Good morning, ladies and gentlemen. My name is Sean. I am your conference facilitator today. I would like to welcome everyone to Cliffs Natural Resources 2015 Third Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. The company reminds you that certain comments made on today's call will include predictive statements that are intended to be made as forward-looking within the Safe Harbor protections of the Private Securities Legislation Reform Act of 1995. Although the company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially. Important factors that could cause results to differ materially are set forth in reports on Forms 10-K and 10-Q, and news releases filed with the SEC which are available at the company Web site. Today's conference is also available and being broadcast at cliffsnaturalresources.com. At the conclusion of the call, it will be archived on the Web site and available for replay. The company will also discuss results excluding certain special items. Reconciliation for Regulation G purposes can be found in the earnings release which was published this morning. At this time, I would like to introduce Kelly Tompkins, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Sean. Thanks to everyone for joining us on this morning's call. I am joined today by our Chairman, President and CEO, Lourenco Goncalves. I will kick off the call with a review of our third quarter results and related financial commentary before turning it back to Lourenco for his remarks. This quarters financial results clearly reflect the disciplined execution and great cost management we have undertaken at Cliffs. As a result of our relentless focus on cost cutting, we have generated solid operating results during very challenging market conditions. To highlight our two continuing operations, USIO cash production cost were $49 per ton, the lowest we have reported in this segment in years. Just as notable was our performance in Asia Pacific Iron Ore where cash production costs were $27 per ton, a record performance since Cliffs became 100% owners of these assets back in 2008. On the revenue side, the continued softness of iron ore prices and the further decline of hot-rolled steel prices have impacted our realizations in both USAO and APIO. We have, however, largely offset lower realizations with these lower operating costs, as well as cuts and overhead to achieve third quarter adjusted EBITDA of $60 million, which I will note, includes $33 million of cost related to the idle of Empire and our United Taconite mines. Excluding these idle costs, adjusted EBITDA for the quarter would be $93 million. Despite the impact of idle costs, we are maintaining our cash cost of goods sold guidance of $60 million to $65 million per ton for the full year. From a liquidity standpoint, we ended the quarter with $270 million of cash and cash equivalents which includes the $160 million tax refund we received in early August. We had no borrowings on the company's asset…

Thank you, Kelly and thanks to everyone for joining us on this morning's call. I am very proud of what we have accomplished since August last year. Our management team and our operators have been able to consistently reduce costs across the board and improve our execution during one of the most challenging times in the history of the business. This quarter is another demonstration of how efficient the members of the Cliffs team are. We continue to enhance our focus on the USIO core business and address our non-strategic assets. Before I talk about USIO and comment on the domestic steel market, let me briefly update you on the CCAA proceedings for our Eastern Canadian Iron Ore assets. We are now approaching the final phase of the process. At this point, the CCAA parties have completed their assessment of the various bids and proposals that have been submitted by several interested parties. The CCAA parties are now in the process of attempting to negotiate purchase and sale agreements with the leading bidders, subject to court approval in respect of certain of the Eastern Canadian Iron Ore assets. In the first week of November, there is a court hearing it's scheduled to extend the protected state until nearly next year at which time, we hope the asset sales will be completed. At the same hearing, we will be seeking approval of the claims procedure for creditors of our former Eastern Canadian Iron Ore business. The claims procedure requires the CCAA parties to reach out to all known creditors and to provide notice through local newspapers with the specific requirements for filing a proof of claims against the CCAA parties. This process will determine the amount and validity of total claims that we will eventually share in the procedures of the…

[Operator Instructions] Your first question comes from the line of Michael Gambardella from JPMorgan. Your line is open.

Congratulations, Lourenco and the team on basically doing a great job on everything under your control, it seems like especially on the cost front and even going on the new markets with the DRI facilities. But a question just going forward. First question in regards to this Essar situation, do you have any legal recourse back to Essar?

I am not sure if -- thanks for the congratulations, Mike. I am not sure if I understand what do you mean by that?

