Cliffs Natural Resources Inc. (NYSE: CLF)(PARIS: CLF) is urging
shareholders of Freewest Resources Canada Inc. (TSX VENTURE: FWR)
to disregard false and misleading statements being made by Noront
Resources Ltd. in support of its increasingly desperate take-over
bid for Freewest.
Counter to what Noront promotes:
- Noront's chromite deposits are smaller, thinner and deeper
than Freewest's, are unlikely to be developed for decades and, as a
result, there are no synergies in consolidating Noront's and
Freewest's chromite deposits;
- Noront has grossly overstated the value of its bid by, among
other things, using inappropriately aggressive assumptions to value
the warrant component of its offer, an indisputable fact based on
market trading;
- There are no significant tax savings from Noront's offer, only
a tax deferral if a shareholder does not sell the Noront
shares.
Cliffs and Freewest are petitioning the Quebec Autorite des
marches financiers to investigate Noront's public statements,
deficiencies in its regulatory filings and potential irregularities
in the trading of Noront stock, and to take appropriate action.
"Noront is exaggerating the value of its bid as well as the
potential for synergies between Freewest's and Noront's chromite
assets," said Joseph Carrabba, president, chairman and CEO of
Cliffs. "We believe only one mine will be developed. It will be a
surface operation on one of the Freewest properties rather than an
underground mine on Noront's deeper, thinner and discontinuous
deposit. The simple fact is that the scale and quality of
Freewest's massive 2.5 km long chromite deposits render the Noront
chromite properties completely irrelevant in the Ring of Fire."
"Based on a year of technical work by Cliffs, we can say with
confidence that Freewest's deposits are readily developable and
more than sufficient to meet market demand for the foreseeable
future. Consequently, we believe it is highly unlikely that
Noront's inferior properties will be developed. This underscores
the risk to Freewest shareholders of owning Noront shares. It
explains why Noront wants to acquire Freewest. And it is why Cliffs
has no interest in acquiring Noront or its chromium deposits.
Freewest shareholders should not be taken in by Noront's false and
misleading claims," Mr. Carrabba added.
Cliffs urges Freewest shareholders to consider the following
facts.
- Noront's offer includes a fraction of a warrant for each
Freewest share that has a much lower value than advertised and
which ultimately may prove to be of zero value to Freewest
shareholders. Noront promoted a value for that fractional warrant
of $0.22 per Freewest share. Traditional valuation methods - and
the market trading activity on the date of that announcement -
indicate the actual value of the warrant is less than half that
amount. Only inappropriately aggressive assumptions can be used to
arrive at the warrant valuation claimed by Noront. We believe
Noront did this deliberately to mislead investors who are not
experts in valuing such complex and speculative securities. Based
on Noront's valuation, the fractional warrant represents 26% of the
consideration it has offered to Freewest shareholders.
- Excluding the fractional warrant, Noront's offer had an
implied value of just $0.64 per Freewest share upon its
announcement on November 30, and has traded as low as $0.55 within
the past 21 days. While Noront's share price has increased since
then, it appears to have done so on the basis of false and
misleading statements. At $0.64 per Freewest share, the announced
value of Noront's increased share consideration represents a 29%
discount to the fixed and certain value of $0.90 per share being
offered by Cliffs.
- Noront has made bold pronouncements about the value of its
offer in press releases that it has chosen not to include in
filings with securities regulators, which must be certified by
officers or directors of Noront. These omissions violate applicable
securities law and are a strong indication that Noront knows its
public statements are misleading.
- Noront's CEO Wes Hanson has publicly stated that Noront
believes that Cliffs is inexperienced in mine development, and
inferred that Noront is more capable of developing these properties
and associated infrastructure. This is an absurd statement. Cliffs
has 160 years of mine development and operating experience and is
the largest producer of iron ore pellets to the North American
steel industry. The steel industry is the ultimate customer for the
products of a new chromite operation in the Ring of Fire. Cliffs
has a market capitalization in excess of US$6 billion and has the
capability to finance the development of Freewest's chromite
deposits. Noront is an exploration company with no track record of
bringing mines into production and working capital at July 31, 2009
of only $15.4 million.
- Current and future Noront shareholders are at risk of
significant dilution that could depress the value of Noront shares.
Noront currently contemplates diluting its existing shareholders by
39% without requesting its shareholders' approval. Cliffs estimates
that development of Freewest's deposits would require up to $800
million in capital. With a market capitalization range of $250 to
$400 million over the last 21 days, Noront's shares would be
subject to significant dilution - also without shareholder approval
-- should Noront attempt to develop a chromite mine or attract a
strategic partner.
- Contrary to false claims by Noront, the tax treatment for
Freewest's Canadian resident shareholders receiving Cliffs shares
is equivalent to the tax treatment of receiving cash. In general,
any taxes resulting from the Cliffs transaction will not be payable
by individual Freewest shareholders resident in Canada until April
2011. Noront has compared the after-tax value of receiving Cliffs
shares by a hypothetical Freewest shareholder having a low cost
base to the pre-tax value of receiving Noront's shares and
warrants. This is deliberately misleading to Freewest shareholders
and exaggerates the tax benefits of Noront's offer. Freewest
shareholders that tender to Noront's bid and receive Noront shares
and warrants as consideration will not save any tax, but merely
defer the payment of taxes for so long as they continue to hold the
Noront shares and warrants. Cliffs believes the comparison of
pre-tax and after-tax values is blatantly inappropriate and advises
Freewest shareholders to seek independent tax advice rather than
rely on Noront's misleading claims.
