Cliffs Natural Resources and Consolidated Thompson Iron Mines entered into a definitive agreement in mid- January hereby Cliffs will acquire Consolidated Thompson in an all-cash transaction valued at about C$4.9 billion, including debt. Consolidated Thompson’s board of directors recommended its shareholders support the transaction, and Cliffs has entered into a support agreement with China’s Wuhan Iron and Steel, which owns nearly 19% of Consolidated Thompson’s outstanding shares and is the company’s largest shareholder. The companies expect the transaction to close in the second quarter of 2011.

Consolidated Thompson operates in the iron ore-rich area spanning northeastern Quebec and western Newfoundland and Labrador. The company owns and operates the Bloom Lake open-pit iron ore mine, which started up in 2010, and has two adjacent development properties, Lamelee and Peppler Lake. Bloom Lake currently is ramping up to an annualized production rate of 8 million mt of iron ore concentrate, with an expansion in progress that is expected to double production to 16 million mt/y. The company controls approximately 580 million mt of proven and probable iron ore reserves at an average grade of 30%, as well as more than 1 billion mt of measured and indicated resources, with potential additional resources to be proven via a nearmine drilling program.

Consolidated Thompson’s operations are located close to Cliffs’ existing Wabush Mines operations, which have rated capacity to produce 5.6 million mt/y of iron ore pellets and have integrated rail and port infrastructure. The close proximity of the companies’ operations is expected to provide significant operating synergies. Cliffs said it has identified opportunities to lower Consolidated Thompson’s freight and ship-loading costs and to maximize the combined company’s consolidated reserve and resource base by optimizing product mix between pellet and concentrate products. Cliffs estimates the proposed transaction could generate annual pre-tax operating synergies of about $75 million.

Cliffs’ also expects its acquisition of Consolidated Thompson to enhance its profile as one of the largest mining and natural resources companies in North America, with significant exposure to Asia. The combination of Cliffs’ global iron ore operations with Consolidated Thompson’s current operations and expansion projects is expected to position Cliffs to produce up to 30 million mt/y of iron ore pellets, up to 16 million mt/y of iron ore concentrate, and up to 11 million mt/y of lump and fines.

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