Good morning, ladies and gentlemen. My name is Kelly and I am your conference facilitator today. I would like to welcome everyone to the Cliffs Natural Resources 2014 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. At this time, I would like to introduce Terry Paradie, Executive Vice President, Chief Financial Officer and Treasurer.

Thanks, Kelly. I’d like to welcome everyone to this morning’s call. Together with me today, I have our Chairman and CEO, Lourenco Goncalves and our Executive Vice President, Business Development, Kelly Tompkins. As we start, let me remind 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 protections 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 the 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 our 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. We will also discuss our results, excluding certain special items. A reconciliation for Regulation G purposes can be found in our earnings release, which was published after market yesterday. At this time, I would like to discuss Cliffs’ financial performance during the fourth quarter of 2014. Due to the impact of the impairment charges and other items since the third quarter we have adopted adjusted EBITDA as our main metric as it gives us a more accurate view of our operational and financial performance. For the fourth quarter of 2014, Cliffs reported adjusted EBITDA of $297 million. This number does not include Bloom Lake, which was recently removed from our portfolio of assets. Comparing apples-to-apples, our fourth quarter EBITDA represents a sequential improvement of $30 million compared to an adjusted EBITDA of $267 million reported for the third…

Thanks Terry and thanks to everyone joining us this morning. Next Saturday, I will complete 6 months on the job and the fourth quarter of 2014 was my first full quarter as Cliffs’ CEO. Q4 was a truly remarkable quarter for Cliffs in which we accomplished some very important things. First, we paid down a substantial amount of debt. Second, we lowered our costs beyond even the most optimistic expectations. Third, our U.S. iron ore business generated $275 million of EBITDA and 36% of EBITDA margin. Fourth, we sold Logan County coal. And fifth, last but not least, we resolved Bloom Lake. As Terry reported earlier, we continued to make consistent progress in reducing our debt. Going forward the elimination of the common share dividend should allow us to further pay down debt. This accelerated debt reduction program is a more effective method to protect our shareholders than continuing with quarterly dividend. As I informed all of you during our Q3 conference call, I proposed to the Board to keep the $0.15 December quarterly dividend on the common shares. And as expected the Board approved that dividend payment. The rationale for keeping the dividend in place last quarter was simple. First, we thought it would provide some support for the share price, while we got investors comfortable with Cliffs’ new U.S. centered strategic direction. Second, we have then and still have today the liquidity to pay the quarterly dividend. Our liquidity is not the issue now, nor do we anticipate any issues affecting our liquidity in the foreseeable future. The primary issue is that despite all of the decisive moves we have made to reshape the company as a pure U.S. player and to take Cliffs out of the iron trade with China, the short thesis gained momentum and the…

[Operator Instructions] Your first question comes from the line of Michael Gambardella from JPMorgan. Your line is open.

Good morning, Lourenco and congratulations on the good work in a very tough environment in the last 6 months. A couple of questions though when you mentioned about the possibility of new capacity coming into the marketplace and that would have to be ready by 2016, are you referring to the fact that your ArcelorMittal contract comes due in 2016 and if you were to renegotiate that there would basically be very little tons available to the marketplace for new competitors?

That’s exactly right, Mike. And first of all thank you very much for your kind words. Yes, I am referring to the fact that our first contract to go up to renewal is our – one of our contracts with ArcelorMittal and that will happen this December of 2016. Until December 2016 we will have no renegotiations, no reset, no changes in any of our contracts. And each one of these contracts have yearly nominations tonnages tied to the contract letter and there is no room for Arcelor as long as they don’t – the mills don’t change their production capacity, there is no room for new entrants in the marketplace anytime before the renewal of the contract. However, we are dealing with pellets in a very stable and predictable self contained U.S. domestic market. I don’t believe that any spot seller of pellets or new entrants or any pellet plant that would be ramping up and that just in quality would have any chance to succeed before we renegotiate any contracts in this market, that’s my point.

Great. And the second question, using today’s spot price on seaborne pricing and adding to it the pellet premium in today’s market and the transportation for say a Brazilian producer like Vale to move the product into the Midwest market with all the transportation, what would the landed price be of that product right now to a Midwest consumer?

We believe that, that number would be north of $100 per ton, just to breakeven. And we are probably right, because they wanted to just mention, has been trying or not has been, but in the past tried hard to sell in the United States and failed. So, we don’t believe that anything has changed for the better.

If you took the spot price of seaborne today and added to it the conversion costs for pellets and then added to that the transportation costs to get it into the Great Lakes, what would that be?

Yes, that’s the number I get to, north of $100.

