CLIFFS NATURAL RESOURCES INC. 2008 SUSTAINABILITY REPORT

CLIFFS NATURAL RESOURCES INC. | 2008 SUSTAINABILITY REPORT Contents Message from the Chairman, President and CEO . . . . . . . . . . . . . . . . . . 1 Company Profile . . . . . . . . . . . . . . . . . . . . 2 Governance, Management and Transparency . . . . . . . . . . . . . . . . . . . . . . 8 Embracing Environmental Stewardship . . . . . . . . . . . . . . . . . . . . . . 14 Promoting Sustainable Development in Local Communities . . . . . . . . . . . . . . . 30 Economic Impact: Our Role in Promoting Prosperity . . . . . . . . . . . . . 38 Respecting our Employees . . . . . . . . . . . 42 For More Information For additional information about this report or questions about sustainability at Cliffs, please contact Steve Baisden, Director, Investor Relations and Corporate Communications at steve.baisden@cliffsnr.com. Message from the Chairman, President and CEO Addressing the global challenges we face today will require action on the part of governments, nongovernmental organizations, individuals and businesses of all types and sizes. A first step for corporations is to understand their positive and negative impacts on the world we share . The first Sustainable Development Report from Cliffs Natural Resources Inc. is our company’s attempt to do just that: Explore the impact that Cliffs has on all stakeholders, including our customers, employees, investors, governments and the communities in which we operate . Admittedly, the overarching goal of longterm sustainable development is difficult to envision for corporations embarking on the reporting process for the first time. Safe production, long the most obvious component of sustainable development for mining and natural resources companies, will remain a top priority and a core value. Through rigorous training and education programs, as well as established lossprevention principles, we will strive for a zero-accident environment. With our substantial growth in recent years, Cliffs is now of a size and scale that requires us to expand our focus . In addition to maintaining an excellent safety record, we must place similar importance and emphasis on other core sustainability values, such as health and wellness, environmental protection and economic impact . As part of our maturing approach to sustainable development, we will be very measured in the commitments we make – so we can deliver on what we say. That is the intent of this year’s report, to share with you the current state of the company in many areas, both where we’ve historically performed well and where we have some work to do . Cliffs believes that sustainable development is integral to success in our industry. Mines and minerals are finite natural resources, and as such, future growth depends on the goodwill and cooperation of communities where we will look to do business. We will be invited into those communities only if we act responsibly where we currently operate. It is not enough to be an employer. We must become an engaged and committed neighbor, offering models of education, well-being and environmental stewardship that sustain themselves over the long term. Examples of this philosophy in action include: › Contributing to a health care clinic in Michigan’s Upper Peninsula, which offers wellness programs and specialized care tailored to the needs of our active and retired employees in that region. › Recognizing that greenhouse gas emissions are a global, not sectoral, problem. We will voluntarily disclose our carbon emissions through our participation in The Climate Registry and actively participate in the unfolding debate on how best to respond to climate change . › Acquiring a majority ownership position in the biofuel company renewaFUEL, LLC. Through this venture, we are marketing a low-cost, environmentally superior biofuel cube . › Planning mineral exploration programs so as to avoid areas of highest conservation value and, where mining developments do proceed, planning these to minimize impacts on biodiversity at the local level. We will work with other stakeholders and support environmental management initiatives that protect and enhance environmental quality at the regional scale. Much as earnings reports demonstrate our financial position to our shareholders, the information contained in this sustainability report demonstrates a return on investment for the communities we work in . In preparing this sustainability report, we followed the Global Reporting Initiative G3 Sustainability Reporting Guidelines, and we aim to benchmark our goals against the metrics of the International Council on Mining and Metals, the UN Global Compact and the Dow Jones Sustainability Index. I personally recognize and applaud the contributions of our employees across the globe as we work toward realizing our full potential as an agent of positive change in our communities . The key performance indicators we are developing will help us measure our progress . Through a deliberative process of setting priorities, targets and programs, we are building up a commitment to sustainable development practices we hope will stand as strong as our commitment to safety . We believe this report provides a balanced representation of the economic, environmental and social impact of our operations, highlighting our best practices as well as opportunities for improvement. I encourage your feedback on this report and our performance as we embark on the pathway to sustainable development. Sincerely, Joseph A. Carrabba Chairman, President, and Chief Executive Officer Cliffs Natural Resources Inc. 1 Company Profile Cliffs Natural Resources Inc. (NYSE: CLF) (Paris: CLF) is an international mining and natural resources company, headquartered in Cleveland. We are the largest producer of iron ore pellets in North America, a major supplier of direct-shipping lump and fines iron ore out of Australia and a significant producer of metallurgical coal. With core values of environmental and capital stewardship, our colleagues across the globe endeavor to provide all stakeholders operating and financial transparency as embodied by the Global Reporting Initiative (GRI) framework (see the GRI description below). We recognize that sustainable development is a journey, which we are just beginning . Working in partnership with others, we are committed to improving our economic, social and environmental performance over time . Our Mission Cliffs will be a pre-eminent global producer and merchant of natural resources, including iron ore, coal and other steelmaking raw materials. We will be known for our operational excellence, management expertise and technological leadership. We are dedicated to building value for our shareholders, partners, customers and employees by: › Increasing the competitiveness of our existing operations . › Producing superior products, services and innovative solutions for our customers . › Providing a safe, challenging and rewarding workplace. › Extending our scale in an international industry characterized by its capitalintensity . › Conducting our business with fairness and integrity, and the highest concern for environmental stewardship. Our Core Values At Cliffs, our core values are not simply pretty words on a page. They represent the way we do business day to day at Cliffs worldwide: › › › › › Safe Production Customer Focus Creating Economic Value Bias for Action Trust, Respect and Open Communication › › › › › Group and Individual Accountability Integrity Teamwork Recognize and Reward Achievement Environmental Stewardship Global Reporting Initiative Guidelines To promote transparency in our reporting process, Cliffs Natural Resources elected to follow the GRI sustainability reporting guidelines, 3rd edition (G3). GRI provides stakeholders a universally applicable, comparable framework within which to understand disclosed information. GRI has developed its framework through a process of systematic, consensus-seeking dialogue with a large network of individuals from over 60 countries, representing stakeholder groups including business, civil society, academia, labor and other professional institutions. The process is open, inclusive and takes a global perspective on the growing understanding of good reporting on key sustainability issues. The framework is continuously improved and expanded as knowledge of sustainability issues evolves and the needs of report makers and users change . GRI released the G3 guidelines in October 2006 following a three-year, innovative development period that engaged more than three thousand individuals from diverse sectors worldwide. When using the GRI guidelines, reporting entities have the option of declaring an applicability level, which indicates to what extent the report covers all the disclosures and metrics covered by the G3 guidelines. One purpose of having defined applicability levels is to acknowledge that companies are at different points in their sustainable development programs, and to provide a pathway for making incremental improvements in the overall scope and breadth of reporting over time. In this first public sustainability report from Cliffs, we believe we have achieved a “B” level of applicability by covering a number of topics across the range of sustainability areas. The GRI Index at the back of this document identifies each indicator addressed in this report and where the discussion of that indicator can be found . This report has undergone an internal assurance process conducted by Cliffs’ internal audit department to evaluate the integrity of the information presented. As a result of this assurance process, we are satisfied that the information presented herein fairly represents Cliffs’ sustainability performance over the period covered by the report . As we mature our processes for collecting and reporting data globally, Cliffs may choose to obtain third-party assurance of future sustainability reports. We expect to continue publishing sustainability reports on a regular basis, as well as updating environmental, health and safety data on our website . 3 Sustainable Development Policies As leaders in our industry, we expect of ourselves what our neighbors expect of us – exemplary performance. This is the clear standard that we hold for ourselves: We will conduct business with fairness and integrity, with the highest concern for proactive involvement, safe production, integration of state-of-the-art environmental practices into business plans, and a commitment to continual improvement throughout the corporation . Our policies governing environmental, health and safety performance establish the foundation of our sustainability program and commitments. Excerpts of these policies are included below. Please visit our website at http://www.cliffsnr.com to view the full version of both policy statements. Environmental Policy (updated January 2008) Mining and mineral processing make a vital contribution to world development by providing the essential raw materials for products necessary for modern society. Cliffs Natural Resources Inc. recognizes that extraction and processing of the earth’s mineral resources must be accomplished in a responsible manner that minimizes impacts on the environment and the community. The company believes that stewardship with proper concern for the environment is an essential element of a successful business strategy and subscribes to the tenets of sustainable development. Safety, Health and Loss Prevention Policy (updated January 2007) Cliffs is committed to protecting the occupational health and well-being of each employee and to conserving property from loss. Safe practices and a healthful workplace are consistent with efficient operations that produce a high-quality product. Our Core Value of safe production is sustainable only through an acceptance of zero tolerance of risk. This means everyone doing every job the right way, the safe way every time . Our Safety, Health and Loss Prevention Policy includes a clear statement addressing substance abuse. Cliffs requires that employees report to work in condition to perform their duties at their best, free from the influence of illegal drugs or alcohol. The use of illegal drugs in the workplace is not tolerated. Sustainable Development Commitments and Targets This sustainability report provides a baseline of our performance in key social, environmental and economic areas. Now that we have established our baseline, Cliffs is committed to establish public targets for improving our performance. These targets will be included in our next sustainability report . 4 Operations Overview Cliffs is an international mining and natural resources company. We are the largest producer of iron ore pellets in North America, a major supplier of direct-shipping lump and fines iron ore out of Australia, and a significant producer of metallurgical coal. As a publicly traded company, we are listed on both the New York Stock Exchange and the Professional Segment of NYSE Euronext Paris . Cliffs has continued to execute a strategy designed to achieve scale in the mining and natural resources industry, focusing on serving the world’s largest and fastestgrowing steel markets. In addition to generating record revenues and net income in 2008, we accomplished a number of other significant corporate development and operational achievements. These include: › Acquiring the remaining 20% minority interest in Portman Limited that Cliffs did not own at the beginning of 2008 . › Acquiring our former minority partner’s 30% interest in the United Taconite iron ore mining operation in Minnesota, bringing our ownership to 100% › Repositioning the organization under the Cliffs Natural Resources Inc. corporate name and brand identity The year was also characterized by unprecedented and dramatic reversals, in which we experienced the gamut from booming world demand for raw material to a sharp and steep reduction that materialized in the fourth quarter. This fallout from the global financial crisis and credit crunch resulted in an abrupt and radical response from the world-wide steel industry that saw capacity utilization in North America fall below 50%. Cliffs management team responded quickly to these circumstances and focused on cash conservation and generation from our operations . The boundaries of this sustainability report include those operations where Cliffs has greater than 50% ownership or over which we exercised control during 2008, with the exception of the Cockatoo Island operation in Western Australia. Quantitative data covers calendar years 2006, 2007 and through calendar-year end 2008 unless otherwise specified. Operations whose performance is covered within this report include the following: Coking coal mining complexes: › Pinnacle Complex (includes Pinnacle Mine and Green Ridge Mine), West Virginia, US › Oak Grove Mine, Alabama, US Asia Pacific Iron ore mining complex: › Koolyanobbing, Western Australia The discussions and data in this report do not include those operations where we have neither a controlling share nor a management contract, including the Amapá iron ore project in Brazil (30% ownership) and the Sonoma coal project (45% ownership) in Australia. In North America, our first commercialscale renewaFUEL facility is scheduled to be producing biofuel cubes sometime in 2009. Our