Good morning, ladies and gentlemen. My name is Sally and I am your conference facilitator today. I would like to welcome everyone to Cliffs Natural Resources 2015 Fourth 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 protection of the Private Securities Litigation 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 on the company website. Today's conference call is also available and being broadcast at cliffsnaturalresources.com. At the conclusion of the call, it will be archived on the website 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.

Thank you, Sally, and thanks to everyone joining us on this morning's call. I am joined today by our Chairman, President, and CEO, Lourenco Goncalves. I will being our call with a review of our fourth quarter results and related financial commentary including our outlook for 2016, before turning it over to Lourenco for his remarks. Once again our focus on cost reduction, operating efficiencies, and optimizing cash flow drove our final results for the year. The worst market environment for Cliffs in over a decade has clearly presented ample challenges but our teams at every levels have not only met our financial objectives, but in many instances beat their own aggressive targets. There is no better example of this than looking to our USIO operating cost. Our USIO cash production cost was $45 per ton during the quarter, and $54 per ton for the full-year solidly beating our guidance of $55 per ton to $60 per ton. This quarter's USIO cash production cost represents a 23% cost reduction from the prior year's quarter. Looking ahead into 2016, we expect our USIO cost to once again improve such that we are bringing the guidance range for both cash production cost and cash cost of goods sold down by $5 each. This performance and outlook clearly shows that despite top-line revenue pressure from weak demand and low iron ore and steel prices, plus strong operating performance has made the difference. You will see that our Australian operation has gone toe-to-toe with the U.S. business in terms of its operating results. Despite the significant headwind of depressed seaborne iron ore prices, the focus of our Australian management team on cost and productivity delivered fourth quarter cash production cost of $26 per ton compared to $43 per ton reported in the prior year…

Thank you, Kelly and thanks to everyone for joining us on this morning's call. Let's just start reviewing what changed since August 2014 when I joined Cliffs as Chairman and CEO. Iron ore prices changed a lot. The IODEX pricing for sinter feed fines sold in China went from around $100 per ton when I joined Cliffs to a recent low of $38 per ton. The steel prices changed as well. In the United States, they are above $600 per ton average price for hot-rolled steel in place since 2010; hit a 10-year low of $360 per ton in 2015. The steel production and the massive consumption in China changed too, despite the mistaking assumption by the Australian and Brazilian iron ore majors, insisting on increasing their supply to a never growing demand of their imaginary China. The steel production and demand of the real China peaked in 2014 and began its decline in 2015. Last but not least, the elegant statements of the major iron ore producers are gone. Once is staking that the seaborne price in the $30 range was actually a good thing because it would make for the complete elimination of all other mining companies in the entire world. These major players are now realizing that they will bear the consequences of their own bad behavior. At this point in time, we can no longer hear their excitement about becoming low cost per ton producers by means of investing billions of dollars to increase their tons to unnecessary levels. In fact these companies are now realizing that the returns on investments that they promise to their respective boards have not been achieved and will not materialize. Furthermore this major producers of iron ore have actually become major producers of dividend yields as a direct consequence of…

Thank you. [Operator Instructions]. Your first question comes from the line of Timna Tanners with Bank of America Merrill Lynch. Your line is open.

I want to drill down on your volume guidance because I just wanted to understand the commentary it sounded like was that in first quarter you're keeping some of the mines that are closed, closed with the intention of being able to potentially restart them later on through the year, as I believe you said the U.S. have returned to historical utilization levels. So did I assume that some of your customers restart idle blast furnaces or is that just assuming they go from taking the minimum to a more normal level or can you give a little bit more color about what that -- what your volume guidance assumes for your customers?

Sure. Our guidance is based substantially on nominations that we get. We have already got them from our clients and it is also based on our marketing challenges. We have options outside of our two main clients at this point. And I mentioned during my prepared remarks the substantial impact that we expect from DR-grade pellets. So there's a lot happening here in the U.S. iron ore market and even more important it has become very clear that in the domestic steel market we have a clear differentiation between the steel mills that are focused on automotive and the high end of the market, more towards the cold-rolled and galvanize the steel and the ones that are more leveraged to help in. Fortunately we serve the ones that are more leveraged to the markets that are performing well like I provide the best example is the automotive market. So I will leave it at that but that's the way we're seeing our market developing in 2016.

Okay. So I understand about a million tons probably supplied to Nucor on the DRI side and they're happy having you as the supplier and your existing customers hold on to their current operating model. I just understood from your comments that you're expecting return to more normal operating levels and I just want to know if that was embedded in your guidance or is that potential upside and are you assuming that it comes equally from integrated mini mills to be able to give you a full benefit on your integrated customer base?