North, yes north of $100, okay. And a final question, could you – you are cutting your SG&A by about a third you are forecasting for 2015 by $70 million, what are the major components of that $70 million cost reduction?

In SG&A?

In SG&A.

Is what you are asking? I will let Terry answer this one. Go ahead, Terry.

Yes, Mike, the majority of the costs in there are employee-related. We have done a lot with reducing our headcount, especially at our corporate headquarters in Cleveland. We have cut down to two floors here in Cleveland. We were at five there in prior years. In addition to that, we are really doing a lot of work around looking at our outside service spend and reducing the cost associated with outside services and making sure that we are very efficient with our spending from an SG&A standpoint, because that’s all really what we have control over.

So, they are fairly certain cost reductions for the upcoming year?

Absolutely. And if you, Mike, I believe that your question ties back to our cash generation in 2015 and our ability to service our debt and we stay in good shape. It’s not just debt. We are not done with a lot of things. We are here for six months. So, there is a lot going on at this point and we will continue to cut cost in place that to be honest with you I haven’t addressed, because we have been doing a lot of things at the same time, but my day has only 24 hours and my team has been worked relentless, but we haven’t been able to address all the things we need to address. I will give an example. We are planning to cut another $5 per ton in our cost in U.S. iron ore, times 22 million tons, we are talking more than $100 million in cost-cutting for 2015 for the entire year. It’s not going to have quarter-over-quarter, but for the entire year, 2015. Another thing that people are not really paying any attention so far is that we wrote down a lot of assets. We had a lot of things done in 2014 that will give us the full benefit in 2015. It is a cash tax benefit that we are going to enjoy. So, this will all play for 2015. We are planning for the long run. We are not doing anything short-term. We are not just doing for the quarter. We are doing for the long-term survival of this great company.

Thanks, Lourenco. Keep up the good work.

Thank you very much. I appreciate it.

Your next question comes from the line of Aldo Mazzaferro from Macquarie. Your line is open.

Hi, good morning.

Good morning, Aldo.

Lourenco, a few questions on the cost side. On the SG&A, you have got $39 million on a run-rate in the fourth quarter, which I think would annualize out to about $156 million if you ran forward. So, you are planning to cut about $16 million or so in the full year. Is that a target that could be moved a little more aggressively or is that something you think is locked in stone at this point?

Yes, this is Terry, Aldo. Yes, I think we have the opportunity to be very aggressive. We are currently working on cost reduction efforts with respect to – the size of our business is changing. You look at our strategy as we exited Eastern Canada. We have sold portions of our coal business. We continue to refine the efforts we do in Australia. We will continue to stay focused on having the right size of organization and obviously outside service spend associated with the new size of our business as we become more USIO focused. So, that is our focus today. And we are confident that we can get to the $140 million for the full year – fiscal year ‘15.

Great. And then – and if you look at production costs at the mines, especially U.S. iron ore, some of the – I was wondering if you have noticed any reduction yet in things like fuel costs that might reflect lower diesel or any other operating costs that might be coming down or could still come down further from those items?

Yes. Aldo, we are looking at – our energy costs represents about a third of our total costs. So, what you have seen with diesel, which only is about 5% of our production costs. Natural gas, electricity, also we use some coal from a furnace standpoint. We are looking at some reduction for this upcoming year to the tune of $2 to $3, which has been baked into our production cost guidance for the year. So, we are seeing the impact of that for 2015.

Right. And thanks, Terry. I got two other quick ones if you could. Is there anything…

Please go ahead.

I know you discontinued Bloom Lake as of the end of fourth quarter, would that imply that there is nothing on the balance sheet now from Bloom Lake liabilities or is there anything on there still remaining?

I will let Kelly Tompkins answer that one. Go ahead, Kelly.

Well, the balance sheet of the Bloom Lake Group reflects the liabilities. And as Lourenco commented at the beginning of the call, the Bloom Lake Group is now self-contained and the liabilities within that group will be covered by its cash on hand and the proceeds from asset sales. And as I think you probably saw in our 8-K that was filed, we have effectively deconsolidated Bloom Lake, which will be reflected in the first quarter results and you will see the pro forma balance sheet from that filing as well.

Just to clarify a little bit, the balance sheet you saw in our release does is a consolidated balance sheet. We will have the deconsolidation when we issue our results in the first quarter.

Great. And then if you can just tell us what your corporate accrued tax rate might be next year or this year and what the cash rate might be?