next sustainability report is expected to include performance data from our first commercial-scale renewaFUEL facility after it commences operation. North America Iron ore mines: › › › › › › Hibbing Taconite, Minnesota, US United Taconite, Minnesota, US Northshore Mining, Minnesota, US Empire Mine, Michigan, US Tilden Mine, Michigan, US Wabush Mine, Newfoundland, Canada (and Pointe Noire processing facility in Quebec) 5 Products From the first application of electrical power in Michigan’s mines to the sophisticated computers and Global Positioning Satellite systems used today, Cliffs has been an innovator in the application of new technology to this centuries-old profession of mineral extraction. That successful research and development allowed for what was once considered millions of tons of useless rock to be turned into an iron ore reserve that helps fuel the industrial world and company operations today. Cliffs’ engineering and technical staffs are now engaged in full-time support of its operations and improvement of existing products . Iron Ore – Cliffs has held a leadership role in the iron ore industry for more than 160 years. Widely recognized for innovation in mining and processing technologies and joint-venture management, we are committed to continuous improvement, providing steelmakers with high-quality, cost-effective iron ore products . These products are marketed and priced based on varying mineral content specifications. Primary content controls include iron, silicon dioxide, aluminum oxide, phosphorus and sulfur. Cliffs’ North American operations produce 13 grades of iron ore pellets, including standard, fluxed and high manganese, for use in our customers’ blast furnaces as part of the steelmaking process. In Australia, we supply a total of four direct-shipping export products to Asia via the global seaborne trade market. Koolyanobbing produces a standard lump and fines product as well as a low-grade fines product. For the year ending December 31, 2008, Cliffs produced a total of 35.2 million long tons of iron ore pellets in North America, including 22.9 million long tons for our account and 12.3 million long tons on behalf of steel company owners of the mines. In Asia Pacific, we produced a total of 7.3 metric tons of iron ore pellets. The company actively strives to improve cost and steelmaking performance by minimizing chemical and physical variability of all products . Coal – Cliffs’ North American coal operations produces a premium quality, low volatile metallurgical coal which is very low in sulfur and has excellent coking characteristics. Also known as coking coal, it is a necessary ingredient in the production of steel. We also mine a quantity of thermal coal. For the year ending December 31, 2008, we sold a total of 3.2 million short tons of coal in North America. Biofuel Cubes – renewaFUEL LLC, a majority-owned subsidiary of Cliffs, produces a proprietary blend of sustainably collected renewable feedstock from local farms and businesses including wood, sawdust, corn stover, straw, paper, grasses, grains, grain and seed hulls and screenings. Densified cubes allow immediate use in most existing solid fuel systems with no or minimal capital modifications or improvements. Processing and compaction results in products that are consistent in size, heat value, moisture content, ash content and other key fuel characteristics. The cubes are more easily transported, stored and used than raw biofuels. 6 Engaging with Stakeholders: Working Together to Improve Our Sustainability Performance Stakeholder engagement is an important element of our approach to sustainability. We recognize that we cannot solve the sustainability challenges facing our company unless we work with others in the communities in which we operate, including governments, academia, nongovernmental organizations and community groups . We believe that effectively engaging with our stakeholders makes Cliffs a more successful business. Cliffs works with a broad range of stakeholders who have an interest in successful and responsible mining operations, including: › › › › › › › › › Employees and their families Investors Customers Suppliers Neighbors, community groups and civic organizations Chambers of Commerce and economic development organizations Educational institutions Local, state and federal governments Nonprofit organizations concerned with environmental protection and land conservation Cliffs communicates with these stakeholders in a variety of ways – for instance, presentations and discussions with community and civic organizations, responses to individual inquiries and dialogue with local, state and national government officials. As part of our commitment to open communications, our U .S . iron ore mine operations offer facility tours regularly during the summer. Such tours give Cliffs the opportunity to educate the public on mining operations and outreach programs while maintaining an open dialogue with the community. At our coal operations in West Virginia and Alabama, we meet with local government and civic organizations to identify ways in which Cliffs can help address community needs . Across Cliffs, we participate in town meetings to understand the issues and concerns of communities and government officials and keep them informed of our projected operating plans. Material Sustainability Issues As a result of continuing dialogue with our diverse internal and external stakeholders, Cliffs has identified the following sustainability issues as most important to our operations: › Moving beyond compliance › Managing business and operating changes › Challenges from growth › Greenhouse gas emissions › Mine reclamation › Mercury › Water effluent › Safety performance › Reclamation planning › Wetlands › Biodiversity › Education In this report, we illustrate our efforts to address these issues, including the challenges and opportunities they present to our company . We are working to improve our processes for identifying, managing and reporting on our material sustainability issues. 7 Governance, Management and Transparency In 2009, Institutional Shareholder Services evaluated and ranked our corporate governance performance . We are pleased to report that Cliffs outperformed 98.6% of all materials companies surveyed and 98 .2% of S&P 400 companies . Our record for meeting or exceeding governance regulations and guidelines was recognized, and these ratings are a testament to how seriously we take governance at Cliffs. While these exceptional ratings are gratifying, good governance is an ongoing process on which we must constantly focus. Ethical conduct is an integral part of the governance philosophy at Cliffs. The company’s core values and business ethics policy provide guidance to Cliffs’ directors and employees. Corporate Governance Cliffs’ Board of Directors and management team firmly believe that sound principles of corporate governance are critical to obtaining and retaining the trust of investors. They are also vital in securing the respect of the company’s employees, customers, suppliers, the communities in which Cliffs operates and the public at large. Cliffs has a strong, knowledgeable Board that interact frequently with the management team. Our Board of Directors consists of nine independent members, as defined under the rules of the New York Stock Exchange and under applicable law, plus Mr. Joseph Carrabba, the Chairman, President and CEO of the company . Two of the directors are female. One member of the Board was originally nominated by the United Steelworkers Union, pursuant to our 2004 labor agreement. The Board has formed four committees to help carry out its work: Audit; Board Affairs; Compensation and Organization; and Strategy . The Audit, Board Affairs, and Compensation and Organization Committees are composed entirely of independent directors . Consistent with New York Stock Exchange requirements and the rules of the SEC, as may be appropriate, each standing Committee has a written charter approved by the Board . The charters set forth the purposes and responsibilities of the Committees as well as qualifications for Committee membership, procedures for appointment and removal, structure and operations, and reporting to the Board. The charters also provide that each Committee will annually evaluate its performance. Consistent with New York Stock Exchange listing requirements, the charters are included on the company’s website and copies of the charters are made available upon request to the company’s Secretary . There is a constructive working relationship between the Board and management, and the Board provides valuable advice and counsel to management. While there is no regular schedule for discussion of environmental and social responsibility topics, the CEO brings up potentially material topics with the Board members whenever appropriate and relevant to the company’s strategic planning and decision making. The directors have the skills, competencies and experience that allow the Board to oversee and monitor critical activities and results of the company, including those related to sustainable development. The process to determine qualifications of board members depends on what is needed at the time and is not based on a checklist of specific standards. Instead members are selected based on their individual business knowledge and skill set. The Board Affairs committee regularly reviews the size and members of the Board . The Board’s Compensation and Organization Committee recommends to the Board the election and compensation of officers and, in addition, evaluates the performance of the CEO and other named executives. Meeting with external compensation consultants, this committee bases its recommendations on a variety of factors including the ability to fulfill company objectives and goals. The CEO represents the Board and the company in relations with external constituencies and company employees. Direct inquiries from external constituencies or employees are referred to the CEO or the Lead Director, as may be appropriate. The CEO must ensure that shareholders have adequate opportunity to express views or seek information about the company, and periodically reports significant discussions with shareholders to the Board . The CEO must report to the Board any requests from external constituencies or employees to meet with the Board or any group of Directors. Further information on Committees and Charters can be found in the Investor Relations section of our website, www.cliffsnaturalresources.com. Business Risks Cliffs Natural Resources has in place systems designed to minimize both economic and operational risks. In addition to our strong health and safety standards, we have identified and created policies to mitigate our risks in current and potential investments. We look at exchange rate, pricing, interest rate and liquidity risks involved with our business operations, and investor relations. The precautionary approach is used whenever we deal with environmental affairs as well. At all of our operating sites, employees actively incorporate potentially dangerous or detrimental affairs into our environmental management plans. Externally Developed Charters We are committed to upholding the values associated with the Universal Declaration of Human Rights, to ensure safety and human rights are protected wherever we operate . 9 External Associations Cliffs Business Improvement Process Supports Sustainability Goals Cliffs Natural Resources has an active membership in the following organizations. Our involvement with these groups is an integral part of our business strategy by connecting us with peer companies and important external stakeholders: › Alabama Coal Association › American Iron and Steel Association › Chambers of Commerce in Michigan, Minnesota and Ohio › Minnesota Iron Mining Association › National Association of Manufacturers (U.S.) › National Mining Association (U.S.) › West Virginia Coal Association › Western Australian Chamber of Minerals and Energy (CME) Our Business Improvement methodology has been integrated into all areas of our company’s operations. We use this Six Sigma-based process to find, analyze and improve on opportunities in our systems. As a result, we saved $40 million last year alone. In addition to reducing costs, this process helps eliminate waste and maximize productive use of our resources – critical elements of our sustainable development approach. Identifying gaps in performance and understanding the relationships between processes and their outcomes is an important part of utilizing the Six Sigma process. The underlying philosophy is that significant gains can be achieved through incremental improvements, rather than seeking one major “silver bullet” for an entire company. Teams composed of individuals who know the Six Sigma process share their knowledge and training with other teams. This collaboration helps catalyze new ideas and becomes a valuable part of the solution. With over 200 Green Belts and 35 Black Belts trained in Six Sigma last year, we have already seen the following benefits and we expect to find more ways in the coming years to eliminate waste and find opportunity: › Safety - Our streamlined management approach allows for quicker improvements and improved metrics. › Maintenance and Reliability - Six Sigma management has resulted in up to 50% reduction in time needed for operational shutdowns. › Environmental - We have decreased fuel usage by 5% simply by exposing and eliminating inefficiencies in furnace management. › Materials and Supply Chain - We have analyzed our warehouse inventories and identified modified practices to reduce costs and improve our inventory accuracy. › Operations – New design of work areas has led to increased employee satisfaction and safer work environments. 