Thomson Reuters






By Allison Martell


Feb 12 (Reuters) - The activist investor squaring off with
Cliffs Natural Resources Inc named its preferred
candidate for chief executive officer on Wednesday and said it
plans to nominate enough new directors to form a majority of the
iron ore miner's board.


Hedge fund Casablanca Capital, which owns about 5.2 percent
of Cliffs, said it is backing Lourenco Goncalves, former CEO of
Metals USA, to take the top job at hard-hit Cliffs.


Last month Casablanca publicly urged Cliffs to spin off its
international operations and form a master limited partnership
from its U.S. assets, but the fund declined to say what its next
steps would be if Cliffs refused.


Cliffs, a relatively high-cost producer, has been battered
by weak iron ore prices. Operational issues and
worse-than-expected costs have plagued its Bloom Lake Mine in
Quebec, once seen by analysts as a key growth project.


After months of uncertainty, the company said on Tuesday it
has decided to indefinitely suspend a planned expansion at Bloom
Lake, and idle Wabush, another Canadian mine, slashing capital
spending and cutting some 500 jobs.


"The steps Cliffs announced yesterday are, in our view, a
knee-jerk response to our call for change. We believe they are
inadequate to address Cliffs' issues, including the need for
dramatic cost savings," said Casablanca Chairman Donald Drapkin
in a statement.


Cleveland-based Cliffs' shares were higher on Wednesday
morning, but little changed from where they were trading in the
premarket before Casablanca's announcement.


The company is set to report its fourth-quarter results
after the close on Thursday.


The Cliffs campaign is Casablanca's first foray into mining.
Founded in 2010 by former investment bankers Drapkin and Douglas
Taylor, the fund is best known for pushing, along with activist
investor Carl Icahn, for a board shakeup at electronic design
automation company Mentor Graphics in 2011.


But Goncalves is a metals industry veteran - he led Metals
USA for 10 years, until the steel service center operator sold
to Reliance Steel and Aluminum Co last year.


Cliffs supplies steelmakers with iron ore, and has a smaller
coal mining business.


The miner is in the midst of an unusual leadership
transition. Its last chief executive, Joseph Carrabba, retired
in November, and former Barrick Gold Corp executive
Gary Halverson was named to succeed him.


But Halverson's current title is president and chief
operating officer. While Cliffs executives report to Halverson,
he is not yet chief executive.


Executive chairman James Kirsch has been helping with the
transition as Halverson develops "a deep understanding of the
business at an operating level" Cliffs said in October.


Cliffs shares were up 2.2 percent at $21.97 on the New York
Stock Exchange on Wednesday morning.