Yes. Aldo, from the standpoint of the losses that we have incurred this year our cash tax rate for the current year was pretty close to zero. We didn’t really pay a lot of de minimis tax payments. As we move forward into 2015 with some of the loss carry-forwards, we also have had to use some loss carry-backs and you will see on our balance sheet, what Lourenco alluded to, we have a pretty sizable receivable that’s due from an income tax standpoint. So, our cash taxes going into next year will be a lot lower than they have been in the past, something I would if I am modeling I’d use something less than 10% or lower.

10% or lower and a pretty full tax rate accrued or around 30% would you say?

Yes, I think that’s from a GAAP standpoint that’s in the ballpark.

About 30% thanks. Thank you.

Thanks, Aldo.

Your next question comes from the line of Kevin Cohen from Imperial Capital. Your line is open.

Good morning and thanks for taking the questions and Lourenco and Terry congratulations on all the positive news year-to-date. A couple of items, first in terms of the tax asset that you alluded to from the CCAA filing, does that reside in Canada or is that in the U.S. and fully available to the parent?

No, there is no connection with the parent. When we file CCAA, the parent is completely separated from the assets or the assets have been completely separated from the parent. So, what we – we are calling the Bloom Lake Group, Kevin, is completely self-contained, so they either have cash on hand at this point and they are not leaving at this very point, there is no need for a deep or anything like that. So, the Canadian thing is on each zone separate ring fenced, completely insulated from Cliffs Natural Resources.

And then in terms of the prior comment, Lourenco about Bloom Lake being self-funding in terms of cash outlays and no cash outlays from the parent, does that include environmental, severance, any cost like that, is that truly entirely self-contained from the Bloom Lake Group assets, just so I am clear on that?

Yes, everything, 100% self-contained within the boundaries of the Bloom Lake Group or the CCAA, under the control of the monitor and the overseeing of the court.

And then just two last real quick questions, any granularity in terms of when Bloom Lake might be resolved in terms of timing on that?

We believe that we are going to sell assets, not we, but the Bloom Lake Group will be selling their assets during the course of 2015. So, we will have some tail to deal with after that, but all things being considered, we are very confident that the Bloom Lake Group will be done with the CCAA within the calendar 2015.

And then the last question probably a little bit more of a Terry question, can the company disclose the current outstanding balances of the bonds outstanding?

At this point in time, I think we have said our net debt was from $2.6 billion. We will give you more disclosure when we move into the first quarter result from each of the tranches.

Great, thanks for taking all the questions and best of luck.

Appreciate it, Kevin. Thanks.

Your next question comes from the line of Sal Tharani from Goldman Sachs. Your line is open.

Good morning.

Good morning, Sal.

Couple of questions. You had – you are cutting the USIO costs and you had mentioned further cuts in the past over the next 2 years, I was just wondering is there any CapEx involved if you want to go beyond that $4 or $5 you are doing in ‘15?

We believe that the CapEx for USIO for the entire year will be less than $100 million and of course it’s included in the CapEx figure that Terry Paradie informed during his prepared remarks, but USIO alone is less than $100 million. Of course, that’s majority.

And you don’t need any additional – I am sorry, you don’t need any additional CapEx if you want to cut further cost, any further equipment availability or anything like that?

No, it’s all in.

Okay. And I mean, obviously it’s a very tough challenging time, but not only for the traditional iron ore producer, but some of the alternative guys in the Mesabi region, like the magnetation is also having some issues. I was just wondering if there is enough availability in case something, one of those facilities do not workout in terms of the economics at your place to fulfill those orders if need to be over the next year or so?

Well, in the past, there was no magnetation. Cliffs was always able to take care of business. So that will be the future. I am not saying that if, I am saying when.

Okay. And last question on the Canadian restructuring, does it also take care of the Wisco contract or you will have to still fulfill the Wisco iron ore contract?

The Wisco contract was also part of the Bloom Lake Group. So, right now, Mr. [indiscernible] should be dealing with the monitor in Canada, but there is no more iron ore there. So there is a problem there.

Okay, thank you very much.

You are very welcome.

Your next question comes from the line of Nathan Littlewood from Credit Suisse. Your line is open.

Good morning, guys. Thanks for the opportunity and congrats again on a really good result. I just had a couple of clarifications on your guidance, starting on the U.S. iron ore business. I guess, I am surprised to see the volume expectations there essentially flat year-on-year given what’s going on with the U.S. blast furnace industry at the moment, sort of tidal wave of steel imports coming into the country. I was wondering if you could talk a little bit about some of the expectations you have baked in here with respect to sort of blast furnace utilization? Also one of your customers, Essar Algoma had talked about a potential restart of one of their mills this year. Has that been baked into your guidance? And just to finish off the U.S. part on pricing, could you talk a little bit about some of the other assumptions that you have made outside of the iron ore price? I understand that you don’t have high leverage to the seaborne market directly, but indirectly, global iron ore prices do impact U.S. HRC prices and some of your contracts do link to drivers such as HRC and steel utilization. So, just a little more color on some of the assumptions would be useful?