Can you sue Essar and expect to get anything out of them for the breach of the contract?

Well, first of all, we are dealing with Essar Steel, Algoma in this lawsuit. And I know you understand how limited I am and what I can and what I cannot talk about. But the target of the lawsuit is Essar Steel, Algoma. And in this particular case, regarding the commercial contract, they were in breach. The judge agreed they were in breach. And at this point, we no longer have a contract. So I don't really understand what kind of recourse you are talking about.

Just in terms of suing them, just recourse in the courts. But let me go the next question...

Suing them for what?

For breach of contract.

What I would like to get I already got. They were in breach, so there is no more contract.

Right. But in terms of -- won't there be some negative implications in terms of your cost structure because of the lower volumes?

On the other hand, we have the benefit of not having a contract that was a lot more leverage to the IODEX, but that was not the intent of the lawsuit.

Hey, Michael, it's Kelly. At this point, we're holding firm on our USIO cost guidance. Obviously, we're not prepared to fully talk about 2016 but at this point our guys are doing a superb job and even with this reduced sales volume expect to maintain their cash production cost.

We have a different lawsuit going on but it's completely separate and it relates to other things. But again, the defendant is Essar Steel Algoma. That's why I can't comment on the lawsuit, Mike, I'm sorry.

I understand.

Your next question comes from the line of Jeremy Sussman from Clarkson. Your line is open.

Just on the cost front, you noted that you had I think $33 million of idling costs this quarter. How much of that was recurring and how much goes essentially with just one-time specific to the third quarter?

I'll let Kelly take that. Kelly, please.

Yes. Jeremy, the $33 million breaks down between Empire and UTAC and it's roughly even between those two. But in terms of the $33 million, I would say roughly $5 million was kind of one timer, is kind of severance [one] [ph] related items. So if you want to look at it that way, call it $28 million net of the other one timer.

That's helpful. And Lourenco, interesting comments on the coal front, which I know is still classified as discontinued ops. But I guess from a timings standpoint, when should we start to see some of these, the changes in the mine plan start to flow through in terms of positive free cash flow? Thanks, very much.

Immediately. We are starting immediately to no longer develop the new longwalls. We are going to only mine what we have already developed. And I know you are familiar with that, Jeremy, the costs associated with the coal mining are more or less fifty-fifty related to current longwall development of new longwall to continue mining indefinitely. So we are not going to do that going forward. So in other words the clock is ticking for the buyers. If they don't buy in the next several months, very soon they will have a different asset to be pursuing. And the space is crowded by several bankruptcies and the buyers out there, we know them all. We have been dealing with them. They are serious people and they are doing their homework and they are in the [indiscernible] and they are dealing with us and they deliver documents. But the documents are not good enough, they are not focused enough because they also have limited resources to apply and they are running against court mandate, the dates with other process. So look I am a very emotional person, as you know and I cry with them every day but I'm not going to wait for them. And I'm moving with my things and this would be good for Cliffs and it's the best thing to do for our shareholders. So that's what we are going to do. We have contracts in place with good clients for coal. We will continue to run around all of these contracts but we are going to only work with the existing longwalls. And the clock is ticking for the buyers. We're talking about probably the two best met coal mines in the country, Oak Grove and Pinnacle. So they know the quality of the assets and they also know what they are pursuing with other processes in this bankruptcy mandated sales process that they are busy with right now. But it is what it is. I try to avoid as much as I could to let my great people, both in Alabama and West Virginia go. But also the mine workers, the union, will see that Cliffs is serious about moving forward with that situation. The assets for sales, the sales process is alive for us but we are going to work to mine what we have and move on.

Your next question comes from the line of Matthew Fields from Bank of America. Your line is open.

Just a few housekeeping questions. You said the bond [about] [ph] $48 million were at 20 and 21 bonds. Can you care to give us a breakout between how those were bought back in the quarter?

We'll have that all laid out in the 10-Q which would be filed today, Matt. So why don’t we just differ to that. We're going to breakdown every maturity and give you the pricing and all the details about the open market and the tender.