Yes, look your comment about 1 million tons of pellets to a specific client is your comment. I'm not endorsing or negating the comment. But you are absolutely right; we are expecting a much more normal situation. And as far as operations in United States mainly because the impact of the trade case will be real and it has already been started to be realized by the order books of the clients, our clients at least, and we expect that only to improve.

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

Yes, hi thanks for taking my call. Lourenco, very good job on costs in the fourth quarter and nice to see it flowing through to next year or I guess this year anyhow. Along those lines one piece that did go up a bit, is the non-production cash cost which I believe includes idling. Can we just get a sense of kind of how much of the increase in '15 was idling related and kind of may be what the right level of that component is going forward?

Sure. I will let Kelly take this one. Go ahead Kelly.

Yes, Jeremy, you're right. We're going to idle expense again in 2016. We're looking to say roughly somewhere in the $55 million range of total idle expense for the year just based on our, again looking at our sales ton forecast, looking at kind of how we see production evolving over the course of the year based on market conditions, and in customer demand. We tend to have -- we're going to have a little higher amount of idle expense in the first quarter simply because we've got some continuation of sub pay and some other elements of the idle expense that are higher in the first quarter and those will start to decline and more normalize over the course of the year. So and obviously there are number of elements that go into the idle expense everything from take or pay requirements to maintain energy to the facilities and scalable crews to make sure that facilities under good care and maintenance et cetera. So obviously that could change and be lower if we're able to bring back facilities sooner than we expect at this point.

I would just one additional comment it’s more like a win we bring back production, not if, we will bring back production. This is United States of America, we're not going anywhere. We're going to continue to have a resilient economy, domestic steel production, domestic steel consumption, and we're going to continue to sell pellets.

And Jeremy just one other point the idle expense that we're looking at is baked into our COGS guidance. So you got that kind of picked out for modeling purposes.

Right. No that's helpful. So I guess just may be along those lines when you do bring back production, I mean there has been a pretty substantial reduction in your -- the cash cost of production kind of before the line item of the non-producing cash cost. So I guess I mean do you envision this as sort of a two-fold benefit greater volumes but also once you get the idle component of cost out of the way that you should also see margin expansion on back of that? Thanks very much.

Absolutely, you're right about that. Yes. Thanks Jeremy.

Your next question comes from the line of Garrett Nelson with BB&T Capital Markets. Your line is open.

Hi with the closing of Oak Grove and Pinnacle transaction last month, is that the final asset sale we should be expecting or you still considering selling the Asia-Pacific assets and/are your terminal there at Esperance?

That’s a very good question, Garrett, and the answer is no, this is not our last transaction. We are always looking for opportunities of doing better and divesting -- the opportunity to divest assets that may be divested and doing transactions that may make sense and the most clear one is absolutely the complex Koolyanobbing port of Esperance. It's a dedicated port, we are the own users of that port, it's a deepwater port; there was one in that area of Australia that can accommodate capsized vessels. So we have a very good asset in the port and we're going to continue to discuss opportunities related to the Koolyanobbing Esperance complex. Of course Koolyanobbing that continues to be reduced because not only the seaborne prices are going nowhere but down but also because we are really approaching the end of life of mine. But even for other companies, out of the iron ore business the port of Esperance may represent a value proposition and we have some discussions ongoing but they are too premature at this point to be discussed in detail but a good question.

Okay. Great and then one more you’re expecting to produce 16 million tons from U.S. iron ore this year. What's your annual production capacity and how quickly could you ramp up if domestic steel fundamentals were to improve?

To run past this quick, we can run past in less than a quarter we can to back to full production any mine that we have. Our production capacity is sub 20 million at this point not at this point because we still have Empire, but when Empire reached the end of life of mine, we took the sub 20 million. With Empire we got little more than 20 million. But keep in mind the 16 million is production but shipments will be 17.5 million which is an increase in compared with 2015.

Your next question comes from the line of Lucas Pipes with FBR & Company. Your line is open.

Lourenco in the past you were providing details on kind of new entrants to the USIO market and today I think you made some comments but it would be helpful to have more granular update on what you think is happening in terms of competitors coming to the U.S. market. Where do you think that stands right now, how is the supply situation going to change?

