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Cliffs Proposes Transactions to Acquire KWG, Spider

05/26/2010 - Cliffs Natural Resources Inc. intends to make take-over bids pursuant to which it or an affiliate would acquire all of the common shares of KWG Resources Inc. and/or Spider Resources Inc. not owned by Cliffs or its affiliates.

Cliffs Natural Resources Inc. intends to make take-over bids pursuant to which it or an affiliate would acquire all of the common shares of KWG Resources Inc. and/or Spider Resources Inc. not owned by Cliffs or its affiliates.
 
Neither of the proposed take-over bids, which will be funded with Cliffs’ existing cash resources, is conditional on the completion of the other.
 
Cliffs intends to offer Cdn $0.13 in cash per KWG common share—a premium of 62.5% over the closing price of the common shares of KWG on the TSX-V on May 21, 2010. This offer price implies a total value for KWG of Cdn $100 million.
 
Cliffs currently holds, directly or indirectly, an aggregate of 111,733,215 KWG Shares and warrants to acquire 48,460,049 KWG Shares. This represents about 19.4% of the issued and outstanding KWG Shares on a fully diluted basis.
 
To acquire Spider, Cliffs again intends to offer a price of Cdn $0.13 in cash per common share, before giving effect to any share consolidation—which also represents a 62.5% premium over the closing price on May 21. The offer price implies a total value for Spider of Cdn $86 million.
 
Cliffs holds an aggregate of 19,642,500 Spider Shares representing approximately 3% of the issued and outstanding shares on a fully diluted basis.
 
Neither KWG nor Spider agreed to the transaction terms proposed by Cliffs on May 21, 2010, and May 23, 2010, respectively, within the timeframe that Cliffs had established.
 
Cliffs currently owns a 47% interest in the “Big Daddy” chromite project located in the McFaulds Lake area of Northern Ontario. KWG and Spider each own 26.5% of Big Daddy and have the option to earn-in up to 30% each. Cliffs’ objective, which can be achieved by acquiring either KWG or Spider, is to obtain majority ownership of Big Daddy.
 
“While we intend to provide each company’s shareholders the opportunity to receive a significant cash premium, we only need to acquire either KWG or Spider in order to satisfy our strategic objectives with respect to the Big Daddy deposit,” said William C. Boor, President of Cliffs’ Ferroalloys business unit. “It would be a satisfactory outcome for Cliffs if either proposed acquisition were successful, leaving Cliffs as majority owner and operator of Big Daddy with one junior partner.
 
“Preliminary estimates indicate that our wholly-owned Black Thor deposit is larger and wider, making it more amenable to open pit operations than Big Daddy, so our current plan is to develop Black Thor and our other wholly-owned Black Label chromite deposit first,” Boor continued. “However, obtaining control of Big Daddy would enable Cliffs to develop the most appropriate integrated long-term mine plan for moving this new mining district forward.”
 
Cliffs Natural Resources, an international mining and natural resources company, is 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.
 
The company is organized through three geographic business units in North America, Asia Pacific, and Latin America. The company’s North American business unit comprises six iron ore mines owned or managed in Michigan, Minnesota and Canada and two coking coal mining complexes located in West Virginia and Alabama. The Asia Pacific business unit comprises two iron ore mining complexes in Western Australia and a 45% economic interest in a coking and thermal coal mine in Queensland, Australia. The Latin American business unit includes a 30% interest in the Amapá Project, an iron ore project in the state of Amapá in Brazil.
 
Other projects under development include a biomass fuel production plant in Michigan and Ring of Fire chromite properties in Ontario, Canada. 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.