Okay. And then where in the cash flow statement does the $160 million tax refund show up?

Yes. It shows up, overall in the working capital, the $160 million shows up. And it's a big item obliviously, in the period-over-period flip. The $293 million roughly has got $160 million tax refund. But remember we immediately put that cash to use and really was the main driver of our ability to do the debt reduction that we benefited from during the quarter.

So that's part of that big $217 million sort of working capital source?

Yes.

Yes. Remember, we bought a lot of bonds. We made a cash offer, $0.50 on the dollar. We were very successful with that and we appreciate the help we got from the bondholders of that tender and we also appreciate Kevin Cohen's report, telling everyone to sell and hit for the doors. This type of help is always great. I'm sure that Kevin will be asking a question later in this call. So I can't wait to hear from him because he always help me with his reports say that the world is coming to an end. But go ahead Matthew.

And then one last sort of housekeeping question. Do you guys have any receivables due from Essar Steel Algoma on your balance sheet?

No. No, but just in terms of the financials as we commented in the prepared remarks, we have been dealing with Algoma, mindful of their credit situation for several quarters so don't have any exposure from that standpoint.

Matt, these things don't develop overnight.

Sure.

I have been here for a little more than a year and we changed the way we were collecting our money long ago because the writing was on the wall. So the answer is no.

That’s good. Good to hear it. And then one sort of last bigger picture question. Why do you think Essar Minnesota invited you and your management team to tour the plant?

Because they are not very smart. That was one of the most stupid things I have ever seen in this business. Inviting the enemy to take a look from the inside is basically, with ridiculous impression that me or my guys, Terry Fedor, Clifford Smith and Jack Croswell would be impressed with a very convoluted construction site, where people basically banging heads against each other. And with the only positive of having cheerleaders in the local press that have no idea that they are basically inviting for trouble by continuing to support that stupid development. But you know what, that thing is a construction site. One year for now they will not be very different from what they are right now. And at the very least, the exposure that they have right now, we will not allow them off the hook. They are on records saying that they will be producing pellets mid-2016 or second half of 2016. I will give them December 31, 2016. December 31, 2016, they will probably not have their pellets plant with a roof yet because they don't have any equipment in place yet. They don't have any wires, they don't have any motors, they don't have anything. So they are not even close to start getting trouble in terms of their schedule yet to commission the plant. And that's when the problem starts. When you have everything good to go and things don't really match, things don't really work the way they should. Take a look at Roy Hill, that's a much more serious type of an investment in Australia, and it' just to produce fines. This one here is to produce pellets. So after the equivalent to fines, you have to concentrate it, you have to pelletize. So that's not even a factory, that' just another Essar endeavor similar to several others. They collect a lot of money from the government, which I fully believe that Governor Mark Dayton will get his money back on behalf of the people of Minnesota and we'll go from there. And until they produce their first pellet they are just that. A construction site in disarray, nothing else. Why they invited us, ask them.

Your next question comes from the line of Nick Jarmoszuk from Stifel. Your line is open.

Just returning to the Minnesota trip, when are you guys scheduled to tour it?

I'm sorry, what was the question, Nick. I'm sorry. Can you repeat?

When are you scheduled to tour Essar Minnesota?

I didn't schedule. They invited me three times and the third time I accepted. Do you guys remember, when I went there? In July.

Okay. So returning to Algoma. Do you have a view as to how sustainable their present supply arrangement is?

I don't have a view on Algoma and the only thing I can tell about Algoma is that they used to have a contract with us, they were in breach. We after trying to mitigate the breach for no avail and completely unable to resolve our differences in a friendly way, we finally sued them in front of a court of law in Cleveland, Ohio. The judge agreed with us that they were in breach. We no longer have a contract. That's the story. I'm not going to elaborate more than that regarding Algoma.

Okay. And then with the contracts that are coming up towards the end of '16, anything you can provide regarding discussions with Arcelor?