Well you're absolutely right because in the past this was important. At this point, it’s no longer important because not but short of a miracle from God the one that's last being built in Minnesota will not be able to start in the next quarter or two quarters or three quarters or two years or three years. So it’s gone, it’s able. So all that talk, all that great predictions about a competitor establishing himself, first to produce steel and DRI and belts, then to produce only DRI and belts, then to produce only belts. Now they're producing just disappointment, sadness, unemployment, lack of respects, lots of great things over there. So it's gone, so that's a reason I did not even bother commenting. The other one is still grasping the last straws of their existence. We are really standing by respecting the legal process that's going on over there and we will wait and see how we're going to address. It's so great, it's all positive. Even for the current guide in funds bankrolling their existence continues to put good money after that that's their decision not mine. We have a situation in the USIO that can be profitable and that can generate good revenues and return on investments for our investors, well established, and they are the ones not doing the same thing it's operating under Chapter 11 and continuing to struggle day after day after day after just relying on legal opinions to stay afloat and to stay supplying our client that doesn't like them. So that's the current situation. I don't know if I missed something but if want to ask a more specific question I'll give you a more specific answer.

No, no this was exactly what I was looking for. Thank you for that and just to make sure I understood your prior comments on USIO outputs from Cliffs at current steel capacity utilization factors where would that shake out if kind of things stay at the status quo, what sort of volume should we be looking at for 2016?

17.5 million tons, 16 from mill production and 1.5 from inventory.

At current utilization rate?

At current utilization, exactly at current utilization rates, exactly right.

Okay, great. Well, good luck.

Which I -- Lucas, which I truly believe it will improve during the year by the way for the record. We tend to build our worst case scenario in our forecast to protect the downside.

Got it. That's great. Well good luck with everything. I appreciate your color.

Thanks, Lucas.

Your next question comes from the line of Evan Kurtz with Morgan Stanley. Your line is open.

So first one good work on controlling what you can control, looking at cost coming down and continuing into next year certainly a positive. So I was trying to take your guidance and kind of back into what the seaborne price for iron ore would be for Cliffs to be free cash flow breakeven and at least on my math and this is not including that $100 million in the working capital that you had mentioned at the beginning of the call. I was shaking out somewhere near $50 a ton or so. And I was wondering you're about $10 a ton away from free cash flow breakeven at this point. What do you see or what can you do footprint wise or to get there over the next year to two?

Evan, look, here's the thing. The number that would be the answer to your question would be very relevant for iron ore mining companies that are fighting to be cash cost breakeven in the seaborne iron ore market, that's not my goal. My goal is to profitable in the United States, helping our clients to continue to be profitable in the United States, enhance the product mix in the United States, and last but not least as kind of the tail of the dog, not be generating any negative EBITDA out of Australia. So far, so good, so you have the answer in the number that we have already realized. And then you plug your own price assumptions for seaborne iron ore and then you see if you're going to be cash flow positive, cash flow neutral, or Australia will have to drop out of the picture that will be the three options that we will have as far as Australia. So I don't have an answer for the number because here in United States this number is totally irrelevant at $42 per ton, seaborne iron ore prices. The seaborne iron ore price can only down $42 and the seaborne iron ore prices go down $42 this will not mean anything for the United States market because our market is driven by the steel prices not seaborne iron ore prices. It was driven by seaborne iron ore price when we were in the 70, 80, 90, 100 plus IODEX price. At these IODEX price, these numbers totally irrelevant for the U.S. iron ore price. But now that you're talking here I have a question for you Evan Kurtz, why you're still calling Cliffs high cost reducer, if you're saying that we have been cutting cost so much. Our last report still costs are high, cost produce like, if you're writing above Cliffs on 2014 we're in 2016.

Okay. Well taking into account your new guidance we will see where you shake out in the cost curve and revisit that?

Say it again.

Taking into account of your new guidance we will see where you shake out on the cost curve again we will refresh that?

Yes, cost is my guidance; cost is numbers that we publish every quarter. We did it in Q3 2014, Q4 2014, Q1 2015, Q2 2015, Q3 2015, Q4 2015; you are still calling me high cost producer. So it’s hard to confuse people when they don’t want to be confused. Have a nice day Evan Kurtz.

Your next question comes from the line of John Tumazos with John Tumazos Very Independent Research. Your line is open.

Congratulations on all the progress. Two questions if I may.

Thank you very much, John. Always nice hearing from my old friend.

Good, good. The flow of ferrous scrap for publicly traded companies has falling about 20% and many of the private scrap yards have closed, so the companies that are down 20% probably are gaining share. First question is if the mini-mills are short 10 million tons to 15 million tons due to the lower scrap flows, do you think that they will hit the 12 million tons of scrap exports into the domestic market or simply stop producing the products to have the lowest price like hot-rolled sheets? Or bid up scrap you can’t give them iron units fast enough for them to build DRI plants given how quickly the scrap was falling? How do you think that plays out?

