Feb. 16, 2006 — Cleveland-Cliffs Inc. reported net income of $66.1 million on revenues of $468.9 million for the fourth quarter and net income of $277.6 million on revenues of $1.7 billion for the full year ended December 31, 2005.

Fourth Quarter Results—The $66.1 million net income ($2.36 per share) compares with net income of $203.3 million ($7.31 per share) for the fourth quarter of 2004. (All per-share amounts are diluted.) Revenues from product sales and services increased 43% to $468.9 million compared with $326.9 million for the fourth quarter of 2004. Higher average pellet prices and the inclusion of the results from Portman contributed to the revenue increases.

Full Year Results—The $277.6 million net income ($9.97 per share) compares with 2004's net income of $323.6 million ($11.80 per share). Net income in 2004 benefited from the gain on sale of directly held ISG common stock and the reversal of a deferred tax asset valuation allowance. These items totaled $213.1 million on an after-tax basis for the full year. Excluding these two items, 2005 net income grew by $167.1 million, or more than 150%. Net income in 2005 benefited from higher North American sales margins and the inclusion of Portman's results, partially offset by the adverse impact from the indefinite idling of Mittal Steel USA's Weirton blast furnace, which resulted in the inability to recognize revenue related to supplemental payments on 1.1 million tons, which under current estimated pricing would yield $9.2 million.

Revenues from product sales and services increased 45% to $1.7 billion compared with $1.2 billion for 2004. Contributing to the revenue increases were higher average pellet prices and the inclusion of the results from Portman.

Management Comments—Chairman and CEO John Brinzo stated, "Our strong financial performance is the result of successful execution of strategic objectives set in motion several years ago. Improved industry dynamics and iron ore prices have coincided with our increased ownership in the mines we manage."

North American Iron Ore—Cliffs says the significant increase in North American sales margins in 2005 was primarily due to higher sales price realizations, partially offset by higher production costs. Sales volume of 6.1 million tons in the 2005 fourth quarter was unchanged from last year's comparable quarter, and decreased modestly to 22.3 million tons for the full year from last year's 22.6 million tons. Average sales prices increased 30% in the fourth quarter and 33% for the year.

Cost of goods sold and operating expenses (excluding freight and venture partners' costs) increased $49.7 million for the quarter and $103.6 million for the year. Full-year 2005 increases reflected higher energy prices of $50.4 million, increased maintenance of $18.7 million, higher supply pricing of $16.6 million, and increased royalty rates of $13.2 million, partially offset by lower sales volume of $13.0 million.

Australian Iron Ore—Sales revenues of $59.1 million in the fourth quarter and $204.5 million for the nine-month period, ended December 31, 2005, both represented records for Portman. Sales tonnage totaled 1.7 million tonnes during the quarter and 4.9 million tonnes since the March 31, 2005 acquisition. Sales volume in the fourth quarter was impacted by two expected December shipments, which slipped into January 2006.

Cost of goods sold and operating expenses were $60.5 million in the fourth quarter and $174.1 million for the nine-month period. Sales margin was a loss of $1.4 million in the fourth quarter and a gain of $30.4 million since the acquisition, reflecting the company's basis adjustments of $21.9 million and $48.4 million in the fourth quarter and nine months since the acquisition, respectively, due to the allocation of the $433.1 million purchase price. The primary contributing factors to the fourth-quarter loss were the result of purchase accounting adjustments to cost of sales primarily for higher depletion and inventory step ups totaling $12.1 million and $9.8 million of revenue reductions due to foreign currency contract settlements.

When Cliffs acquired Portman, Portman held currency derivatives to hedge currency exposure. At that time, these derivatives had a fair value of $13.0 million. A portion of Cliffs' acquisition cost was allocated accordingly to these "in-the-money" contracts. As the contracts settle, they are charged against revenues. Consequently, Cliffs recorded $9.8 million of revenue reductions in the fourth quarter.

Production and Inventory—At December 31, 2005, Cliffs had 3.3 million tons of pellets in its North American product inventory, approximately the same as last year. Total North American production for Cliffs' account was 5.5 million tons in the fourth quarter and 22.1 million tons for the year, versus 6.0 million tons and 21.7 million tons in the respective 2004 periods.

Production of lump and fines ore at Portman totaled 1.6 million tonnes in the fourth quarter and 5.2 million tonnes since the acquisition. At December 31, 2005, Portman's finished goods inventory totaled .6 million tonnes.

Outlook—Cliffs expects to operate most facilities at or near capacity in 2006. Production schedules, while subject to change, currently call for full-year North American pellet production to be approximately 35 million tons with Cliffs' share representing approximately 21 million tons. Portman's 2006 estimated production volume is approximately 8 million tonnes, which includes 0.6 million tonnes from Cockatoo Island.

Cliffs' share of 2006 North American sales is projected to be approximately 21 million tons. Portman's full-year sales are estimated to be approximately 7.9 million tonnes, reflecting completion of the expansion at Koolyanobbing, which will increase annual capacity to 8 million tonnes.

Commenting on the outlook for 2006, Brinzo said, "We believe 2006 will be another very good year for the industry and for Cliffs.

"China's steel-production growth rate continues to show signs of strength and its subsequent raw-material requirements will need to increase. Correspondingly, global iron ore demand and prices are expected to remain firm. While international mining companies are increasing iron ore production capacity, future supply growth appears to correlate well with projected growth in demand."

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. Cleveland-Cliffs operates a total of six iron ore mines located in Michigan, Minnesota and Eastern Canada. The company is majority owner of Portman Limited, the third-largest iron ore mining company in Australia, serving the Asian iron ore markets with direct-shipping fines and lump ore.