10 Code of Business Conduct and Ethics Our Code of Business Conduct and Ethics (“Code”) reaffirms the company’s commitment to ensure all employees and contractors are aware of the highest standards and basic principles of business conduct and ethics, integrity and compliance reporting in accordance with all applicable laws. The substance of the Code is intended to protect and enhance the company’s integrity and reputation by maintaining the highest degree of honesty in all business relationships. The Code incorporates our Business Ethics Policy Statement and Core Values Statement, setting forth a common set of values and standards to which all of the company’s employees are expected to adhere. These values and standards address three areas. › Compliance with Laws and Regulations: The company’s responsibility to abide by the laws that apply to our business wherever we operate . › Business Conduct: The company’s obligation to conduct internal and external business fairly and ethically. › Relationships: The company’s responsibility to interact fairly and respectfully with its customers and suppliers, and its host communities, and our employees’ responsibility to treat each other with the same fairness and respect, at all levels of the organization. All employees and agents will act with the highest ethical and moral standards. We comply with all rules, laws and regulations in the communities where we operate . Employees and Directors of the company must avoid situations that may create a conflict between their personal interests and the interests of the company . Cliffs Natural Resources encourages public participation from our employees. This can include supporting political candidates of their choice . However, our Code of Business Conduct explicitly states that endorsements of a political candidate using company funds is prohibited, and no direct or indirect company endorsement of a particular party is allowed. Our Code effectively states our position on anti-competitive behavior. Activities or understandings between competitors to limit marketplace capabilities or to affect matters such as price, sale, production and distribution are usually illegal. Any instance of potential anti-competitive behavior is brought to the attention of the company’s General Counsel for outside consideration if necessary . The company requires all employees and contractors to fully comply with our Code of Business Conduct. Employees violating this Code intentionally or by a pattern of negligence are subject to disciplinary action, including discharge or other legal action . Cliffs shall cease transacting business with a supplier or agent who violates this Code intentionally or exhibits a pattern of negligence in compliance with the Code. Child Labor Our Code of Business Conduct requires that Cliffs act in compliance with the laws that apply where we operate. In our North American operations, our Code means obeying child labor laws in every U.S. state and Canada. All applicants for employment in our North American business must fill out an application that requires them to certify they are 18 years of age or older. In North America, we have no employees at any location that are less than age 18, nor have we made application under any state laws to hire individuals under age 18. In addition, all prospective employees must fill out an “I-9 form” and demonstrate they are legally eligible for employment in the United States. This requires a passport or valid drivers license to certify the age . In our Australia Iron Ore business unit, we do not have any employees under age 18. In the event a prospective employee was age 17 or less, Cliffs would apply to the Australia Department of Education and Training. The Department would then review the proposed position to ensure it would provide the best opportunity for the minor. Cliffs would also obtain written consent from the parent/guardian of the minor . 11 Civic Engagement and Lobbying Public Policy Initiatives Cliffs encourages employee participation in public affairs by supporting, volunteering for and contributing to the political party and candidates of the employee’s choice . However, endorsements, the use of company funds and resources, or other indications of support by the company to candidates for elective office of any domestic or foreign government are prohibited, even where such endorsements, support or contributions are lawful. Cliffs’ political action committees are separate, segregated funds permitted under election law and supported by voluntary contributions from Cliffs employees. In 2008, Cliffs’ political action committees contributed almost $50,000 to candidates for state and federal office. Cliffs participates in lobbying activities, directly and indirectly, for legislation and public policy initiatives that support our efforts to be a more financially sustainable company . These activities are permitted by law and company policy. Contributions in support of non-partisan referendum issues are permitted in states where not prohibited by law. At our iron ore operations in Australia, Cliffs closely follows policy discussions regarding biodiversity conservation and the assessment and permitting of mining operations . We support positions that are consistent with our Core Values and our commitment to sustainable development. We have actively lobbied for the accommodation of biodiversity conservation areas and resource extraction, balancing these sometimes conflicting interests on the basis of sound science . In 2008, Cliffs lobbied on U.S. federal climate change legislation to ensure proper consideration is given to energyintensive, trade-exposed industries, such as iron ore mining and processing . Without enhanced treatment under greenhouse gas regulations, industries such as low-grade iron ore mining and processing could be subject to substantial increases in costs resulting in the transfer of production and jobs to countries that do not regulate greenhouse gas emissions . Cliffs also lobbied both directly and through trade associations on a number of issues. In particular, the company lobbied for clarification of certain provisions in a federal asbestos ban bill that could have improperly classified non-asbestos form mineral fibers and jeopardized Cliffs’ ability to mine and process iron ore . At the state level, Cliffs successfully lobbied in opposition to a proposal in Michigan to place a five percent severance tax on metallic minerals. This proposal would have imposed a substantial additional tax burden on Cliffs’ Michigan operations. Cliffs also worked in cooperation with the Lake Carriers Association to influence regulations intended to control the introduction of new aquatic invasive species into the Great Lakes system. Of specific concern was the inclusion of lake vessels along with ocean going vessels in the requirement to treat ballast water. Lake vessels that operate solely within the Great Lakes pose no threat to the introduction of aquatic invasive species . Dredging of the Great Lakes has been a major concern for Cliffs’ operations and its customers as ports are becoming increasingly difficult to maneuver and heightened sediment levels have hindered the company’s ability to fill ships to capacity. In 2008, Cliffs joined with other concerned interests to advocate for increased dredging and maintenance of our Great Lakes shipping lanes and ports. In both Michigan and Minnesota, Cliffs sought tax incentives and government assistance for the construction and development of renewaFUEL biomass commercial demonstration facilities. In Michigan, Cliffs was successful in extending a tax renaissance zone for a planned renewaFUEL facility in Marquette County and received a Community Development Block Grant from the Michigan Economic Development Corporation to support development of the facility. In Minnesota, renewaFUEL was awarded a loan guarantee from the Iron Range Resources Board for the establishment of a biomass facility in Northeast Minnesota. 12 13 Embracing Environmental Stewardship Cliffs’ commitment to environmental stewardship is one of the company’s Core Values, embodied in our approach to become more environmentally sustainable, codified in Cliffs’ Environmental Policy and executed in our environmental management systems . Environmental Stewardship… Going beyond compliance... being socially responsible... anticipating and addressing potential impacts before they occur... personal accountability... operating to preserve the environment for future generations . Within that commitment comes a growing understanding that sound environmental stewardship is not only an imperative associated with corporate sustainability, but a dynamic process interrelated with numerous internal and external factors. It is these changing business, social and other factors that require Cliffs to maintain a continual effort that consciously focuses organizational resources on past, present and future environmental-related impacts. Our journey and some of our accomplishments are highlighted in this report in four key themes: › Choosing the environmental sustainability approach; › Managing climate change risks; › Integrating sustainable land practices; and › Reducing our environmental footprint. Choosing the Environmental Sustainability Approach While achieving environmental sustainability remains a challenging goal for any corporation, Cliffs has embraced a management approach that goes beyond traditional or regulatory-driven decision-making to integrate economic, environmental and social considerations for long-term success and sustainability. With respect to some of these considerations, Cliffs continues to focus and make progress in three key areas: 1. managing our environmental impacts; 2 . partnering and communicating with stakeholders; and 3. developing more environmentally sustainable products. Realizing Benefits of EMS for Improving Environmental Performance Northshore Mining began developing its Environmental Management System (EMS) in 2000 and was first registered to the ISO 14001 standard in 2003. The company worked with a number of consultants and educators to find the best way to understand and identify its interactions with the environment, both positive and negative, and then set priorities for dealing with them. Establishing the EMS has resulted in several benefits: › Regular management review meetings have increased understanding of environmental issues among the plant managers, both for daily operations and for considering the environmental implications of process changes. › Hourly and salaried employees are more aware of the environmental consequences of their jobs, and more likely to bring up solutions to environmental problems. › Employees have a common resource for environmental information, instead of relying on a few staff members. › Contractors are more aware of the environmental impacts of their jobs and more likely to ask for guidance. › A Corrective/Preventive Action Request system tracks problems and their solutions. › Improved housekeeping and waste management have reduced the risk of government agency citations. Managing our Environmental Impacts Mining and mineral processing make a vital contribution to development throughout the world by providing the essential raw materials for products necessary for modern society. Cliffs recognizes that extraction and processing of the earth’s mineral resources must be accomplished in a responsible manner that minimizes impacts on the environment and the community. As environmental-related issues grow in quantity and complexity, Cliffs, its regulatory stakeholders and other environmental stakeholders continue to raise the bar for improved environmental solutions and performance. For this reason, Cliffs is investing heavily in building an environmental management infrastructure that will facilitate sound management in the growing, dynamic environmental field. › As a result of spill response awareness training, spill response and reporting has improved; although more spills are accurately reported than six years ago, the volume of material lost to spills has decreased. › Less hazardous waste is generated, and it is better managed, thereby reducing the company’s environmental risk. A vital part of the EMS is the internal audit program. The internal audit team includes both hourly and salaried employees, drawn from a pool of operations, maintenance, administrative and engineering staff. The team has been very helpful, not only in looking for ways to improve the company’s environmental management, but also as an educational tool. At Northshore, the EMS has matured to the point that nuts-and-bolts issues, such as knowledge of procedures and document control, are fully integrated into daily operations. Typical areas for improvement now include broader issues such as comprehensive emergency preparedness and awareness, improved training methods and opportunities for reducing costs while improving performance. Environmental Management Systems Providing a Framework for Sound DecisionMaking and Continual Improvement At Cliffs, business management and environmental management are not discrete objectives and must be managed together. Established Environmental Management Systems (EMS) provide a foundation for effective planning and execution of all objectives in a balanced fashion that is consistent with corporate values. For this reason, we have a CEOdriven, companywide effort to establish environmental management systems in conformance with the internationally recognized ISO 14001 standard . In 2008, Cliffs was proud to announce that our Tilden, United Taconite and Hibbing 15 Taconite operations all achieved ISO 14001 third-party certification — joining Northshore Mining, which has maintained certification since 2003, and our iron ore mining complex in Koolyanobbing, Western Australia. We expect that all of our U.S.based operations will achieve ISO 14001 certification in the near future. Information Systems Enhance Management of Environmental Performance To facilitate monitoring of emissions and operating parameters, we incrementally install integrated information technology that will make up a sophisticated Environmental Information Management System (EIMS). Our EIMS will provide the analytics, tracking mechanisms, reporting systems and task management to enable Cliffs to most effectively manage compliance, focus on environmental improvement opportunities and provide solutions for efficient, accurate environmental management. Specifically, Cliffs is in the process of implementing several integrated databases in its EIMS that include tracking and reporting greenhouse gas (GHG) emissions, carbon reduction projects, air emissions, water effluents, waste generation and disposal, spills, notices of violation, corrective action plans from audits, maintenance of pollution control equipment and other EMS parameters . Our EIMS includes a task manager, an intranet library of information and best practices, and escalating email notification to help facilities manage environmental issues while providing corporate oversight . Environmental Expenditures: Investments and Fines The company invests significantly to manage environmental impacts. Our environmental expenditures include waste management, emissions control, remediation, employee training, research and development and more. In North America, which represents a significant majority of our operations, our capital expenditures relating to environmental matters were $7.3 million, $8.8 million and $10.5 million in 2008, 2007 and 2006, respectively. Compliance with all applicable regulations is the minimum acceptable performance for all Cliffs operations. We regularly monitor all our sites’ legal compliance with national, regional and local environmental regulations. The company investigates any instances of nonconformity and implements corrective actions to prevent their recurrence. Cliffs accounts for monetary fines, non-monetary sanctions and dispute resolution settlements in the year the issue was resolved. 2006 Number of non-monetary sanctions Number of dispute resolution settlements Total $ value of significant fines (>$100,000) 0 0 0 2007 3 0 0 2008 1 0 0 Cliffs’ Pinnacle Facility Initiates Stream Partnership Program in West Virginia Another example of working with stakeholders on mutually beneficial programs is the new stream partnership program at Cliffs’ Pinnacle facility in West Virginia. Cliffs employees, the West Virginia Department of Environmental Protection (WVDEP), the Upper Guyandotte Watershed Association and Wyoming East High School initiated a cleanup of Pinnacle Creek in Fall 2008, removing 80 tires and almost 2.5 tons of additional trash. Partnering and Communicating with Stakeholders Environmental issues are very often complex, requiring careful management of compelling—and sometimes competing— economic, social, legal and scientific considerations. As Cliffs strives to find solutions to balance these interests, we lean heavily on a practice of partnering and communicating with interested stakeholders. Cliffs is ever mindful that successful, long-term solutions to environmental challenges are best met through partnership opportunities with a foundation of credibility that comes with regular and transparent communications. 