No. We are still in '15. We still have a year and a quarter to reach the first contract deadline. It's clear that we understand our contracts extremely well and we are dealing with each contract the right way. We have partnerships with our clients by in large, with a 100% of the ongoing clients, for sure. And things are in great shape with ArcelorMittal. So I can tell you right now, so far so good. But keep in mind, the contracts expire one in December of 2016, the other one in January '17. So we are far away.

Okay. And then regarding the coal assets with the change on the longwall mine plan. What sort of runway do you have to keep on producing? And then once you've run out of -- once you have run through the current mine development, do you anticipate if they haven't been sold that you would close the mines? And then is there an associated reclamation expense with that?

I'll let Kelly answer that.

Yes. At this point, we're going to operate and utilize all of the coal currently developed. When we reach the point where that's run out and if we have not sold these assets, which again remains our primary objective is to get these assets sold, then we'll move to the next phase of as needed reclamation. But we think this new operating plan which will significantly reduce the CapEx burden over the next, particularly over the next two years, coupled with the significant reduction in cost. Because think about, we're going to be reducing labor, materials, energy, maintenance costs, all by about 50%. So the turnaround from an EBITDA standpoint will be significant. So we're going to extract all that value over roughly the next six to 12 months and at that point if the asset is not sold, we'll do what we need to do in terms of moving to a reclamation. But all that is factored in and we believe the new operating plan is still the best near term alternative while we're pursuing a sale. It may well be a critical catalyst to push a couple of the buyers that we're dealing with across the finish line.

So is the available production for another six to 12 months? That's the way to think about it?

That's a reasonable estimate.

And regarding the cash costs at USIO, they were down nicely year-over-year and there was discussion that it was from reduced maintenance, repair costs, etcetera. Can you delineate how that's split actually between eliminating Empire, which is a higher cost mine and then the benefit from the lower cost that we're running?

First of all, we're not eliminating Empire. We are actually, right as we speak, we are operating Empire. And due to the fact that we delayed a little bit bringing Empire back due to the current nominations coming from the client, they have iron ore at Empire to explore even beyond December '16. We don't know yet. We are still in the process of discussing nominations with the client. So we don't know how much we are going to mine out of Empire between now and the end of '16. But your assumption that we are not having Empire is not correct.

Yes. Just to add a comment to that. I mean, it's really not, it doesn't have anything to do with Empire. Really the guys from an operating standpoint, better stripping, lower energy rates and usage, the predictive maintenance work that we've done which also enable us to manage our CapEx spend much better. This is just good solid operating performance. Empire really is a factor in terms of the idle cost for the quarter. You can look at Empire that way. But really I wouldn't look at it in terms of contributing to the significant USIO cost performance in the quarter.

Your next question comes from line of Tony Rizzuto from Cowen and Company. Your line is open.

Solid job on attacking the cost and driving the other initiatives. My first question is with regard to your guidance on the USIO, the Q4 revenue per ton. What is the hot band assumption that's embedded in that guidance?

We are going to have that in the 10-Q.

It's going to be in the 10-Q?

Yes. Which will be filed shortly after this call.

Okay. And very positive to hear about the development of -- just going back to the pricing for a moment. Obviously the Platts' IODEX has softened further and we are below 50 right now. And I'm concerned about the near-term as you indicated, you've got ramp ups going on in Brazil and Australia right now. Is there some cushion that you've provided for in that range you talked about the realization of $80 to $85 per ton...?

Look IODEX is really below 50 right now. But you just issued a report today saying that Rio Tinto is doing everything right. If everything is doing everything right, I actually should be doing everything wrong here, because I have been separating ourselves from China since the day I put my feet here. On the other hand, Rio Tinto that where you all report is doing everything right, continues to say that China will reach 1 billion ton of steel production. And now, they act a little bit [indiscernible], because they are saying that the world instead of going to the old [Mackinson] [ph] 2.5 billion tons, is going to 3 billion tons. So they are bending backwards to justify their own strategy but you still say that they are doing everything right. On the other hand, I am doing everything to separate ourselves from China because I believe that China is a disaster. I believe that China will bring Australia down. But you know Australia is not very different from Minnesota. I think that Australia will only believe that China is destroying Australia when they build an artificial island on the Great Barrier Reef that they can see from the shore. So it's a matter of myopic approach to world geopolitics and economics. The United States will survive. We are going to continue to be insulated and Cliffs is the only 900-pound gorilla in this marketplace. So you've got to pick your poison. If they are right, I am wrong, if I am wrong, they are right.

