Thomson Reuters






Jan 28 (Reuters) - New York-based hedge fund Casablanca
Capital LP picked up a 5.2 percent stake in Cliffs Natural
Resources Inc and urged the iron ore producer to spin
off of international assets and double its annual dividend.


Shares of the company rose 13 percent to $21.85 in
pre-market trading.


Casablanca, which has met with the company twice over the
past six weeks, said on Tuesday Cliffs should "significantly"
cut costs and convert its U.S. assets to a master limited
partnership (MLP).


An MLP derives most of its cash flows from real estate,
natural resources and commodities.


"(Cliffs') U.S. iron ore assets are ideally positioned to
participate in the recovery of the U.S. automotive and
construction sectors," Casablanca said in a letter to the
company's board.


Cliffs said on Tuesday it would continue talks with
Casablanca and that it had engaged J.P. Morgan as financial
adviser and Wachtell, Lipton, Rosen & Katz as legal counsel.


Cleveland-based Cliffs, which supplies steelmakers around
the world, has cut spending on exploration as weak iron ore
prices have weighed on earnings.


The company has also been plagued by operational issues at
its Bloom Lake Mine in Canada's iron-rich Labrador Trough region
in Quebec and it suspended most work on its Black Thor chromite
project in Northern Ontario in June last year.


Casablanca urged Cliffs to spin off its Bloom Lake mine,
together with Asia Pacific and the rest of its Eastern Canadian
assets to create "Cliffs International," to stop its relatively
riskier international assets from weighing on its U.S. iron ore
business.


The hedge fund, which was started in 2010 by former M&A
bankers Donald Drapkin and Douglas Taylor, said it believed
Cliffs' shares could be worth $53 a piece, if its
recommendations were implemented.


Cliffs shares closed at $19.40 on Monday on the New York
Stock Exchange. They have nearly halved in value in the past
year, compared with a 19 percent rise in the S&P 500 index
.


Cliffs annual dividend totaled 60 cents per shares in 2013,
about 75 percent lower than what it paid though 2012, according
to Thomson Reuters data.