16 United Taconite Green Production Project The Green Production Project at United Taconite epitomizes the power of partnering for environmentally sustainable decision making. In 2008, the Minnesota Pollution Control Agency (MPCA) was working hard to incorporate regional haze solutions into its air quality plans. A traditional approach to reducing regional haze emissions at United Taconite would likely have included pollution controls that might not be considered economically feasible in most applications and would provide limited emission reduction opportunity. Faced with this realization, Cliffs and MPCA representatives partnered to find a way to redesign the facility in Forbes, Minnesota, that would provide greater emission reductions. Cliffs committed to make substantial capital improvements to the facility, including a retrofit to allow burning of lower-emitting fuels and the addition of new emission control equipment. The project will allow enhanced fuel blending and the use of lowersulfur coal and biomass, resulting in substantially less use of petroleum coke and natural gas. The estimated environmental improvements from the Green Production Project are substantial: for each ton of iron pellets produced, there could be a 14% reduction in mercury emissions, 30% reduction in GHG emissions and 37% reduction in emissions of sulfur dioxide, nitrogen oxides and particulate matter. These reductions will allow the facility to increase production from approximately 5.3 million long tons to 6 million long tons per year, adding 24 new jobs, while still reducing annual air emissions and helping MPCA address the state’s regional haze issue. Developing an Environmentally Sustainable Product Cliffs is proceeding with an eye toward the future, looking beyond its current asset mix and traditional environmental management. Nowhere is this sustainable approach more evident than in Cliffs’ research and development of renewaFUEL’s environmentally sustainable biofuel cubes. By utilizing life-cycle product analysis and long-term thinking, Cliffs is positioning itself to offer a product that will not only make its own facilities more sustainable, but has the potential to reduce environmental impacts for new customers . In 2007, Cliffs invested in renewaFUEL LLC, an alternative energy company that will produce high-quality, low-emission biofuel cubes for Cliffs’ iron mining and processing operations, as well as other industries in Minnesota, Michigan and other Midwest states . renewaFUEL produces dense fuel cubes made from renewable components, such as corn stalks, switchgrass, grains, soybean and oat hulls, wood and wood byproducts . Combustion of renewaFUEL’s biofuel cubes presents significant benefits: › Generates about the same amount of energy as burning coal from the Western United States › Emits 90% less sulfur dioxide than coal combustion › Emits 35% less particulate matter than coal combustion › Generates about 35 times the energy required to produce and transport the biofuel cubes In addition, the feedstock inputs are considered biogenic carbon, meaning they are already part of the natural carbon balance and will not add to atmospheric concentrations of carbon dioxide, making combustion of the cubes “carbon neutral” under most existing carbon dioxide registry and trading programs . Carbon neutral fuels are those that release no new carbon dioxide into the atmosphere. Fossil fuels increase the carbon dioxide in the atmosphere by taking carbon, which was previously sequestered in fuel deposits underground, and releasing it into the atmosphere when the fuel is burned. Plant-based fuels like renewaFUEL, on the other hand, are considered carbon neutral because plants utilize carbon dioxide from the atmosphere to build their mass as they grow, and this carbon is released back into the atmosphere when the plant matter is burned. renewaFUEL not only represents opportunities within Cliffs’ operations to reduce GHG emissions, but also presents significant opportunity to reduce GHG emissions of external customers by serving as a potential substitute for coal and natural gas. 17 Managing Climate Change Risks and Opportunities Developing and Sharing Our Understanding of a Critical Issue Although the factors that drive climate change are complex, it has become increasingly clear that the growing utilization of fossil fuels has created legitimate climate change concerns. To best develop our understanding of climate change, Cliffs has engaged independent expert consultants for more than a year to advise senior management and assist in the development of Cliffs’ comprehensive GHG strategic plan. The plan is designed to be a holistic and fluid guideline for Cliffs to effectively manage climate change issues, including the risks and opportunities as they relate to the environment, stakeholders (including shareholders and the public), legislative and regulatory developments, operations, products and markets . Quantifying Our Greenhouse Gas Emissions and Related Risks As an energy-intensive business, Cliffs’ GHG emissions inventory captures a broad range of emissions sources, such as iron ore furnaces and kilns, coal thermal 18 driers, diesel mining equipment and a wholly owned power plant, among others. Our emissions have increased over time, reflecting increases in our production. Over 99% of the company’s total 2008 emissions were produced through Cliffs’ North American Iron Ore business segment, which burns natural gas or coal in the process of producing blast furnace pellets. Reporting Our Greenhouse Gas Emissions Consistently and Transparently In developing a better understanding of our GHG emissions, we pledge to share our data, plans and viewpoints in a transparent manner, and we welcome input from all stakeholders. Cliffs is proud to be a founding member of The Climate Registry, a nonprofit organization that facilitates transparent reporting of GHG emissions . Through our participation in the registry, we commit to voluntarily measure, independently verify and publicly report our GHG emissions on an annual basis utilizing The Climate Registry General Reporting Protocol, which is based on the internationally recognized GHG measurement standards of the World Resources Institute and World Business Council on Sustainable Development. The Climate Registry Tier B method was used to report each U.S. facility’s GHG emissions . This method uses published GHG emission factors based on the fuel and energy types utilized by each facility. For the Canadian and Australian operations, GHG emissions were calculated using each country’s established GHG statutory reporting protocols. Along with sharing our data with stakeholders, Cliffs engages various stakeholders in dialogue on mandatory carbon legislation, business growth opportunities, current opportunities for GHG emission reduction with existing operations, and development of new, more sustainable products and technologies. Considering the Solutions – a Message from the Chief Executive Officer Climate change is a complex issue that has the potential to have a tremendous impact on the environment, our business, our shareholders, our customers, and the U.S. and global economy. Without question, the issue encompasses countless layers of differing assumptions, variables and beliefs – layered with complex considerations of disparate impacts, international fairness and economic viability. With that understanding comes the realization that with the complexities and uncertainties associated with the U.S. and global navigation of the climate change issue as a whole, one of Cliffs’ biggest risks for the future is the ultimate shape of mandatory carbon legislation in the United States. Despite these uncertainties, the concerns about climate change and its impact on the environment are legitimate. For Cliffs, these issues will soon become more tangible challenges because iron ore mining in North America is a carbon-intensive business that is potentially subject to dramatic regulatory risk. Although there are only eight domestic iron ore mines left, for over 160 years Cliffs has re-invented itself to continue to serve our nation — literally as the backbone of our national infrastructure, national defense capability and manufacturing economy. As an organization with a bias for action, Cliffs is taking targeted and proactive steps to reduce our greenhouse gas emissions today that will continue to foster a more sustainable business in the future. While we are taking these steps with the good of the environment, the public, our customers and our shareholders in mind – we also are compelled to share with policy makers the projected impacts associated with mandatory carbon regulation in the United States. These critical policy decisions must be made commensurate with our nation’s ability to reduce carbon emissions in a manner that balances the overall risks to the environment, domestic energy security, economic security and national security. One key point that Cliffs believes must be considered is that in the currently contemplated free market capand-trade system, our industry will always have the business incentive to reduce our carbon-related emissions – regardless of how the regulatory burden is allocated. With that concept, we’ll continue to engage stakeholders to ensure the economic sustainability of the iron ore mining industry is considered as our policy makers navigate the inter-related impacts from their decision-making. In sum, we want to reiterate that Cliffs acknowledges and accepts the need for action to address climate change issues responsibly. We also understand there will be differences of opinion on how best to formulate that program – and these differences of opinion should not hinder our efforts as responsible corporate citizens to engage in proactive steps. To that end, Cliffs pledges to pursue two important climate-related corporate actions: 1) Actively employ internal and external resources to continue reducing greenhouse gas emissions, as well explore new ideas, technologies and products that will contribute to significant reduction of greenhouse gases both inside and outside of Cliffs’ direct carbon footprint; and 2) Engage in forthright and meaningful dialogue with key industry and policy decision-makers and all other stakeholders to facilitate the development of a fair and sustainable approach that balances risks to the environment, our economy, our nation and our world. Joseph A. Carrabba Chairman, President and Chief Executive Officer Photograph by Kevin EuDaly 19 Total Greenhouse Gas Emissions (million metric tons CO2e) 8 3.60 3.30 Total Greenhouse Gas Emissions (CO2e per metric tons of production) 0.20 0.18 Coal Mine Methane Recovery (thousand metric tons CO2e) 800 700 7 6 5 3.46 0.17 0.16 0.15 600 529 500 4.01 4.36 4 3 2 1 0 0.10 400 300 227 79 394 192 3.38 0.05 Indirect Direct 06 07 08 0 200 100 06 07 08 0 03 04 05 06 07 08 Note: tons CO2e recovered are verified per Chicago Climate Exchange protocols and thus Cliffs does not account for recovery until an area is mined (i.e., 2007 and 2008 data will continue to grow) . Acting Now for Greenhouse Gas Emission Reductions Today and Tomorrow With Cliffs’ public acceptance of our obligation to effectively manage carbon risks comes the responsibility to back up that claim. We investigate and pursue opportunities to provide more greenhouse gas friendly operations and products that prepare Cliffs to become a more environmentally sustainable corporation. Embracing Energy Efficiency Cliffs’ core business, supplying iron and metallurgical coal to the world’s steel mills, requires energy in many forms – fuel to run mining equipment, electrical power for mills and heat necessary to convert iron ore in our furnaces, to name a few . To meet the challenge of maintaining efficient operations, balanced with recognition of energy effects on global warming, we have formed an interdisciplinary technical team to investigate alternative energy sources, improvements in operating technologies and innovative emission controls. Methane Capture During the mining operation, coal mine methane gas is released. Coal mine methane is a potent GHG that contributes to climate change if emitted to the Spotlight on Hibbing Taconite At Hibbing Taconite, our efforts over the past few years have produced an annual reduction of GHG emissions of well over one million pounds. Hibbing staff has accomplished these reductions through the use of higher efficiency pumps, pump downsizing, elimination of unnecessary fans and pumps, and combustion optimization improvements, among others. Hibbing’s Computational Fluid Dynamics modeling spurred combustion chamber modifications that resulted in a 10% reduction in natural gas usage. 