Tomahawk, WI 01/30/2014 (BasicsMedia) – As one of the largest producers of iron ore in eth UNS, Cliffs Natural Resources Inc (NYSE:CLF) enjoys certain advantages over its peers. However, in the last one year, it has not fared as well as its investors would have wished. It has been the second worst performing stock at the S&P 500 Index. This level of performance has prompted heavy backlash from one of the most trusted hedge funds, Casablanca Capital LP. The hedge fund is one of the biggest shareholders in CLF, and has every right to demand that the company takes certain actions that benefit it.

Casablanca has advised Cliffs on the need for cutting down on costs. The hedge fund has gone ahead to advice CLF to double the dividends it issues to shareholders. In addition to the above, the hedge fund expects that CLF will convert all or most of its assets in the US in to Master Limited Partnership. However, the biggest recommendation that Casablanca has extended to CLF is to spin off the international operations that seem to be riskier than others. Casablanca believes that with these steps, CLF will see a huge change in its fortunes and perform better.

Casablanca’s recommendation to CLF to convert the latter’s assets into MLPs, is informed by the fact that once this happens, the company will be able to pay out investors on a regular basis before taxation, rather than after, which is the norm in the industry as well as in the financial circles. Such acts are quite popular in certain type of industries, which include the oil pipeline sector where companies enjoy steady earnings. If CLF follows the recommendation issued by Casablanca, chances of investors being pleased with this new development are quite high.

Casablanca has shown that it is ready to make its vote and voice count, despite not being even five years old, since Douglas Taylor and Donald Drapkin, who are former M&A bankers, established it in 2010. The hedge fund says that CLF’s Chief Executive Officer, James Kirsch, is willing to listen to their proposals, and has promised to forward the same to the company’s board for consideration. Casablanca’s founders are of the opinion that if CLF is to act, it should not waste too much time if it expects to change the current perception of its investors towards it.

This matter is worth keeping a close eye on, since it is still unclear what Casablanca’s options are in case CLF refuses to act based on its recommendations. Currently, CLF does not have a deadline by which it should respond to the ideas put forward by Casablanca. It is worth noting that this is the first time Casablanca has tried its hands in the mining sector, where CLF plays a crucial role through its activities that are related to iron ore production. If it succeeds in convincing CLF to take the path that it has recommended this will probably embolden it.

Whether CLF does what Casablanca recommends or not, it has to show its investors that it is ready to turn its current situation of being the second worst performer in S&P 500 Index.

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