I will be glad, Nathan, and I appreciate your congratulations, especially because our earnings per share in Q4 was coincidentally exactly equal to your price target for the stock. So, even if we are trading at zero dollars, right now we are even, so $1, that’s exactly our EPS and that’s exactly our price target. So it’s fixed highly above the precision of your model and your conclusion. But back to your questions one by one, imports, the United States has been flooded with imports. And that’s not new stuff. The new stuff is that in debts and the intensity of the avalanche of the imports reaching this country. And these will be taken care of as we have done in the past, you make no mistake. We are going to defend our turf, and we are going to use the trade laws every single weapon that’s in our disposal to protect what is ours. But on the other hand you got to discount the fact that some of the imports don’t even affect Cliffs, because some of these imports are long products that are produced by mini-mills and mini-mills by and large use the scrap they don’t use iron ore. So the impact of imports is a lot less than it looks like at first glance. On the other hand if the domestic integrated blast furnace mills reduce production some things that they haven’t done yet, and we have to adjust in order to satisfy their current needs, we are partners, we will work with them. So imports are a potential problem. We are watching carefully and we are getting ready to act. And we are going to be acting in complete sync with our clients and our partners. Then the second was about the Essar Algoma I don’t really remember exactly what you said about Essar Algoma, if could help me.

The second furnace coming on?

The second furnace coming on, if they come with the second furnace they are going to more pellets and we are going to be able to supply if they need more pellets. We are going to have to discuss. But we will certainly take care of business with the Essar Algoma. And the third was about the indirect impact of the IODEX in the U.S. iron ore, is that correct Nathan.

Look Lourenco, the color is all very useful, but I guess what I was trying to get to was whether or not you could share with us some of your assumptions about is Essar Algoma included or excluded from that territory. Secondly what U.S. HRC price assumption is your pricing guidance based upon and also what level of U.S. steel industry utilization have you assumed in this volume guidance as well?

Well, the utilization that we use is the current level around 77%. Then the Essar Algoma second blast furnace is not included in the 22 million tons.

And the hot-band pricing assumption we are using is in the range of $575 to $600?

Terrific, that’s all very useful guys. Just one other question is on APAC, as I am sure the lump premium has shot up recently, we are now at about sort of $27 or $28 a ton I think, freight rates have also capitulated over the last little while, both of which are very, very favorable to the realized pricing of that APAC business. So again I was just wondering if you could clarify for us what assumptions you have baked in for freight rates and the lump premium into that APAC selling price?

It’s a lot more than we had in the past number one, because freight rates have been going down. Second thing, we have increased the participation of CFR sales instead of F.O.B. And that is benefiting our price realization. And last but not the least we are moving towards selling more separate cargos between fines and lump. We used to sell a lot of combined cargoes and now we are selling more of lump cargoes separate from fines cargo. So we are playing in all three things in order to improve our price realization in Asia-Pacific.

Okay, that all sounds like very smart things to be doing, but can you tell us what the lump premium and freight numbers that you have assumed are, because at the end of the day I mean both will have a pretty big impact on your EBITDA regardless of how you are selling the ore?

Well, we don’t have that break down because we currently sell – we still sell lot of combined cargoes. And then we don’t have the number you are asking for. As we start to sell more and more lump cargoes separate from fine cargos then we will have this number a little more clear.

No problem.

You would see on the outlook box that you have the realized pricing for APIO. So you can take the plus and you can probably use some assumptions that you see in the marketplace for freight and lump premium. Then you got to look at discounts and moisture and things of that nature and typically nets down to a realized pricing. And you could probably come up with the triangulation on what we are using based on that.

Yes. Sure, I hear you Terry. I guess my concern was that over the course of the year, most of us are expecting that lump premiums will come down and that oil and freight rates would probably go up, so I was just a little worried that the translation from 62 IODEX into those A-PAC ASPs much sort of move against you a little bit over the course year, that’s kind of what I was getting at. But now I look forward to further updates. Again, congrats guys and I will turn it over.

Thank you, Nathan.

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

Hi, good morning guys.

Good morning.

Good morning.

So first, just wanted to try to clarify I mean this question for Terry, some of the cash tax benefits that you are going to see in 2015, if you can just quantify what is carry forwards versus carry backs, I think they will be really helpful?