20 656 atmosphere. Historically, the high gas content of these coals has led to large volume emissions of methane gas into the atmosphere, with methane gas more than 20 times more powerful as a global warming agent than CO2 . Cliffs’ North American underground coal mining facilities in West Virginia and Alabama have been recovering coal mine methane for several years. As a voluntary participant on the Chicago Climate Exchange, Cliffs’ coal facilities have captured over 3.5 million cubic feet of coal mine methane as qualified early emission reductions from 2003 to 2006 (and substantially more prior to the qualifying period from 1999 to 2003). With extremely efficient sur- face-drilled multilateral wells, up to 90% of coal mine methane can be recovered and sold – substantially reducing the amount of methane subsequently released during mining and conserving a local source of valuable, clean-burning energy. Integrating Sustainable Land Practices Revitalizing Habitat: Reclamation and Remediation The goal of integrating sustainable land practices at Cliffs’ mining operations is to render the impact of mining on the landscape as temporary as possible. Once mining and processing has ceased, federal, state and provincial regulations govern restoration of the mined lands, and Cliffs tries to ensure that we comply or exceed the requirements and that lands are successfully reclaimed. Recognizing that mineral deposits are finite resources, we begin planning for the closure of our mining operations from the beginning, taking into account the mineral extraction, current and ultimate landforms, water resources and management, vegetative and arboreal features and our neighboring communities. Formal plans are developed and reviewed with state resource authorities each year as the mining progresses to enable an orderly transition from mining operations to reclamation. In addition, to the extent possible with particular regard to worker safety concerns, reclamation of rock stockpiles, tailings basin berms and certain other features on mine sites is done concurrently with active mining operations. Pit development and progression affects local hydrologic conditions . Streams are intersected and a groundwater cone of depression forms around the pits as groundwater is removed to allow mining to proceed under dry conditions. Following active mining, the pits fill with water to form lakes and the groundwater returns to background elevations. The water that accumulates in the pit lakes is high quality and supports a local fishery. Upon completion of mining, the ore processing facilities are removed, the land is reclaimed, and it eventually returns to forest land. Likewise, upon closure, tailings basins are vegetated and eventually return to wetlands or forest land. 21 Wetlands are the predominant habitats that are protected on the mine sites . Impacts to wetlands are governed by federal and state regulations and, when impacted, they are mitigated by development or restoration of wetlands in new locations. The table below is based on management’s best estimates of wetlands impacted and mitigated from 2006 to 2008. Cliffs implements innovative programs to enhance reclamation and revitalization of habitat – some examples are listed below: › One of Cliffs’ proudest environmental achievements is the reclamation at the site of the former Republic Mine in Michigan . The Preserve encompasses over 2,300 acres of upland and wildlife habitat, including 679 acres of wetlands. For a more detailed account of the Republic Wetlands Preserve Project, see page 33 . › Cliffs’ Empire and Tilden mines have created significant landforms as a part of the mining process. An innovative plan developed in collaboration with Northern Michigan’s pulp- and paper-making industry utilizes the solid waste residuals from that industry as an environmentally acceptable growth medium. The program facilitates the establishment of vegetation on the area’s rocky stockpiles, while providing the additional advantage of recycling biosolids that would otherwise be landfilled. › In Canada, the Wabush Scully Mine has developed a program in conjunction with the Canadian Department of Fisheries and Oceans that focuses on fish habitat enhancement and compensation in areas impacted by ongoing mining activities . Preserving Biodiversity Mining requires access to vast tracts of land to provide the global community with the raw materials it requires to continue to progress. Cliffs welcomes its responsibility to minimize environmental impacts and preserve biodiversity . In doing so, we engage with various stakeholders to understand the current and potential uses of the land we manage, including its biological and social values. In 2008, Cliffs owned and leased a total of nearly 1.8 million acres of land. The iron ore mines and the West Virginia coal operations are located in areas of naturally occurring high biodiversity relative to the climatic conditions of their respective regions . These areas are heavily forested with wetlands, streams and lakes within and in close proximity to the mines, which provide habitat to a wide variety of birds, fish and mammals characteristic of relatively pristine settings. The North American iron ore mines are located in areas of habitat for the Gray Wolf and Canada Lynx, which are listed on the IUCN Red List as least concern and as endangered and threatened, respectively, by the U.S. Fish and Wildlife Service. Wetlands Management Statistics 2006 Wetlands Impacted (km ) 2 2007 0 .11 0 .03 12 .40 2008 0 .09 0 .09 12 .40 1 .12 0 .10 2 Wetlands Mitigated (km2) Wetlands Within Permit To Mine Boundary (km ) 12 .40 * Mitigation of wetlands not required in Canada (Wabush Mines). Preserving Rare Flora in Australia Our iron ore mine at Windarling, Western Australia, is home to the rare Paynters Tetratheca shrub. About 7,800 Paynters Tetratheca exist globally; all of them grow on one small ironstone ridge at Windarling, out of cracks in vertical cliffs and outcrops. The species can survive in quite a harsh environment: rainfall less than 12 inches per year and temperatures that exceed 122 degrees Fahrenheit in summer. Due to the fact that this plant only grows in Windarling, in conjunction with an agreement giving the company access to high-grade iron ore, Cliffs has embarked on an extensive research program to ensure the ongoing survival of the species in the wild. Botanists collected hundreds of cuttings from plants to be removed, as well as about 45,000 tiny seeds from rock crevices prior to the start of mining. The program includes continuous monitoring of the condition of more than 300 plants annually. Cliffs also commissioned two of the foremost research agencies in Western Australia, the Botanic Gardens and Parks Authority and the Science Division of the Department of Environment and Conservation. Their research confirmed that propagation from seed is the most viable method of reproducing plants for restoration and determined the method for the successful, long-term storage of seed. There are some encouraging signs in the work to date with a number of new plants surviving in a trial rock outcrop. This success is the first step in a plan to enhance the populations of Tetratheca at Windarling. Further research into the behavior and abundance of pollinators, which will affect the longer-term viability of the restoration program, is being planned. 22 Reducing our Environmental Footprint Wise Use of Energy The mining industry, including Cliffs, is extremely energy and resource intensive. For this reason, Cliffs closely tracks and manages resource use and energy efficiency. In 2008, our direct energy consumption from coal, natural gas, oil, coke and propane was 44.7 million gigajoules, a 2% increase compared to 2006. Our indirect energy use was 18.3 million gigajoules, a 12% increase since 2006. To meet the challenge of maintaining efficient operations, balanced with recognition of the effects of carbon-based energy consumption on global warming, we have formed an interdisciplinary technical team to investigate alternative energy sources, improvements in operating technologies and innovative emission controls. Direct Energy Use (million gigajoules) 50 43.96 Indirect Energy Use (Purchased Electricity) (million gigajoules) 50 44.69 40 40 30 35.83 30 20 20 16.26 17.32 0.40 10 10 0 06 07 08 0 06 07 08 Direct Energy Use (gigajoules per metric ton of production) 1.2 1.0 0.8 0.6 0.4 1.07 Indirect Energy Use (Purchased Electricity) (gigajoules per metric ton of production) 1.2 1.0 0.97 0.84 0.8 0.6 0.4 0.40 Note: factors used to convert fuel usage to gigajoules are not GRI factors, but rather from the following source: › U.S. operations: The Climate Registry › Western Australia operations: National Greenhouse Account Factors Workbook 0.2 0 06 07 08 0.2 0 06 07 08 0.40 18.26 23 Conserving Water Resources Although our operations experience few water restrictions, we recognize the global significance of diminishing water supplies and decreased water quality. Water conservation measures are integral to continued mining operations at all our sites, since large volumes of water (several thousand cubic meters per day) are required daily for ore processing. Although we withdraw significant amounts of water in some cases, management estimates these withdrawals do not cause any unacceptable impacts on the water resources. With the exception of our coal operations in West Virginia (where the state resource agency does not require a permit to withdraw mine water), all our water withdrawals are permitted by state and local government. Management estimates our taconite operations reuse or recycle approximately 97% of the water withdrawn. This water is recycled and reused many times, and typically only excess precipitation water is discharged . Accordingly, we do not believe that our operations have a significant impact on any of the water bodies from which we draw . Total Municipal and Ground Water Withdrawals (milion cubic meters) 3.5 3.0 2.5 2.0 1.5 1.0 total: 1.3 total: 1.8 total: 3.2 Total Surface Water Withdrawal and Pit/Mine Dewatering (million cubic meters) 350 313 6.77 300 250 200 150 100 Municipal water Ground water 50 0 280 6.81 295 6.88 0.5 0.0 06 07 08 06 07 08 Total Municipal and Ground Water Withdrawals (cubic meters per metric ton of production) 0.08 0.07 Total Surface Water Withdrawal and Pit/Mine Dewatering (cubic meters per metric ton of production) 8 7 6 5 0.07 0.06 0.05 0.04 0.04 0.03 4 3 2 1 0.03 0.02 Note: the vast majority of total surface water withdrawal consists of mine dewatering (as opposed to water used in our processes) . Data from North American Coal Operations is included for the first time in 2008. 0.01 0 06 07 08 0 06 07 08 24 Efficient Use of Raw Materials As the table below demonstrates, Cliffs uses raw materials and associated process materials on a very large scale. These materials are crucial for meeting the growing demand for metallics and coal among global integrated steel and coke producers. The raw materials data included in this report represent management’s best estimates for raw material use. Raw Materials(1) Iron Ore - Crude (metric tons) (2) Coal (metric tons) (3) Bentonite (metric tons) (2) 2006 86,092,685 0 261,554 1,388,488 735,056 15,561,305 2,364,861 (4) 2007 86,473,665 0 263,530 1,461,218 865,856 14,715,902 2,322,304 99,152,723 3,242,290 2008 89,873,678 5,316,606 259,287 1,398,215 976,987 13,386,426 3,101,381 107,073,599 2,997,881 Limestone (metric tons) (2) Associated Process Materials Coal for fuel (metric tons) (4) Natural Gas (gigajoules) Gasoline (liters) (4) Diesel Fuel (liters) Fuel Oil (gigajoules) (2) (4) 96,930,242 3,006,655 Raw Materials(1) (per million metric tons of production) Iron Ore - Crude (metric tons) (2) Coal (metric tons) (3) Bentonite (metric tons) (2) Limestone (metric tons) (2) 2006 2,092,718 0 6,358 33,751 17,868 378,260 57,484 2,356,154 73,085 2007 2,017,809 0 6,149 34,097 20,204 343,386 54,190 2,313,667 75,657 2008 2,086,938 1,689,895 6,021 32,468 21,142 289,681 67,114 2,317,060 69,613 Associated Process Materials Coal for fuel (metric tons) (4) Natural Gas (gigajoules) (4) Gasoline (liters) (4) Diesel Fuel (liters) (4) Fuel Oil (gigajoules) (2) (1) Data is for North America only and reflects the addition of newly acquired coal operations facilities for the full year 2008. Raw material use from Western Australian operations was de minimis and is not included. (2) This raw material is used only by iron ore operations. Normalized data is based on iron ore production. (3) This raw material is used only by coal operations. Normalized data is based on coal production. (4) This raw material is used by both coal and iron ore operations. Normalized data is based on total production . 25 Reducing Air Emissions As a responsible corporate citizen, we are aware that mining may cause pollutants to be released to air and water, and we monitor these emissions and comply with all applicable regulations. Consistent with our focus on environmental sustainability, we are actively looking for effective ways to reduce our air emissions . We continue to work toward improving operating practices, optimizing fuel usage or installing controls to minimize any health or environmental impacts from our emissions . Cooperative Approach to Reducing Mercury Emissions Mercury emissions also result from iron ore processing. Cliffs’ Minnesota operations have joined in a cooperative state-federal-industry research project to investigate possible means of reducing furnace emissions to address national and state concerns about mercury emissions from combustion sources . As part of this project, Cliffs and the other taconite mining companies in Minnesota have agreed to a voluntary 75% reduction by 2050 industry-wide, based on the 2010 Minnesota Mercury Emission Inventory taconite emission level of 841 pounds per year. If successful, this would result in a total reduction of 631 pounds per year (due to the variability of the quantity of mercury contained in each ore body, we currently cannot accurately measure the quantity of mercury emitted and must rely on estimations) . Addressing Regional Haze Visibility is important to the visitors who come to enjoy the scenic beauty of the environment that surrounds our mines . This visibility may be impacted by the air emissions associated with our activities . The U.S. EPA established Clean Air Act Class I air sheds to “preserve, protect and enhance the air quality in national parks, national wilderness areas, national 26 monuments, national seashores and other areas of special national or regional natural, recreational, scenic, or historic value.” We operate in close proximity to several Class I air sheds, which require the highest level of protection under the Act. The following Class I air sheds are located within 145 km of at least one of our mines: › Boundary Waters Canoe Wilderness Area › Voyagers National Park › Isle Royale National Park › Seney Wildlife Refuge › Sipsey Wilderness Area The most significant emissions at Cliffs’ facilities contributing to regional haze are nitrogen oxides and sulfur dioxide from process emissions and fugitive dust . As discussed in prior sections, Cliffs is actively pursuing ways to reduce process emissions – such as United Taconite’s Green Production effort (see page 17). With respect to fugitive emissions, dust from stockpiling and moving material can impact air quality and visibility. Each of our operations has comprehensive measures in place to control fugitive dust. These include daily inspections of fugitive emission sources, use of watering or foam dust control systems and other practices to minimize dust emissions. We have implemented specific practice and control measures for drilling, blasting, loading/unloading materials, unpaved roads, stockpiles, material transfer points, tailings basins and cleaning activities . When attention is required, corrective actions may include application of water or dust suppressants to roadways, mulching on basin beaches, addition of water to belt transfers or even reduction of material throughput. The company received 1, 4 and 4 notices or warnings from a regulatory agency regarding fugitive dust in 2008, 2007 and 2006, respectively. The company also received 14, 9 and 18 complaints from the public with regard to dust emissions in 2008, 2007 and 2006, respectively. Air Emissions (metric tons) 50,000 Lead* 40,000 PM2.5 VOC 30,000 CO PM10 20,000 PM SOX 10,000 NOX * emissions not visible on graph 06 07 08 0 Air Emissions (metric tons per million metric tons of production) 1,200 Lead* 1,000 800 600 400 200 0 PM2.5 VOC CO PM10 PM SOX NOX * emissions not visible on graph 06 07 08 Note: More detailed information on air emissions is provided in the data table on page 48. Reducing Waste Generation Each of our mines tracks its generation, recycling and disposal of waste. We seek to reduce waste generation and to reuse and recycle waste when possible. When recycling is not an option, we store or dispose of the waste in an environmentally responsible way, in accordance with applicable regulations. Cliffs experienced a significant decrease in hazardous waste incinerated or used as a fuel between 2006 and 2007. The large amount of generation in 2006 was due to a cleanup campaign at Northshore to remove PCB transformers and leaded open gear lubrication. The hazardous and nonhazardous waste data included in this report represent management’s best estimate . Waste generation from Western Australian operations for 2008 was de minimis and is not included. Total Non-Hazardous Waste (thousand metric tons) 100 Total Hazardous Waste (metric tons) 600 500 400 300 357.8 13.96 8.35 574.2 84.79 60 70.14 84.24 80 40 200 20 100 0 0 06 07 08 06 07 08 Total Non-Hazardous Waste (thousand metric tons per million metric tons of production) 2.5 Total Hazardous Waste (metric tons per million metric tons of production) 15 2.06 Managing Wastewater Effluents to Reduce Impacts Cliffs’ corporate standards and guidelines ensure that our facilities comply with all applicable requirements and permits regarding the treatment and management of wastewater effluents. Any water discharged is done so according to water quality compliance limits. Based on management’s understanding, no significant impacts from wastewater discharges have been identified at any Cliffs operation. 