CLEVELAND, June 14 /PRNewswire-FirstCall/ -- Cleveland-Cliffs Inc
("Cliffs") (NYSE: CLF) today announced that it has agreed to acquire
PinnOak Resources, LLC, and its subsidiary operating companies, for $450
million in cash plus approximately $150 million in debt. PinnOak is a
privately owned domestic producer of high-quality, low-volatile
metallurgical coal. Payment of 25 percent of the cash portion will be
deferred until December 31, 2009. The transaction is expected to close
within 60 days and is subject to regulatory clearances.
"This acquisition represents an attractive expansion opportunity for
our Company. When combined with our Australian coking and thermal coal
operation, the Sonoma Project, the Company will control a 10 million ton
position, with the majority being for export," commented Joseph A.
Carrabba, Cleveland-Cliffs chairman, president and chief executive officer.
"It marks yet another step in the execution of our strategy to deepen
Cliffs' exposure to faster growing international markets and further
diversify its mineral sales."
The transaction is expected to increase Cliffs' 2008 revenues by
approximately $400 million and add approximately $100 million in EBITDA.
Due to customer transition issues, full-year 2007 revenues are expected to
be approximately $300 million. The transaction will have minimal earnings
impact to Cliffs in 2007 as it covers acquisition and integration costs.
PinnOak's operations include two complexes comprising three underground
mines -- the Pinnacle and Green Ridge mines in southern West Virginia, and
the Oak Grove mine near Birmingham, Alabama. Combined, the mines have the
capacity to produce in excess of seven million tons of premium-quality
metallurgical coal annually.
The Pinnacle complex, located in Pineville, West Virginia, comprises
the Pinnacle and Green Ridge properties. In operation since 1969, Pinnacle
produces a high-quality, low-volatile metallurgical coal and boasts the
only longwall plow system in the United States. The Green Ridge mine,
opened in 2004, also produces a premium-quality product. Coal from both
mines is processed by the Pinnacle Preparation Plant and then shipped to
the customer via the Norfolk Southern rail line and exports from the port
of Norfolk, Virginia.
Located in Adger, Alabama, the Oak Grove mine has been in operation
since 1975 producing high-quality, low-volatile, very low-sulfur product,
which is in high demand due to its excellent coking characteristics.
Processing from this mine is done at the Concord Preparation Plant and
product is transported domestically by rail, barge or truck. International
shipments initiate from the port of Mobile, Alabama.
Approximately 80 percent of PinnOak's total 2007 production is slated
for the international steel market, with the balance committed to
integrated steelmakers in the United States. The company produced
approximately 3.9 million tons of coal in 2006 and has current estimated
reserves of 140 million tons.
"We are excited to welcome the PinnOak team to the Cliffs organization
as they provide a depth of experience and an additional growth platform
consistent with the Company's strategic objectives," Carrabba added.
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Cleveland-Cliffs Inc, headquartered in Cleveland, Ohio, is the largest
producer of iron ore pellets in North America and sells the majority of its
pellets to integrated steel companies in the United States and Canada.
Cleveland-Cliffs Inc operates a total of six iron ore mines located in
Michigan, Minnesota and Eastern Canada. The Company owns 80 percent of
Portman Limited, a large iron ore mining company in Australia, serving the
Asian iron ore markets with direct-shipping fines and lump ore. It also has
a 30 percent interest in the Amapa Project, a Brazilian iron ore project,
and a 45 percent economic interest in the Sonoma Project, an Australian
coking and thermal coal project.
News releases and other information on the Company are available on the
Internet at: http://www.cleveland-cliffs.com
This news release contains predictive statements that are 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 statements are based on reasonable
assumptions, such statements are subject to risk and uncertainties. There
can be no assurance that the transactions contemplated in connection with
the acquisition of PinnOak will be consummated.
Actual results may differ materially from such statements for a variety
of reasons, including: market forces that negatively impact the domestic
and international low-volatile metallurgical coal markets; changes in
global demand for low-volatile metallurgical coal by integrated steel
producers due to changes in steel utilization rates; operational factors;
availability of capital equipment and component parts; availability of
float capacity and other transportation issues; changes in the financial
condition of the Company's partners and/or customers; rejection of major
contracts and/or venture agreements by customers and/or participants under
provisions of the U.S. Bankruptcy Code or similar statutes in other
countries; inability to achieve expected production levels; failure to
receive or maintain required environmental permits; problems with
productivity, labor disputes, weather conditions, fluctuations in coal
grade, tons mined, changes in cost factors including energy costs,
transportation and employee benefit costs; and the effect of these various
risks on the Company's future cash flows, debt levels, liquidity and
Reference is also made to the detailed explanation of the many factors
and risks that may cause such predictive statements to turn out
differently, set forth in the Company's Annual Report and Reports on Form
10-K and previous news releases filed with the Securities and Exchange
Commission, which are publicly available on Cleveland-Cliffs' website. The
information contained in this document speaks as of the date of this news
release and may be superseded by subsequent events.
SOURCE Cleveland-Cliffs Inc