Yes. Evan I think probably the easiest thing to do is probably move to our balance sheet and our press release. You can see there is an income tax receivable of $261 million. And the majority of that really is associated with carry backs with the items we noted in our press release with the impairment, the loss on sale of CLCC as well as us executing on a financial guarantee in a company note, so that generated a significant amount of cash benefit going forward for us for next year. We also have significant amount of tax NOL carry forwards associated with our AMT rate that we have a full valuation allowance but also will protect from our future cash tax rate going into 2015 and beyond.

Okay, got it. Thanks. And then maybe just not to beat a dead horse here, but just a clarification on Bloom Lake exit costs being zero, so correct me if I am wrong, but it was my understanding that the environmental reclamation bond may have been guaranteed by the parent, so if you can’t sell the assets or Bloom Lake Group rather can’t sell the assets, would there be a different scenario where you might be on the hope for some cash if you had to actually cleanup the site in the near-term?

The answer is no, but I will let Kelly Tompkins give you a little more color.

Yes. I mentioned earlier Bloom Lake will fund its obligations by its cash on hand and asset proceed sales and after we conclude the sale of assets process we move into a liquidation mode which is yet another form of selling residual assets. And then ultimately move to abandonment which essentially those obligations like the environmental obligation we revert to the province because we would be no longer operating the site and no longer involved. So it’s ultimately the answer is no that we go through the process sale liquidation and abandonment.

Got it, thanks. And just one last quick one if I may on CapEx pretty surprised to see the CapEx number for 2015 come down so much, I assume like you weren’t spending any CapEx on Canada in the fourth quarter and your run rate annualized with closer to $200 million or so, so you are coming down pretty significantly even from that. So I was just kind of wondered what some of the big pieces are that outside of Canada that are moving that number so much and how sustainable do you feel like you can – that number is – how many years can you maintain kind of the – that kind of midpoint of 137.5?

Well, if you consider that in the longer have Canada, if you consider that I have already disclosed their total CapEx for Asia-Pacific through the end of life of mine that’s $50 million for 5 years or $10 million a year. And if you can see that we already sold Logan County Coal and we are highly confident that we are going to sell Oak Grove and Pinnacle. At the end of the day we are talking CapEx just for U.S. iron ore. And that’s the new Cliffs. So the CapEx for the new Cliffs like I replied earlier before in this call will be less than $100 million. So even the figure that was given today is a little bit in the high side if you consider just U.S. iron ore, so that will be another source. Keep in mind, Evan, the time of the $1.8 billion revolver, this is gone. This is old Cliffs. This is that Cliffs that was going to be the next Rio Tinto. We are going to be the best iron ore mining company, the most profitable, the most reliable, the most predictable in the world. We are the ones that where the Australians and the Brazilians will be bleeding like crazy. In the next couple of years, we are going to be standing tall. It’s already stupid betting against America and that’s our positioning ourselves for, to be standing tall when others will be dealing with the mistakes that they are making as we speak. That’s what we are doing.

Just to add to that, Evan, you recall from a Canada standpoint, we did produce throughout most of the year and we said last year that we had a significant amount of CapEx related to tailings. So, with that going away, that’s really a big driver of the significant decrease in 2015 from 2014 actually to the point where we have more capital allocated towards our core business of USIO from where we were last year.

That’s helpful. Thanks guys.

Thank you.

Your next question comes from the line of Mitesh Thakkar of FBR Markets. Your line is open.

Good morning and thank you guys for taking my questions and congratulations on a very good quarter and cost control.

Thank you. I appreciate it, Mitesh.

So, my first question is, Lourenco, on the Canadian side, with Bloom Lake into the restructuring, does it include all the other reserves which are acquired through that acquisition? And how should we think about any other Eastern Canadian ops, including Wabush going forward, any associated ongoing costs which you can help us?

I will let Kelly answer that. Go ahead, Kelly.

Yes, Mitesh, the reserves that were acquired as part of Bloom Lake would be included in the Bloom Lake Group filing. The Wabush assets, which include the Scully mine and certain other infrastructure, were not included in the CCAA. The focus was to put, if you will, the turn a kit on the bleeding at Bloom Lake. Wabush, the liabilities there are more long-term oriented and are very manageable and we have opportunities potentially to sell assets within that portfolio as well either alongside or separate from the CCAA.

Yes. So, when I really think about asset sale, I should think about those assets plus U.S. coal assets and even Asia-Pac assets, is there anything else, of course, the chromite assets too?

That’s right.