2.0 12 1.82 0.5 3 0 06 07 08 0 06 07 08 The wastewater effluents data included in the data table on page 48 of this report represent management’s best estimate. Data reflect the addition of newly acquired coal operations facilities for the full year 2008 only. Wastewater effluent from Western Australian operations for 2008 was de minimis and is not included. Note: more detailed information on non-hazardous and hazardous waste by disposal method is provided in the data table on page 48. 6.59 1.0 1.64 1.5 9 6 304.3 27 Preventing Spills Cliffs is committed to the prevention of spills from our operations. Unfortunately, large volumes spilled in 2007 and 2008 represent what Cliffs believes to be anomalies related to isolated spills that occurred in each respective year . In 2008, we experienced more than one tailing release at the Tilden mine in Michigan. Our largest historical spill occurred in 2007, when a one million gallon release from a Tilden pipeline safety siphon vent discharged tailings into a wetland and red water into Warner Creek and the Escanaba River . The company has put extensive changes in place to prevent recurrence of this type of release. The spills data included in this report represent management’s best estimate . Spills data from Western Australian operations for 2008 was de minimis and is not included. Cliffs facilities continue to focus on spill prevention, which has been made part of the key environmental performance metrics Number of Spills 200 179 Spill Volume (cubic meters) 12000 10000 8000 6000 4000 11,339 100 159 150 171 50 180.5 2000 0 0 06 07 08 06 07 08 at all its facilities. One example of continual improvement efforts related to spill prevention is at the Northshore operation in Silver Bay, Minnesota. Employees participate in environmental training at least twice per year: once for the entire plant and once for their specific department. This training has all employees looking for ways Cliffs can improve its environmental commitment . We have increased the inventory of spill response equipment and improved its locations so spill responders can access supplies more quickly. Since making these improvements, Silver Bay has seen a significant decrease in the number of spills per year. 28 3,895 Environmental Management Synopsis Goals Cliffs has numerous environmental goals throughout all levels of the organization in the following broad categories: › Managing the environment in a sound fashion › Partnering and communicating with stakeholders › Developing sustainable products › Managing climate change risks and opportunities › Integrating sustainable land practices including revitalizing habitat and preserving biodiversity › Reducing our overall environmental footprint related to: › Energy use › Water conservation › Raw material use › Air emissions › Water discharge › Waste generation › Spills Cliffs is proud of our 2008 performance with many of these key goals. Please refer to the text in the Environmental Section of this Sustainability Report for a transparent and detailed account of our performance. Our objectives in 2009 are to continue to demonstrate improvement in meeting our environmental goals, including: › preparing and managing our greenhouse gas risks and opportunities through the implementation of our comprehensive greenhouse gas strategic plan; › implementing enhanced compliance procedures for improved performance with leading and lagging indicators as driven by exceeding our Cliffs-wide environmental compliance metric; and › partnering with stakeholders to obtain new, environmentally sustainable permits at various locations. Policy The Cliffs Environmental Policy was last updated in January 2008. It is available on the company’s website at www.cliffsnaturalresources.com. Key Successes and Challenges Cliffs’ key successes are documented in the Environmental Section of this Sustainability Report. Of particular note are the Green Production Project resolution at United Taconite; the ISO 14001 registration of our Tilden, United Taconite and Hibbing mines; the completion of Cliffs’ Comprehensive Greenhouse Gas Strategic Plan; and the identification of several opportunities to reduce greenhouse gas emissions . Key challenges that remain for Cliffs revolve around the need to continue to improve our Environmental Information Management System, spill incidents at our Michigan operations, and blackwater discharges at our Pinnacle mine in West Virginia. Organizational Responsibility Cliffs’ organizational responsibility for environmental management is omnipresent throughout the company and all its operating subsidiaries . At the heart of this organizational focus lies the structure of Cliffs’ commitment to environmental stewardship. Our Vice President, Public and Environmental Affairs, holds the most senior position with operational responsibility for environmental aspects. He reports to the President, North America Business Unit, who in turn reports to the Chairman, President and Chief Executive Officer. Major Organizational Risks and Opportunities Cliffs’ most significant environmental risk is associated with climate change and the uncertainty surrounding mandatory greenhouse gas regulation – particularly in the United States. Cliffs’ most significant opportunity lies with the development of its renewaFUEL biofuel cube product (see more information on page 17). Training and Awareness Environmental training and awareness remains a constant focus for all our operations. At Cliffs, these training requirements are captured in our environmental management systems. Monitoring and Corrective Action Cliffs employs numerous and varying resources for monitoring and corrective action, including but not limited to: › › › › third-party compliance audits third-party ISO 14001 registration audits internal facility self-assessments internal business auditing of environmental issues › quarterly reviews on material environmental issues and environmental reserves › Environmental Information Management Systems › Third-party verification of greenhouse gas offset projects Major Changes to Improve Performance Major changes occurred in 2008 with ISO 14001 third-party certification and the installation of integrated information technology that will make up a sophisticated Environmental Information Management System . More information can be found on page 16 of this report. 29 Promoting Sustainable Development in Local Communities Cliffs Natural Resources Inc. is committed to being a respectful member of the communities in which we operate . As a global mining and natural resource company, Cliffs has core values of both environmental and capital stewardship, and our colleagues across the globe endeavor to have open, transparent relationships with all of our stakeholders. With the growth of our company over the years, we have accelerated our investments in environmental stewardship and pollution prevention. We are actively engaged in innovative projects and programs that will enhance our environmental performance while stimulating economic growth and community development – a positive outcome for Cliffs, our customers and local communities that reflects the essence of sustainability. Management Approach Our ability to mange the social impacts of our company both inside and outside our fenceline has a direct impact on the success of our business. Building successful relationships with the communities in which we operate and the customers who use our products helps preserve our license to operate. Our Code of Business Conduct and Ethics addresses the company’s responsibilities to interact fairly and respectfully with our customers, suppliers and host communities. We comply with all rules, laws and regulations in the communities where we operate . By engaging with stakeholders, Cliffs understands the key issues affecting the communities in which we operate . Working with communities is a two-way street, and our goal is to communicate and cooperate in a variety of ways – providing financial support for local programs and institutions as well as expanding educational and economic opportunities . The actions of our employees are a reflection of our ability to meet our commitments, making the many employees that serve as sports coaches, civic leaders and volunteers a vital link to the communities where we operate . Community outreach is an important aspect to Cliffs’ management approach. We engage with the community through active participation in local government, media, memberships, schools, colleges and service organizations, to name just a few . We participate in meetings with city commissions, county commissions, boards of education, township boards, economic development groups and chambers of commerce. Occasionally, issues arise and as a practice are dealt with through faceto-face meetings within the communities affected . Organizational responsibility for community engagement resides within each of our operating facilities, with support from the Public Affairs department. The most senior position with operational responsibility for community relations in North America is the Vice President, Public and Environmental Affairs, who reports to the President, North American Business Unit. In Asia Pacific, it is the Senior Human Resources Officer reporting to the Chief Executive Officer and Senior Vice President and Managing Director. Local management develops engagement programs that are appropriate for their specific communities and provides training and awareness to employees on their roles and responsibilities regarding community relations. Monitoring of performance occurs at the local level, with corporate oversight on key issues to ensure that local needs are addressed . Through newspaper advertising, tours of our operations and regional television advertising in some of our mining areas, we help raise awareness of our approach to community relations. For employees, our internal newsletters at the operations level discuss public affairs and community relations activities, and we use a variety of methods, including e-mail, mailings, quarterly meetings, presentations and electronic display monitors to share information on a company-wide, sitespecific or department-specific basis. The most senior position responsible for customer relations in North America is the Executive Vice President, Commercial, who reports to the President, North American Business Unit. In Asia Pacific, it is the Vice President of Sales, Marketing and Strategy, who reports to the Chief Executive Officer and Senior Vice President and Managing Director. Each business segment monitors its own customer requirements and needs . Our focus is on understanding and minimizing negative impacts, responding to community concerns as quickly as possible and turning those issues into opportunities for positive change . The most common issues our North American Iron Ore sites encounter are complaints regarding blasting, fugitive dust emissions and visual aesthetics . In the case of blasting, each site has employees trained to investigate and respond to complaints, and we utilize the most up-to-date technology to manage blasting. At our Michigan iron ore mines and United Taconite in Minnesota, for example, switching to an electronic blasting technique resulted in more accurate blasts, reduced vibrations and decreased impacts on the community. The improved blasting controls have led to other optimizations, such as new explosive products that reduce air and dust emissions, to further reduce the impacts of blasting on the community (see more information on page 47). While every tactic possible is deployed to keep dust emissions to a minimum (see environmental section of this report), there are still instances where community members are affected. We actively encourage both employees and residents to report any substantive issues regarding fugitive dust so they can be immediately addressed . We have an ongoing program in Michigan to provide the townships of Richmond and Tilden $25,000 annually to each township to administer house washing programs . This program has eliminated requests and complaints. Other Cliffs’ operations handle such needs and requests on a case-by-case basis. In cases where our operations are in close proximity to residential areas, rock stockpiles can impact views. Our concurrent reclamation plans take into account how the piles are developed to minimize both current and future community view concerns. We place particular focus on replanting rock faces that impact the public viewshed. 