It plays out John in a way that the mini-mills of today are not the mini-mills of the early 90s. The mini-mills of the early 90s were really low cost scrap, easily available driven big reservoir, nobody tapping to produce flat roll. That was when Crawford sued can [ph] corporation in 1989 and then Hickman, then the Steel Dynamics plants, and so on and so forth, you and I saw that happening real time. Fast forward we are in 2016 we have a much more material market a bigger huge presence, majority presence of mini-mills in the marketplace they have done a phenomenal job in improving the quality of their steel and their ability to produce high end materials and to be competitive against the Esperance producers, including some markets that were not the markets that were designed for as high as automotive. So at this point in time, what the mini-mills, I have problem calling them mini-mills at this point -- but the producers are aiming when they go to DRI, HBI or any other iron sub institute is to be able to cater to a clientele that they would not be no matter how cheap, no matter how available, no matter how simple life would be by using only scrap. So DRI or HBI or any iron sub institute, yes, gives the mini-mills -- the [indiscernible] producers the ability to compete in markets that they were able to compete before and that is like MasterCard.

Thank you. I will ask the second question Lourenco --

Yes, go ahead.

Fluctuations on the debt exchange which looks like it will create at least $1 billion of fresh equity on your balance sheet, if accepted without issuing any dilutive stock, it's really you should get to know about price, you're trying to preserve shareholder value. Thank you.

I appreciate the congratulations but I had to stop you, John. I will not discuss the debt exchange I can't, that is a legal.

Excuse me, if that was a legal, Lourenco. Thank you.

Thanks, John. Appreciate, thanks a lot. I will take the last question operator.

Your next question comes from the line of Chris Haberlin with Agincourt Capital. Your line is open.

Hi, Lourenco thanks for taking the question. On your inventory reduction, can you just kind of talk about how you expect that to go through the year, I know at some point you mentioned that you expect some of it to happen in the first quarter, is that the whole 1.5 million tons and then how should we think about the working capital benefit of that reduction is it just simply kind of looking at the $71 to $78 iron ore realizations and just multiplying that by the volume or is there some other math that I'm missing there?

I will let Kelly take this one.

Chris, your math isn't really wrong. I don’t think you should look at the working capital benefit which will be substantially driven by USIO inventory obviously a lot of other elements contributing the working capital, but that will be the main driver, it should follow largely our seasonal patterns maybe a little bit more in the first quarter than the normal but I think you can just look at it pretty typical to our normal seasonality. And we finished last year with about $2 million tons -- of $2 million tons higher inventory than I will say more normal levels. So we got an opportunity to work it down and so that is a very significant driver of our cash flow operations this year.

And then just the second question here on your volume guidance for USIO, I guess I was a little bit surprised to see it increasing from 2015 just given that you had six plus months of the SR contract that was terminated. And I know you've talked about this quite a bit but is this all I guess it implies if your shipping increased volumes to other customers. Is that indeed the case?

Look we're not going to breakdown our shipping forecast for you but it's a combination of new clients and old, new, getting more pellets than they got last year. That's pretty much it.

Okay.

I know that's not the answer you would like to get but I'm not going to go beyond that. So no matter how many times you ask the question so I'm feeling sorry.

That's fair. And just one last question can you just kind of update on where you stand with the middle contracting and how you expect that to play out over the balance of the year.

Yes, we look we have two contracts with ArcelorMittal and one expires in December of 2016 was the last month of this year and the other expires in January of 2017 which first month of next year. So we still have 11 month left in one contract and throughout in the other one. So that's the status of both contracts. The renewal will come at the right time and I’m 100% sure that the contract will be renewed in a situation that would be very good for Cliffs and very good for ArcelorMittal. That’s all I can tell you right now.

I appreciate the call. With that we are going to wrap up the call. We are really at the last stages of implementation of our strategy but we still have a lot to do here in this company. The U.S. domestic market for steel and consequently for pellets should improve in 2016 especially for the clients that are focused on the higher end of the U.S. domestic steel market. We have a lot of hope and the hope is probably not even the right word, but a lot of conviction that the U.S. Department of Commerce will do the right thing to fix the legal trade of steel that we have been subjected to especially in 2015 and we continue to feel that our decision to refocus Cliffs into a USIO pellet center company was the right thing to do. We look forward to continue the dialogue with you all and we will stand in fact as needed. Thank you very much and have a great day. Bye now.

Thank you, ladies and gentlemen for your participation today. This concludes today's conference call. You may now disconnect.