Okay, great. And just on the USIO, Kelly, I know you haven’t provided a 2016 revenue outlook, but from the comment which Lourenco made about that the contracts are not resetting or anything like that, should we assume more like a $4 for every $10 move in iron ore prices as the sensitivity or is that something else?

Look, we used to supply that table with the number of dollars fluctuation around the $10 variation, but we are really pleased with that, Mitesh, with the table that we supplied at this time, because we believe that, that would be a better indication. The other one was we always received a lot of follow-up questions, especially our IR Manager, Paul Finan, regarding clarifications related to that way of providing guidance. So, we replaced that with the table with the hopes that this would facilitate your ability to make a conclusion.

Yes. No, the 2015 table is excellent, actually. There is no debate about it. It’s just I was thinking if I am thinking about 2016, should I use like similar sensitivity or is it more or less?

The problem with 2016, Mitesh, is that 2016 is so far away and so far we moved from the reality of January – February 2015 that it’s very, very difficult to give any type of reasonable guidance about 2016.

Yes.

I know that spreadsheet ask for that, but the realities are lot different. Think about two years ago, everyone was betting on BRICS, Brazil, Russia, India, China, which one of the letters you want to take now? None.

Yes.

Six months ago everybody was very confident that fuel prices would continue to be extremely high and oil will be great for the foreseeable future. What about now, $50, $51 last week $44. Two years ago, Brazil would dominate the world and the iron ore projects in Brazil were all great. Now you would not bet that, that Brazil would be able to do anything with what they have right now. It keeps going. So you know what iron ore is at a very low point right now. The Australians don’t know what to do anymore. They are putting even their kangaroos for sale and the iron ore price is not going anywhere at this point and they are starting to manipulate their currency and the situation is starting to smell bad over there. So I don’t know what’s going to happen in 2016, nobody knows. So you got to plug in your spreadsheet whatever you want.

Okay, thank you. I think just a follow-up on the Aussie cost, obviously came down dramatically. How should we think about the other non-cash production cash cost, sorry, production cash cost which are in the other category, which I think is mostly royalty, but is there something else flowing through that because it looks like a really low number there?

Terry, please go ahead.

Yes, Mitesh. The primary driver in the non-production cash cost you see in our results are just lower royalties. The royalties are linked to the realized pricing and we’ve seen that come down and that’s why you’ve seen that come down dramatically. There’s obviously inventory movement and things like that, that impact that number as well. But what you’re seeing this year in our results is the lower royalty rate.

Okay, great. Thank you very much guys and good luck. Good job on the cost again.

Thank you, Mitesh. Appreciate it.

Your next question comes from the line of Sam Dubinsky of Wells Fargo. Your line is open.

Thanks for taking my questions. Just a follow-up to a prior question, can you disclose your sensitivity to every change in HRC pricing? Is HRC a mine now just in your 540, today, but internal projections are around 575 to 600? Then I have a follow-up.

Well, thank you for saying. Thank you to taking my question – for taking my questions, but I still not answer your question because you continue to believe that you know this business better than Cliffs Natural Resources. But because I am in a good mood today, I will ask Terry Paradie to reply your question.

Yes, Sam. I think we disclosed in the past for hot-rolled pricing sensitivity for every $50 change on a full year basis is just under a $2 impact on our realized pricing and that has not changed and that sensitivity stays pretty consistent from year-to-year and you can use it in your model today.

Great. Thank you very much. And just a follow-up on the ArcelorMittal contract, I know there is - you guys don’t see any risk from that. But could you guys just give us an idea of how pricing on that contract compares to the corporate average?

We have several contracts with ArcelorMittal, Sam. So we have contracts that have the price floors. We have other contracts that have different metrics. And we overall all blended we supplied a table that should guide your conclusion in terms of pricing. And what we do know is that at this point, we don’t have any reliable competitor. We are following the progress of the one that is pertaining that’s building a pellet plant in Minnesota and we are also – discuss with ArcelorMittal. So your fears are overblown.

Okay, great. And just my last question is just when should you get the income tax receivable from a cash flow perspective, the timing of that?

To be throughout 2015 and through the start being able to receive soon.

Okay. Thank you very much for taking my questions. Good luck.

Look, it’s always great to receive your questions. If you ask more questions we’ve got more answers. But you need to start calculating better your price target because our EPS was your price target. Okay. Operator, who is next.

Your next question comes from the line of Brian Yu from Citi. Your line is open.

Great. And congrats guys on a pretty strong fourth quarter.

Thanks, Brian.

My first question is, hey, just you mentioned that at Bloom Lake Group, it will be funded by cash on hand. How much of that 291 million at the end of 4Q will be a part of the Bloom Lake Group when it’s deconsolidated?