31 Addressing Common Community Issues As with any major mining and natural resources operation, our business may have an impact on local communities. Community Relations in Western Australia Cliffs places a high value on being a responsible corporate citizen in Western Australia. The company’s community relations has had a positive impact not only in the Perth metropolitan area where the business unit office is located but in the communities that are crucial stakeholders to our Iron Ore operations at Koolyanobbing, Windarling / Mt. Jackson and our export operation from the Port of Esperance. Cliffs builds and enhances relationships with community stakeholders through developing specific projects and initiatives, particularly our university vacation student placements at Koolyanobbing mine site. We also support community events such as mining conferences, Esperance Port Authority Open Day and the Esperance Festival of the Wind. Cliffs consults with the community and communicates formally through a number of forums, meetings and committees. A notable example is the Koolyanobbing Operation’s Community Reference Group (CRG), a committee formed under a Ministerial requirement as a condition of our mining approval for Koolyanobbing and Windarling / Mt. Jackson operations. The CRG provides a forum for the company to share information relating to mining proposals and the management of environmental issues. Throughout 2008, we contributed nearly AU$225,000 (US$157,117) in donations. Some of the recipient organizations included The Centre for Cerebral Palsy, Juvenile Diabetes Research, Southern Cross District High School, Police and Community Youth Centre, Princess Margaret Hospital and the Esperance Chamber of Commerce and Industry. In addition to sponsorship and donation Cliffs tries to maximize opportunities for local communities to participate in our business. Koolyanobbing mine has a large number of employees hired from the local region and purchasing local goods and services is in practice. Cliffs operates with full regard to legislative requirements for ensuring heritage areas are respected and due process is followed. We engage in open and constructive consultation with indigenous groups that have traditional relationships with the areas of mining activity. Mutually beneficial agreements with indigenous groups provide for economic sufficiency, identification and protection of heritage sites, and the development and implementation of cultural awareness programs for our employees and contractors. Giving Back to Our Communities As the principal employer in many of the communities in which we operate, the decisions we make can have significant effects. By working closely with our communities and becoming a valued member, we believe we can be part of their long-term success. County’s Habitat for Humanity at greatly reduced prices. This allowed the organization to take full advantage of specific grant offerings. Many of the lots are now occupied by single family homes. In October 2008, the Republic Wetlands Preserve was officially opened to the public. Cliffs conveyed to the State of Michigan a perpetual conservation easement on the land, making 2,300 acres of upland and wildlife habitat and several miles of trails available for recreational use (for more information, see next page) . › Minnesota – The company recently provided land for new baseball fields as well as railroad crossings for a national shoreline trail under development between Beaver Bay and Silver Bay. › West Virginia – The Hatfield-McCoy Trail System extends for hundreds of miles, attracting ATV enthusiasts from across the United States. The trail system relies on privately owned property, with about 80 miles of trails on property owned by our Pinnacle Mining Company, one of our North American Coal subsidiaries. The system has a significant positive impact on the communities surrounding Cliffs’ coal mining operations by supporting campgrounds, motels, ATV outfitters and numerous other small businesses that have sprouted up and grown along with the summertime influx of ATV riders. Cliffs is currently working towards managing its approximately 85,000 acres of forest lands in Michigan and Minnesota in a more sustainable manner. Approximately 15,000 acres of the 42,000 acres in Michigan are currently enrolled in the Commercial Forest Reserve program. In 2008, Cliffs conducted a general review of all its land holdings and identified acreage that will eventually be submitted for national certification for sustainable forest management . Providing Land Access to the Public By its very nature, extracting minerals requires occupying large tracts of land, often removing this valuable space from public use. We make every effort to return this land to public use as quickly as possible. In addition, Cliffs provides no- or low-cost utility easements, recreational leases, roadways, residential sites and discounted land sales to local communities. In many instances, this facilitates community development projects and increases the tax base through residential or commercial development of previously unavailable land. A few examples are highlighted below. › Michigan – Approximately 42,000 acres of non-operating land that we own are open for daytime public recreational use. This includes water reservoirs, nature and wetland sanctuaries, trails and forests. In 2006, we made approximately 35 residential lots available to Marquette 32 Republic Wetlands Preserve Provides Abundant Community Benefits Cliffs is proud of our environmental and community achievement at the former Republic Mine in Michigan, where reclamation and remediation efforts have created a stunning natural landscape – protected in perpetuity for the enjoyment of the surrounding community. The Republic Wetlands Preserve serves as an excellent example of sequential land use, from an economically beneficial mining operation to flourishing wetlands that are home to a diverse population of birds, reptiles and mammals. During the mining process, tailing basins act as water filtration systems. Dikes, berms and gravity move water from basin to basin until eventually suspended sediment settles – leaving water, which is then recycled or held in retention ponds. The sediment left behind is a fine, inert sand that, with proper fertilization, is particularly suitable for wetlands development. Development of the wetlands began in 1996, under the oversight of the U.S. Environmental Protection Agency (EPA) and the Michigan Departments of Environmental Quality and Natural Resources. In this process, Cliffs created 615 acres of new wetlands through aerial fertilization and seeding, and planted 60,000 wetland plants and 225,000 wetland trees. The wetland preserve is divided into three tiers. The upper third of the preserve is exclusively grasslands, unique to Michigan’s Upper Peninsula. The second tier is forested wetlands with numerous small ponds, streams and overlooks looking down on osprey and eagle nests. Tier three is a large lake with a blue heron rookery, beaver huts, loons and numerous waterfowl. Wolf, coyote, bear and deer are common sightings within the preserve. The preserve was partially opened to the public in October 2008. Visitors are able to hike, bike and ski throughout the preserve’s 2,300 acres and several miles of trails. The newly created acreage is also being used as a wetland mitigation “bank” to provide compensatory wetlands for those unavoidably impacted by ongoing operations at Cliffs’ Tilden and Empire mines. Volunteering to Enhance Community Safety At Cliffs’ properties in North America, on-staff first responders and emergency medical technicians play a pivotal role during emergency situations . Many of our employees live in small, rural towns where volunteer emergency service providers fill a critical community need. Cotton, Minnesota, is a small town located nearly 40 miles from the nearest hospital and home to some of our United Taconite employees. One member of United Taconite’s First Responder Team serves as Cotton’s fire chief. The team, first established in 1990, has 18 members and responds to an average of 12 calls a year. Bi-weekly training ensures that the team is ready to respond when needed . By having two first responders on each crew we are able to lower insurance rates for United Taconite and help ensure the best possible outcome in any emergency situation . At our Michigan operations, nearly 40 individuals at the Empire and Tilden mines volunteered for training as first responders. In addition to providing services at the mine sites as needed, they put their valuable skills to work in their local communities by serving on fire department and emergency medical services squads. The First Responder Team at Hibbing Taconite was started in the 1980s . Today, the team consists of nearly 25 volunteer members, some of whom also volunteer for the local ambulance service. As the workforce has aged, medical emergencies have increased, and the team has been trained to deal with problems such as chest pain and other injuries caused by accidents . Funding Local Needs through the Cliffs Foundation The Cliffs Foundation was formed in 1962 for the purpose of making contributions to groups organized and operated exclusively for religious, charitable, scientific, literary or educational purposes and for the prevention of cruelty to children or animals. The Foundation operates a matching gifts program for education and also makes direct contributions to institutions . The matching gifts program matches employee donations to education dollar for dollar with a $25 minimum, up to $4,000 a year per eligible employee. In 2008, the Foundation donated a total of $1,439,997. Grant requests are accepted year round and submission guidelines can be found online at www.cliffsnaturalresources.com. 33 2006–2008 Contributions from Cliffs Foundation Advancing Community Education At the Babbitt-Embarrass School in Minnesota, the local Parent Teacher Organization used a $5,000 donation from the Foundation to replace unsafe 25-year old playground equipment. Northshore Mining donated cement, the local school district provided groundcover and volunteers provided labor to install the new equipment. In West Virginia, a $10,000 grant from the Cliffs Foundation to the Southern West Virginia Community & Technical College allowed the school to provide four scholarships for students enrolled in mining or mining related electrical or mechanical degree programs. Students from the economically depressed counties of Wyoming and McDowell are eligible to apply for the scholarships, filling a need for skilled workers in the coal industry. Other Examples of Recipients › Lake Superior Partners in Education mini-grants, Marquette County, MI › Newspapers in Education › Band instruments for Cordova High School in Cordova, AL › Wolf Ridge Environmental Learning Center, Finland, MN › Junior Achievement programs in Cleveland, OH › Ohio Foundation of Independent Colleges › Seeds of Literacy, Cleveland › North Shore Trade & Tech program in Two Harbors, Minnesota › Cleveland Institute of Music Supporting Health and Human Services Through the Foundation, the company made a $2 million, 5-year commitment to construct a new critical care hospital in Ishpeming, Michigan. The new hospital will provide area residents with a choice of medical service providers versus the regional Medical Center hospital in Marquette, approximately 15 miles east. The hospital also has a clinic dedicated to providing health care to active and retired Cliffs’ employees. In 2008, a $10,000 donation supported Minnesota’s Virginia Regional Medical Center’s helipad project. The Center serves a population of 68,000 people over a 900 square mile area and schedules approximately 145 helicopter flights of critically ill patients annually. The new helipad, on the center’s 5th floor roof, eliminates the need to land lifeflights in the middle of a cemetery, on Silver Lake Beach, in the hospital parking lot or on a nearby golf course — as was previously done. Other Examples of Recipients › Grace House in Fairfield, AL › Marquette Women’s Center, MI › Range Women’s Advocates in Chisholm, MN › Hibbing Food Shelf, MN › Food Bank Council, MI › Salvation Army in Cleveland, OH Improving Cultural Resources The Cliffs Foundation contributed $25,000 – split between the cities of Negaunee ($10,000), Ishpeming ($10,000) and Republic Township to support construction of the Iron Ore Heritage Trail. Contributions to the Heritage Trail focus on the historical connection of iron mining in these communities recognizing the jobs and impact on local citizens. The trail will also encourage tourism and investments that could help foster economic diversification and increased tax revenues for the local municipalities. Other Examples of Recipients › Iron Industry Museum in Michigan › Iron Ore Heritage Trails in Negaunee, Ishpeming and Republic Township, MI › U.S. Hockey Hall of Fame in Eveleth, MN › Pine Mountain Music Festival, MI › Historical Societies in Finland and Schroeder, MN › Great Lakes Science Center in Cleveland, OH › Cleveland Orchestra › Cleveland Museum of Art › Wyoming County Association/ Annual Dogwood Festival in WV 34 Funding Community-Based Projects In West Virginia, the Cliffs Natural Resources Foundation supports the Mullens Opportunity Center through a $1,500 grant to install high-speed Internet access throughout its building. The center acts as an incubator for new businesses by providing inexpensive office, Internet and phone access. In addition, the center is a community and educational hub for the surrounding area and houses a variety of social and environmental agencies. Other Examples of Recipients › Upper Guyandotte Watershed Association, WV › Gwinn Village Clubhouse, MI › Hibbing Historic Project, MN › ParkWorks in Cleveland, OH › Sands Township Recreation Complex, MI › Pineville and Wyoming County Labor Day Festival, WV › Cuyahoga River Community Planning, OH Our Foundation staff assesses all requests to determine need, with priority given to organizations in or supporting Cliffs’ mining communities . Cliffs Foundation Giving Totals (dollars) 1,600,000 1,439,997 United Way Total Giving (thousand dollars) 600 500 400 300 200 470 547 Supporting the United Way Cliffs supports local communities near its North American operations through the United Way. Each site conducts a local campaign annually. The company or mining operation provides a 50% match or other donation on its employees’ United Way contributions. In 2008, Cliffs employee contributions plus company matching funds totaled over $500,000 for local United Way chapters . In the 2007-2008 United Way campaign in Marquette County, Michigan, Cliffs employee contributions and the company match equaled 15% of the total funds raised by the United Way countywide . 1,200,000 1,019,119 800,000 400,000 339,104 100 0 0 06 07 08 06 07 08 through the College of the North Atlantic. The mine participates in the Newfoundland Apprenticeship Board, focused on delivering training programs throughout the province . Cliffs is also active when it comes to training a skilled labor force for the future. We hold presentations at all grade levels to talk about our business and the opportunities in mining . We sponsor high school mentoring programs to encourage students to pursue engineering degrees . Mine representatives also visit community colleges and trade schools. We offer a college scholarship program to children of employees who are graduating from high school. The program is offered in North America and at our Asia Pacific iron ore operations . In 2008, we awarded 54 scholarships of $1,000 each – for a cumulative total of 490 awards and more than $730,000 since the program’s inception in 1991 . Welding Machines Benefit Local High School Students and Cliffs Employees In a collaborative effort with the William Kelley High School, Northshore Mining offered to purchase six new machines for the school’s welding lab in exchange for Northshore employees being able to use the space for training when school was not in session. Northshore personnel are now able to attend summer welding courses to practice for their safety welding tests, and the students of William Kelley High School benefit from the new equipment. Enhancing Educational Opportunities Cliffs develops and supports other training and educational opportunities across our operations. We not only improve the skills of our current and potential future workforce, but also contribute to the economic vitality of local communities. In 2000, the company began providing two-year partial scholarships to eligible students attending the Northern Michigan University School of Technology and Applied Sciences. The program includes an Industrial Maintenance Technology Associate Degree program for those interested in mining and an Industrial Electrical Technology Associate Degree program. Wabush Mines is actively working with stakeholders to develop the local workforce 519 35 Strengthening Relationships with Customers and Suppliers Cliffs is focused on forging relationships with customers and suppliers that result in a strong, positive impact on shareholder value while supporting the company’s commitment to sustainability. Each cargo