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Cleveland-Cliffs Reports
1st Quarter Results

April 29, 2004 — Cleveland-Cliffs Inc. reported a first quarter 2004 net loss of $.6 million, and a loss attributable to common shares of $.16 per share. Results reflect the effect of $1.1 million preferred dividends related to the January 2004 preferred stock offering.

Included in the first quarter loss was a $4.5 million pre-tax ($3.6 million after-tax) accrual for stock-based compensation reflecting a higher Cliffs' stock price, and a $1.6 million pre-tax ($1.3 million after-tax) increase in the provision for customer bankruptcy exposures. Excluding these items, Cliffs' after-tax earnings would have been $4.3 million. This compares to net income of $2.2 million ($.21 per share) in the first quarter of 2003.

The earning decrease is attributed to the following major factors:

• Higher administrative, selling and general expense ($4.1 million) driven primarily by the increase in Cliffs' common stock price.
• Lower other income ($3.8 million) reflecting non-strategic asset sales in 2003.
• An increase in the provision for customer bankruptcy exposures ($1.6 million) reflecting a decrease in the expected recovery on the purchase-leaseback arrangement with FW Holdings, Inc., a wholly owned subsidiary of Weirton Steel Corp. (Cliffs had previously recorded a $2.6 million reserve in May 2003 for its estimated Weirton bankruptcy exposure.)

Cliffs’ sales margin increased by $4.1 million over the prior-year first quarter, reflecting higher sales price realization ($11.4 million) partially offset by higher unit production costs ($7.4 million). Iron ore pellet sales volume of 4.3 million tons was a record for the first quarter exceeding the record 2003 sales of 3.5 million tons. Cliffs continues to expect total year sales of approximately 22 million tons in 2004. The increase in sales prices primarily reflected the favorable effect on Cliffs' term sales contract escalators of higher steel prices and an approximate 20% increase in international pellet prices.

Production costs for the first quarter 2004 were adversely affected by continuing and expected low ore throughput at Empire, lower production at Tilden due to furnace refractory problems and the completion of repairs on the kiln riding ring, slower than anticipated ramp-up to design production levels at Wabush and United Taconite, and the impact of the decreased valuation of the U.S. dollar on Canadian operating results. Energy pricing continues at high levels, adversely affecting unit production costs by approximately $2 million in the first quarter 2004.

Additional factors affecting earnings include:

• Lower interest expense ($.9 million) reflecting total repayment of the senior unsecured notes in January 2004.
• Higher royalty and management fee income ($.6 million) partially due to management fees from United Taconite, which began operations in December 2003.

The decrease in income taxes reflected lower alternative minimum taxes due to the decrease in pre-tax earnings.

At March 31, 2004, Cliffs had 4.2 million tons of pellets in inventory compared to 4.1 million tons at December 31, 2003 and 5.0 million tons at March 31, 2003.

Liquidity—At March 31, 2004, Cliffs had $179.7 million of cash and cash equivalents and no outstanding debt. In January 2004, Cliffs completed an offering of $172.5 million of redeemable cumulative convertible perpetual preferred stock. The preferred stock will pay cash dividends at the rate of 3.25% per annum, with the first dividend of $1.1 million for the partial period ended March 31, 2004 paid in April 2004. Cliffs utilized a portion of the $166 million net proceeds from the offering to retire the remaining $25.0 million of senior unsecured notes and $25.4 million to fund its underfunded salaried pension plans. Cliffs expects to use remaining proceeds for working capital and other general corporate purposes, including capital expenditures, increased investments in existing mines and additional contributions to its pension plans.

Subsequent to the sale of substantially all of its assets to Severstal North America, Inc. on January 30, 2004, Rouge Industries, Inc. repaid the $10 million secured loan plus accrued interest. Severstal also assumed the company's pellet sales contract with Rouge with minimal modifications.

Outlook—Steel industry fundamentals in North America remain strong, with solid demand and good pricing. Domestic steel mills are operating at high levels, which is projected to continue as the economy continues to strengthen and China's increasing consumption of steel products absorbs global capacity.

John S. Brinzo, Cliffs' Chairman and CEO, stated "The domestic and global iron ore markets are exceptionally strong and we remain sold out for the year. While we would liked to have seen better first quarter results, they typically are not reflective of our full year results, due to disproportionately low sales volume with shipping lanes closed, and carryover of previous years' pricing due to shipment timing. Actions are being taken to mitigate higher operating cost incurred in the first quarter. These actions, coupled with higher sales volume and full 2004 price realization, will produce positive results for the full year."

Cost of goods sold and operating expenses (net of expenses related to freight and minority interest) for the full year 2004 are expected to be approximately three percent below 2003 on a cost per ton of sales basis.

Headquartered in Cleveland, Ohio, Cleveland-Cliffs Inc 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. The company operates six iron ore mines located in Michigan, Minnesota and Eastern Canada.

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