Kelly, please go ahead.

Yes, Brian. The Bloom Lake Group right now has about 40 million of cash on hand which we - you would expect we’ll be able to cover the care and maintenance and related required obligations through the bulk of the CCAA process supplemented by asset sales once we get into the sale process.

Got it. And then the second question on a different topic is, I know in the past when prices were going up, the contracts around the collars and whatever fell outside of the collar, you had carried over an impact on the following year, they are calling it lag year adjustment. I think whilst you are in a different situation now. But is there any of this carryover impact or lag year adjustments as we look out into 2016 from what the price we’re seeing now?

Brian, this is Terry. From a contract standpoint, we don’t disclose the specific to our clients – contracts that’s why we provide the sensitivity box, any floors, collars, carryovers and things of that nature are built into our sensitivity at this point in time. I think that in the past we may have had some of those carryovers, but I don’t believe we have any of those going forward.

Okay, thank you.

You are welcome.

Your next question comes from the line of Tony Rizzuto from Cowen & Company. Your line is open.

Thank you very much. Congratulations on the success gentlemen.

Thank you, Tony. Appreciate it.

You are welcome, Lourenco. I’ve got a – just a follow-up question on strip ratios U.S. You indicated that you are targeting $5 per ton of lower costs in 2015 and it seem like about half of that was owing to lower energy cost. But I wonder if you could talk a little bit more about what you’re doing with strip ratios there and have you been able to - in other words some strides made there in previous quarters. But just update us a little bit about strip ratios, ore grades things of that nature, haulage profiles, all those types of things in the U.S.?

Yes. Look we are not high grading any mines if that is your concern.

No, no, no, no. I wasn’t asking that.

Okay. Just trying to guess what your concerns are. We are not high grading. We are not changing anything in terms of how we mine our properties. We are going to continue to cut what we had been cutting a lot more for example in Australia because that’s where the focus was, like we did in coal because they were in surviving mode and we were really acting fast to keep that business afloat, while we were closing the sale of Logan County. And now we are doing the same thing with Pinnacle and Oak Grove. So these businesses – I was a lot more focused on the details of contracts and outsourcing and personnel and extra cost that you can take out of the picture and that’s where we’re going to continue to focus. It’s not that we haven’t done anything, we have done a lot. I believe we have probably the most comparative cost structure for all pellet plants in the world, but that’s not enough at this point in time, we need to do more and that’s the challenge that’s in front of us. And we will continue to cut cost out of the picture, but not doing anything is stupid that we will regret in the future or pay the price in the future.

Fully agree, Lourenco. Alright, thank you very much. Appreciate it.

You are very welcome. Tony.

Your next question comes from the lien of Lucas Pipes from Brean Capital. Your line is open.

Thank you and good morning everyone.

Good morning Lucas.

You mentioned earlier landed price of the Brazilian product north of $100 into the Midwest, and I was wondering at kind of current IODEX pricing, so based on your table there, your net back pricing call it in the low $80s or so what would your landed price into the Midwest?

Do you want to reply that Terry?

Yes. For the most part, that is our landed price into the Midwest, that’s the delivered cost to our customers what we are showing in our realization tables.

Okay, great. That’s very helpful. I appreciate that.

Thank you.

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

Yes. Hi. Thank you very much for taking my questions and I appreciate all the color you have given on the call so far.

Thank you.

In terms of – just looking at the Asia–Pacific cost guidance, the 2015 level of $40 to $45 a ton, obviously compares much lower to the 2014 realizations, just wondering, obviously it’s a very solid number, I am just wondering if you can give us a sense of how much of the decrease is due to exchange rates and maybe a lesser extent fuel prices versus just flat out better operations?

The biggest contributions, if we are going to compartmentalize the contributions, the biggest individual contribution is exchange rate, that number is $4 per ton. So, if you compare just to compare apples-with-apples, Q3 with Q4, we are talking $10, $4 were exchange rate, $6 was a – several different things that we have implemented that we can call altogether a provision on improvement. This being said, the numbers refer to Aussie dollar exchange rate of around $0.81. As of this morning, the exchange rate is $0.76. So, the Aussie dollars are – the Australians are taking no prisoners with the Aussie dollar. So the Aussie dollar will continue to help APIO, because they don’t want to help APIO, they don’t want to help BHP, they don’t want to help Rio Tinto, they want to help that lady over there, Gina or whatever. They are going to help to continue to help Fortescue. And they will believe that they will squash the Chinese producers, big mistake, but it is what it is.