I meant more on an operational front, in terms of how they're managing their operation just like you are doing a great job managing your operations. But we can talk about that later. But I just wanted to know how should we, very exciting comments about the DRI grade pellet. And what should we be looking at in terms of development timeframe and how we should be thinking about the trials and so on and so forth? Maybe you could elaborate a little bit more on that?

I'd be glad. Look I'm very proud that Cliffs is now an industrial sized producer of DR pellets in this country. So the United States has officially started to produce DR pellets. It's a pretty big landmark for this 168 years old company. This being said, the scrap substitutes have a place for EAF developments, especially regarding high quality steels for the automotive industry via the EAF route. But we have to be cognizant that all these things will only pan out if and when scrap prices go back to a normal price level. With scrap prices so cheap, with iron ore so cheap and with everything being so cheap, it's very difficult to justify investments that we would put more capacity to produce DRI in the Great Lakes. So we have the capability or proving the capability, I believe that there is no assurance because the trial hasn't occurred yet. It would be more towards Q1 2016, the trial in use at the clients' facility. But the capability will be there because when things go back to normal we will be able to supply and we're ready to supply. And hopefully, in the meantime, we will be able to have someone invest in the capital to put a DRI facility in the Great Lakes and we will be the supplier of that facility.

I think that's a proper strategy to pursue, particularly with all the challenges the integrators are facing. Thanks for your responses. Lourenco, we can talk offline about the other. Thanks.

I'll be glad. Thank you.

Your next question comes from the line of Aldo Mazzaferro from Macquarie. Your line is open.

A lot of my questions have been answered. I just had a little follow-up on the on the $33 million of idle cost. I heard you say that some of it is going to come to an end and was that the $5 million non-recurring, I assume, and then leaving $28 million continuing. If I remember correctly, that was over two months, so that be a rate of about $14 million a month. Is that we should be looking for in the fourth quarter?

Not quite to $14 million. The $5 million I referenced was the front end idle cost, particularly related to UTAC. But you're going to be looking at $5.5 million-$6 million a month going forward apart from that upfront onetime cost, assuming UTAC remains idle.

$5.5 million to $6 million, if UTAC stays idle. And at this point, would you have any kind of forecast for how long that might be? Is it through '16, should that be safer?

Yes, it's really going to -- it ties back although to the nominations that Lourenco referenced in his comments and typically we see our nominations come in, in the November time period and then a firm up by the end of the year. So we match our production to what we see from the client's nomination. So we're several weeks away from really getting good firm visibility and what that will be and then we'll make whatever decisions are needed in terms of production, be it UTAC or elsewhere.

And then, Kelly, couple of other things. On the SG&A expense, I know $22 millions is a great number in the quarter, but eventually given your cost reduction there was a run rate, declining run rate on a monthly basis. Do you have any kind of feeling for what fourth quarter SG&A might come in there?

Fourth quarter is always a little bit messy. But I think directionally we ought to be, reasonably in that range, maybe $25 million. But as you kind of wrap up accruals for year-end, wrapping up outside service provider expense, so it might be a couple of million more than what we saw this quarter although. But importantly, we're continuing to keep the pressure on SG&A and do everything we can to reduce it going forward and that when I've taken a foot off the gas from that standpoint.

Great. And in terms of working capital, Kelly, you are seeing kind of really high volatility, I would think, right? Are you going to be using working capital as we go through the winter and then let it go in summer?