- In considering the value of Noront shares, Freewest
shareholders also should be aware of the recent timing and
questionable disclosure of certain Noront press releases. Before
market open on Thursday, November 19, 2009, Noront released its
very first public statement of "mineralized material" at its
Eagle's Nest property, quoting both estimated tonnage and grades.
None of these statements were supported by National Instrument
43-101, which governs how public companies disclose scientific and
technical information about mineral projects in Canada. The timing
and disclosure were in Cliffs' view meant to manipulate the Noront
share price and impact the perceived value of its bid for Freewest.
After aggressively marketing these statements to investors
throughout the day, resulting in an 39% increase in Noront's share
price, Noront released a "clarification" of its earlier press
release at 3:27pm ET that afternoon stating that its earlier
release had not followed the requirements of NI 43-101. Those
requirements include disclosing that their results were conceptual
in nature, there has been insufficient exploration to define a
mineral resource, and that it is uncertain whether further
exploration will result in discovery of a mineral resource.
The requirements of NI 43-101 are well understood by Noront and
its legal and financial advisors. Cliffs does not believe the
omission of the above cautionary language was made in error.
- Freewest's Board of Directors continues to unanimously
recommend Cliffs' offer, which has also received strong support
from the vast majority of Freewest shareholders canvassed to
date.
- Moreover, when Cliffs and Freewest entered into a definitive
arrangement agreement on November 23, 2009, Freewest's senior
management agreed to reduce the change of control payments due to
them from $6.5 million to $2.5 million. Management did so because
they believe Cliffs' offer is in the best interests of Freewest and
its shareholders.
Cliffs strongly believes that, after considering all of the
facts, Freewest shareholders will conclude that the Cliffs
transaction provides far superior value, certainty and liquidity
for Freewest shareholders.
Cliffs currently owns approximately 12.4% of Freewest Resources.
Freewest's Board unanimously supports the amended definitive
agreement and recommends that all shareholders accept Cliffs'
offer. This recommendation is also supported by a Fairness Opinion
from Freewest's independent financial advisor. The transaction is
expected to close shortly following the meeting of Freewest
shareholders scheduled to be held on January 15, 2010, subject to a
number of customary conditions including approval by Freewest
shareholders and consent of the court.
To be added to Cliffs Natural Resources e-mail distribution
list, please click on the link below:
http://www.cpg-llc.com/clearsite/clf/emailoptin.html
About Cliffs Natural Resources Inc.
Cliffs Natural Resources (NYSE: CLF) (PARIS: CLF) is an
international mining and natural resources company. We are 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. 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. Our Company is organized
through three geographic business units:
The North American business unit is comprised of six iron ore
mines owned or managed in Michigan, Minnesota and Eastern Canada,
and two coking coal mining complexes located in West Virginia and
Alabama. The Asia Pacific business unit is comprised of two iron
ore mining complexes in Western Australia and a 45% economic
interest in a coking and thermal coal mine in Queensland,
Australia. The South American business unit includes a 30% interest
in the Amapa Project, an iron ore project in the state of Amapa in
Brazil.
Over recent years, Cliffs has been executing a strategy designed
to achieve scale in the mining industry and focused on serving the
world's largest and fastest growing steel markets.
News releases and other information on the Company are available
on the Internet at:
http://www.cliffsnaturalresources.com
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995
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 we believe that our forward-looking statements are
based on reasonable assumptions, such statements are subject to
risk and uncertainties.
Actual results may differ materially from such statements for a
variety of reasons, including the inability to close the proposed
transaction as a result of competing acquisition proposals, the
inability to obtain necessary court approvals for the acquisition
and the failure to receive the necessary affirmative vote of
Freewest shareholders. Other factors that could impact actual
results include the following: demand for ferrochrome by global
integrated steel producers; the impact of consolidation and
rationalization in the steel industry; availability of capital
equipment and component parts; availability of rail and float
capacity; availability and cost of capital; ability to maintain
adequate liquidity and to access capital markets; events or
circumstances that could impair or adversely impact the viability
and carrying value of the Freewest assets; inability to achieve
expected production levels; reductions in current resource
estimates; impacts of increasing governmental regulation, including
failure to receive or maintain required environmental permits;
problems with productivity, third-party contractors, labor
disputes, disputes with indigenous tribes in the area, weather
conditions, fluctuations in ore grade and changes in other cost
factors, including energy costs and transportation.
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 our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and previous news releases filed
with the Securities and Exchange Commission, which are publicly
available on Cliffs Natural Resources' website. The information
contained in this document speaks as of the date of this news
release and may be superseded by subsequent events.
Contacts: INVESTOR AND FINANCIAL MEDIA CONTACTS: Cliffs Natural
Resources Inc. Steve Baisden Director, Investor Relations and
Corporate Communications (216) 694-5280 steve.baisden@cliffsnr.com
Cliffs Natural Resources Inc. Christine Dresch Manager - Corporate
Communications (216) 694-4052 christine.dresch@cliffsnr.com
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