TORONTO (miningweekly.com) – Activist shareholder Casablanca Capital on Wednesday rejected a second proposal by US iron-ore and coal producer Cliffs Natural Resources to resolve the ongoing proxy contest, saying Cliffs had not contacted it directly with the proposal.

Based on conversations with a number of its shareholders, Cliffs had earlier on Wednesday offered to concede three seats on a smaller nine-seat board to Casablanca and its slate of nominees, and to elect a new chairperson.

“The press release issued by Cliffs before engaging with Casablanca’s principals is … in our view not a genuine attempt to reach a settlement that will create the fundamental change shareholders clearly want and deserve.

“We have no intention of negotiating through press releases but remain willing, as we have detailed in our public filings, to enter into a reasonable settlement that provides for real change,” Casablanca said.

Cliffs had previously announced that two current directors would not stand for re-election at the annual general meeting, scheduled for July 29, adding that a third current member would neither stand for re-election, should Casablanca accept the offer.

NYSE-listed Cliffs would also elect a new chairperson, whether Casablanca accepted the offer or not.

Casablanca in a statement said, “the current board must be held accountable for wasting $9-billion on a disastrous diversification strategy and overseeing the destruction of 85% of shareholder value. Shareholders deserve better”.

Casablanca, which owns 5.2% of Cliffs, in January launched the proxy contest, advocating for the company to install its own CEO and directors, and suggested the spin-out of certain of Cliffs’ international operations.

The New York-based fund manager highlighted what it termed “Cliffs’ failed expansion strategy” and the resultant loss of more than 80% of the company’s market value, which it alleged was being overseen by a majority of the current 11-member board.

Casablanca also outlined its proposal for a new strategy focused on Cliffs’ core US assets, which it believed would restore value for shareholders, and reiterated its support for 30-year metals and mining veteran Lourenco Goncalves as its chosen leader to assume the position of Cliffs CEO.

The activist is advocating Cliffs spin off its Bloom Lake iron-ore project, in Quebec, together with its Asia Pacific assets, to create ‘Cliffs International’.

Cliffs operates two distinct iron-ore businesses with very different risk/reward profiles. The Cliffs International assets are directly exposed to the competitive ‘seaborne’ iron-ore market and the large Bloom Lake project is still in the development stage.

In contrast, the ‘Cliffs USA’ iron-ore assets benefit from unique supply and demand characteristics, and barriers to entry in the Great Lakes generate strong cash flow and ensure long-term contracts, which provide volume and price visibility.

In a May proxy filing, Casablanca revealed details of nearly two months of negotiations between the two parties that would also have given it three seats on a reduced nine-person board; however, Casablanca’s insistence on Goncalves as executive chairperson, with Cliffs' CEO reporting directly to him, proved to be the deal breaker.

Casablanca on Tuesday nominated James Sawyer to be elected to the Cliffs board, replacing Patrice Merrin, who withdrew from Casablanca’s six-member slate following her appointment as the first female director of global commodities trader Glencore.