Yes, that's the seasonal pattern, although. And that's why in my remarks, we're going to stay very focused on liquidity. We feel great. You saw where we ended the quarter, total liquidity of over $500 million. But as we go through the winter months, that working capital becomes more strained. So we're going to be very mindful of that. But we're following typical seasonal patterns and are going to be very focused too in managing inventory levels as well, which all tie back to ultimately what we see from customer nominations and how we deal with production accordingly.

Okay. And then just one final thing on that. You commented that you were a creditor on the CCAA and possibly sent to collect something. Is there a way you can tell us what the size of your credit is? I don't think I'd assume 100% collection, but just can you give us an idea about the size?

Yes. I think it's probably easier just to reflect that question back to look at the 10-Q. We lay out in our discontinued and deconsolidated detail for coal and our recent Canadian operations, we lay that detail out. We clearly are the largest creditor, but ultimately any recovery is going to depend on asset sales and kind of where we stand relative to other claimants. But we are the largest creditor, so to the extend there is recoveries, we would stand in line to have the largest share of whatever that is.

Your next question comes from the line of Brett Levy from CRT Capital. Your line is open.

Good job in bad circumstances. Sort of an extrapolation of the questions I asked on the AK call. It sounds like they're going to shift Magnetation volume from Ashland over to Middletown. Can you give a little more color on why that doesn't displace you?

First of all based on our contract, and the AK is a real client and they understand the contract. The nominations don't say anything or the contract doesn't say anything that would allow the nominations to be played. So there is a nomination number for 2015 and there is also -- by the way, nomination is a range. So there is a minimum nomination number in range for 2015 and there is even a minimum nomination number for 2016. We haven't finalized the discussions with AK Steel for 2016, but we know the minimal nomination number for 2016. That's the reason we are 100% sure that we will not be affected. We don't disclose this number, but the numbers exist and we know the number, AK knows the number. What I guess, Brett, and that's just a wild guess because I don't have all the details about AK, is that they buy from Cliffs the vast majority, they buy from Magnetation, they buy from someone else. So that someone else will probably be reduced or go away, I don't know. But we will not be affected for sure, 100%.

All right. And then I've got one more question. It's kind of an open ended one. Obviously, we've got three guys who are the biggest guy is in the iron ore, BHP, Vale, Rio. They've decided to expand capacity, they're not cutting back on their high cost capacity, they are all public companies. You see any signs of rationality returns to this market between them and China. It's just, given that the world is in a contraction mode and supply is in an expansion mode, anything as you look forward gives you like a reason to think that the suppliers are going to approach rationality?

Actually I like your question, because these open ended questions allow us to elaborate a little bit on things that otherwise sound just -- a sentence sometimes doesn't really bring the entire explanation. So let me try to elaborate a little bit, it's a good question. As far as signs of rationality and cutting high cost capacity, I see one of the three big guys already doing that. Vale is already doing that. Even though they're not being very specific about. They are shy, they are not it Australia, they are in Brazil, they are far away, they have a clear freight cost disadvantage against the other two, but they demonstrate some rationality. If you look at Vale's last public results, you will see that they are replacing higher cost product with lower cost product already. And that should be even more evident when they conclude their S11D development mid-next year. So it's not like they are adding. They are doing the right thing in my opinion. They are replacing higher cost product from the southern mines with lower cost product coming from, at this point from Carajás, in the near future I believe from S11D. So there is some real sign of rationale that's coming from Vale. The irrationality is actually entrenched at Rio Tinto. BHP has been trying to quietly move away from their previous numbers. Their 1 billion now is 935 million to 985 million. Look at the precision of this number, 935 million to 985 million. So they cut 50 million tons by 2013. But it's a big step, but is that a step in the right direction? I can try to see that as a more than a final rationale but are trying to try to differentiate themselves against the stubborn ones that are the…

With that, I think we're way off the time. So I appreciate your participation in this call. We are starting to get out of the bottom. We are not at the top yet but we will get there. Thank you very much. We will keep in touch. Bye now.

This concludes today's conference call. You may now disconnect.