the steel industry, electric utilities and other industries.

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