Now, that’s very helpful. And just a quick follow-up, Lourenco, you said you are highly confident that you would be selling Oak Grove and Pinnacle and obviously the Logan County sale was a good number in a very tough environment, so I am wondering if you could just maybe elaborate a little bit on what you are seeing out there in terms of potential interest and maybe timing of Oak Grove and Pinnacle? Thank you very much.

Absolutely, look at the sale of Logan County coal was very good one. And that was the one that several research analysts questioned the possibility to accomplish. Nobody was really believing that we could sell our coal asset, and we did. And the multiple is great because if you consider that we are doing with the zero EBITDA, I don’t even know how to calculate the multiple, because zero times any number will give you the multiple we are looking for. So, the enterprise value we are looking for. So, with this sale Logan County and we are in serious discussions with several potential buyers for both Pinnacle and Oak Grove separate and combined. Will any of these deals be closed at this point? I don’t know, but I am very confident that we are going to be able to do so. And conclude that – the sale both mines combined or separate, that’s all I can give at this point.

I appreciate all that color. Thank you very much.

You’re welcome.

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

Hi, good morning, everyone.

Good morning, Garrett.

Most of my questions have been answered, but one housekeeping one for Terry. Following the recent bond repurchases what should you model in for annual interest expense?

Yes, I think from an annual interest expense if you used somewhere between to say 175 and 195 for the year. For the year you would probably be in the ballpark.

Okay, great. And then on U.S. iron ore I know the first quarter this year hasn’t been anything like last year from a weather perspective and have the weather really impacted your shipments on the Great Lakes, but what should we be modeling for U.S. iron ore shipments in the first quarter. I am assuming up somewhat from last year, but is it going to be a lot stronger or a little bit stronger or what

Look Garrett, this business is seasonal as far as shipments. Q1 will always be weaker in terms of shipments, because we are not able to ship through the lakes, no matter what. Last year you may have heard that the winter was a little worse than usual. But that’s not the point. Last year this company was unprepared for the winter, let’s face it. And this year we will be going the same direction. And through the end of Q3 through Q4 we moved 250,000 tons of pellets that were on the ground, we moved to the client, because it was accumulated since last year. So at this point we have zero tons on the ground. So we are lot more prepared. But Q1 will always be our weaker quarter in terms of shipment. Not a weaker quarter in terms of production or ability to generate profits, but from the cash flow standpoint it’s a different quarter, because we don’t ship as much, we only ship what we ship by rail not what we ship by vessel. I don’t know if Terry would like to add something based on your question.

Yes. I guess I would just look at it last year was definitely a different year for us. So I would just go back and look at our prior periods, go back to ’12 and ’13. And I think you can model out something that’s reasonable.

Okay. And then just one final question just want to clarify that the elimination of the common stock dividend applies to that only and not the preferred dividend as well and we should still be modeling about $51 million annually for that, is that correct?

Yes. The preferred dividend will go away soon. We are a year away to be done with that and we have no intention to interrupt the preferred dividend. Keep in mind we have the liquidity to pay their dividend and the comp. We cut not because the banks imposed on us. We cut because we thought it was a better use of capital to continue to buy bonds in the open market. And we eventually may buyback stock. We have as you know we have a buyback authorized and we will be happy to deploy the buyback if necessary. So we have other uses for our capital at this point. But the preferred we would like to keep because of the penalty for not paying the dividend on the preferred is not something that we want to deal with. And like I said the preferred will go away very soon.

Okay. Thanks very much.

You’re welcome. We are going to take one more question before we go, okay, operator.

Okay. Your next question comes from the line of Phil Gibbs of KeyBanc Capital. Your line is open.

Hi, good morning. Thanks very much.

Hi Phil.

Lourenco I had a question on the cost guidance for U.S. iron ore, I think you talked about it already, but should we be thinking about a $5 decline from average levels where you were in 2014, into ’15 with energy being half of that essentially, so that’s in your guidance at this point?

I am basically reiterating my guidance that I gave in Q3, we are going to target $55 per ton cash cost in 2000 – max in 2015 and $50 per ton max in 2016, that’s exactly the same guidance I gave last quarter during the Q3 conference call.

Okay, I appreciate that. And then as far as the accounting piece, the $240 million cash on hand for the Bloom Lake sub, was any of that on the balance sheet at the end of 2014, how do we think about that?

Kelly?

About $20 million was on hand, roughly.

Okay, thanks much.

Very welcome. So, thank you very much for joining our call. And of course, Terry Paradie and myself, will be looking forward to continue our conversations with each one of them. Have a great day. And we will talk soon. Bye now.

This concludes today’s conference call. You may now disconnect.