or shipment of Cliffs iron ore and coal is tested in accordance with customer requirements, and Certificates of Analysis are provided. Nonconforming Cargo Reports (NCR) are issued for any deviation from customer quality specifications. The NCR identifies the deviant analysis value, the customer specification, a description of the nonconformance and any corrective and preventive actions taken by the site, and it provides the customer with an opportunity to provide feedback . In 2008, Cliffs issued 5.03 NCRs per million long tons shipped, approximately a 17% reduction from 2007 levels. This improvement was achieved by identifying the NCR generating processes and focusing resources on identifying and eliminating root causes. Data from Western Australia operations is de minimis and is not included. The data below does not include North American Coal operations, which began tracking NCRs during 2009, the first full year they were under Cliffs ownership and control. We expect to publish these results in future reports after the data collection system is proven and reliable. In summary, Cliffs aims to enhance customer satisfaction by focusing product quality improvement efforts where processes do not currently meet customer requirements 100% of the time and by incorporating customer feedback in the quality planning process. Through ongoing customer engagement and NCR tracking, Cliffs is focused on continual product quality improvement and customer satisfaction . Nonconforming Cargo Reports (NCR) (per million long tons shipped) 8 7 6.03 4.34 5.03 Focusing on Customer Satisfaction Delivering a consistent, high-quality product that meets all contractual specifications is a vital element of competitive success for Cliffs. Our commercial department maintains a good working relationship with customers through regular phone contacts and on-site meetings. Cliffs also conducts internal quality meetings and reviews plant performance, customer input and market trends. Annual reviews assess current performance against customer specifications and allow customers the opportunity to comment on performance . All customers of our North American Iron Ore operations are invited to attend the bi-annual Customer Quality Conference, which is a forum for them to review operations performance and discuss possibilities for future quality improvement. Input gathered at the conference is used by Cliffs to prioritize improvement initiatives. 6 5 4 3 2 1 0 Note: data does not include Asia Pacific Iron Ore or North American Coal operations 06 07 08 36 Sourcing Decisions Support Environmental and Community Progress Cliffs utilizes a fact-based strategic sourcing methodology, which focuses on continuous evaluation and improvement of the sourcing process with a goal of reducing the total cost of ownership. A dedicated function is assigned to proactively manage the strategic sourcing process for total companywide spend including capital equipment, commodities, direct and indirect materials, and contract services . When making sourcing decisions, the company reviews several objective and measurable supplier selection criteria. The weighting of each criteria depends on the specific spend area and strategic objectives. Examples of selection criteria actively used in Cliffs sourcing decisions include: ability to supply, product quality, performance, conformity to defined specifications, value-added services, product lead times, financial stability, manufacturing capabilities, potential alternatives, costs savings ideas/innovation, geographic proximity to mine sites and delivery. Other total cost factors that are also evaluated include product lifecycle costs, in-sourcing versus outsourcing, risk management, maintenance costs, spare parts and energy costs . Additionally, Cliffs seeks to conduct business with suppliers who share our environmental vision and values. To support that vision, we are in the process of more broadly incorporating environmental considerations into our sourcing process and procurement decisions. Several environmental considerations have been identified as potential supplier criteria such as review of products for waste minimization, energy efficiency, pollution reduction compared to similar products, recycled content and recyclability at the end of the product’s life cycle. Assessment criteria and metrics evaluation also include ISO 14001 certification, commitment to reduce environmental and biodiversity impacts, tracking environmental impact of products, measuring the effect on natural resources, regulatory compliance and occupational health and safety performance . While Cliffs does not have a companywide policy that governs the amount of spending channeled to local suppliers, local supplier spending in Michigan, Minnesota and Canadian operations accounts for just over 50% of total spending for the last three years (“local” defined as within 100 miles of each site). Wabush’s Scully Mine has attracted suppliers to relocate to the Wabush Industrial Park through the implementation of a local procurement policy. The policy provides preference to local suppliers where service and pricing are competitive. Our Koolyanobbing mine has an informal policy to use local suppliers. In this case, the remote location of the mine means that there are no significant population centers in the vicinity, and this was reflected in the 2008 expenditure figures where only 1% of expenditure was spent in the local government region . However, 94% of total expenditure was spent locally in the sense that it was spent within the state of Western Australia. 37 Economic Impact: Our Role in Promoting Prosperity Minerals provide essential resources for modern living and steel (the product made from the raw materials we produce) is often cited as the building block of society. Management Approach Today, Cliffs owns or manages six iron ore mines located in Michigan, Minnesota and Eastern Canada, accounting for approximately 46% of North American capacity. We sell the majority of our production in North America to integrated steel companies in the United States and Canada. Cliffs also owns three coal mines in Alabama and West Virginia. The company also owns two iron ore mining complexes in Western Australia, serving the Asian iron ore markets with direct-shipping fines and lump ore. The Asia Pacific region represents an integral component of Cliffs’ international growth strategy; with sales to steel mills in China and Japan, it provides the company with a direct channel to the world’s most rapidly growing steel markets. Cliffs’ efforts to play an ever-greater role in supplying international steel markets and diversify our product mix continue . Recent growth projects – such as Amapá, which provided entry into Latin America, and Sonoma in Australia, which marked Cliffs’ diversification into coking coal – are consistent with Cliffs’ objective of leveraging our proprietary expertise in those markets with the greatest growth potential. Cliffs continues to consider opportunities for expansion globally that not only enhance existing strengths, but contribute ultimately to the profitability and overall health of the company. In our commitment to serve as a respectful citizen in our communities, we are exploring alternative, sustainable methods of powering our business, as illustrated by our 70% interest in renewaFUEL, a biofuel cube company. Extractive industries can greatly contribute to and fuel economic growth and development. We contribute to a larger economic system through the direct and indirect revenue we provide to the communities in which we operate, as well as the less tangible aspects of our business development such as skill building and community development. With effective management, regional growth can continue for decades . Mining, however, is a cyclical industry with many periods of expansion and contraction . In 2008, with the economic decline associated with the global financial crisis, we saw capacity utilization in North America fall below 50%. This is just one example of the boom and bust nature of mining . The Cliffs management team quickly responded to the circumstances to ensure ongoing success for our shareholders, employees and the communities in which we operate . Economic Value Generated and Distributed ($ in millions). Data on economic value generated and distributed provides stakeholders with information on how Cliffs has contributed financially to investors, employees, governments and the communities in which we operate . Amount Component Direct economic value generated a) Revenues Direct economic value distributed b) Operating costs c) Employee wages and benefits d) Payments to providers of capital e) Payments to government (taxes) US Canada Australia f) Community investments (Foundation giving) Subtotal Economic value retained 2,125.4 544.8 63.5 184 .3 0.7 80 .3 1 .4 $3,000.4 $608.7 1,525.1 368.5 43 .0 119 .0 0 .2 61.7 1 .0 $2,118.5 $ 156.7 $ 3,609.1 $ 2,275.2 2008 2007 Contributing to the Economic Development of Communities Cliffs’ mining operations have a significant economic benefit for the host communities. We work with those communities to help develop local capacity for long-term stability, so that a balanced economy can be maintained even after mining operations cease. In 2008, we paid a total of $544.8 million in employee wages and benefits and contributed tax payments of $265.3 million to government agencies in the U.S., Canada and Asia Pacific. In Australia, we are particularly engaged in providing resources for the underserved indigenous population. We have an agreement in place with our main mining contractor to offer a given percentage of job opportunities to indigenous workers. We are also currently planning a three-year program to train indigenous people as park rangers. The AU$1.0 million program (approximately US$826,384) will encompass a biodiversity management component as well. 39 For more information on our efforts to promote sustainable development in local communities, see pages 30–37 of this report . We recognize that our operations have indirect economic impacts through the multiplier effect that comes from our workers supporting other places of business. While we do not have systems in place to track these numbers, Cliffs recently estimated the full economic impact associated with a planned expansion in our Australian mining and processing activities. That study estimated that the proposed expansion of annual production capacity from 8 to 10.5 million metric tons of iron ore would result in an increase in direct and flow-on employment of more than 400 jobs . For our North American iron ore operations, our total proven and probable reserves are over 950 million long tons. Our Asia Pacific iron ore operations have over 90 million metric tons of proven and probable reserves . The total moist recoverable coal reserves in our North American mining complexes, both proven and probable, total about 120 million short tons. allow the Empire Mine to produce at 3 million long tons annually through 2017. Recently, we established a global exploration group, which will work with junior mining partners, such as AusQuest, KWG and others. In addition, we will continue with our near mine drilling program in Koolyanobbing and Tilden/ Empire Mines . Exploration and Development Activities Future prosperity can only be achieved if we grow and expand our operations . While we must remain conscious of the current challenging economic situation, we have identified several opportunities that favorably position our company. In 2008, we continued our strategic growth with several key acquisitions, partnerships and rebranding . › In September 2008, we announced our initial investment in AusQuest, an Australian publicly traded minerals exploration company. This investment allows us to participate in future sales and disposal of explorative assets. › An expansion project at our Tilden and Empire Mines in Michigan’s Upper Peninsula was announced in the third quarter of 2008. This expansion would increase annual production at Tilden by more than 2 million long tons annually and Employment Throughout Cliffs, our workforce is a committed stakeholder and critical factor in our success as a sustainable enterprise. We provide employees with the training and tools they need to do their jobs safely and with respect for the community and the environment . As of year-end 2008, we employed over 5,600 individuals. A very small proportion of these workers are classified as temporary employees. There is not a significant seasonal change in our employment levels. The table below provides a breakdown of the total workforce by gender. Through comprehensive orientation, training and talent management programs, we are able to successfully assimilate new employees into our culture and Core Values. By doing this, we are able to minimize our voluntary turnover within a very competitive industry . Enterprisewide Reserves Proven and Probable Using three dimensional modeling techniques, mine engineers and geologists calculate the reserves at each of our mines. Many factors influence our ability to accurately estimate the amount of reserves we have at each mine, and therefore we periodically review and update our longrange mine plans. Production capacity, governmental regulations, taxes and industry conditions can all change the economic viability of the recoverability of our reserves . Voluntary Turnover Rates 2008 Number of Employees Australia United States Canada Companywide 19 188 40 247 (4.35% of total workforce) Cliffs Workforce as of Year-end 2008 Total Board Executive/ Senior Mgmt Middle Mgmt Administrative Production (hourly) Total 10 24 557 964 4,115 5,670 Male 8 23 508 734 3,941 5,214 Female 2 1 49 230 174 456 40 41 Respecting our Employees Cliffs is a global company, and managing our human resources – the cumulative skills, knowledge and talents of each and every one of the women and men in our employ – has become a strategic business issue . As we manage and expand our operations internationally, building a successful corporate culture is absolutely critical to success. This means providing an environment where all employees have the right to go home safely, where each member of the Cliffs team is motivated and encouraged to work to her or his full potential, and where employee contributions are valued and rewarded by the organization . Management Approach Our Code of Business Conduct and Ethics reaffirms the company’s commitment to ensure all employees and contractors are aware of the highest standards and basic principles of business conduct and ethics, integrity and compliance reporting in accordance with all applicable laws. The Code incorporates our Business Ethics Policy Statement and Core Values Statement, setting forth a common set of values and standards to which all of the company’s employees are expected to adhere. These values and standards address the company’s obligation to conduct business fairly and ethically, and our employees’ responsibility to treat each other with the same fairness and respect, at all levels of the organization. Organizational responsibility for employee relations resides within each operating facility, with support and oversight by corporate human resources staff . The most senior positions with responsibility for labor relations is the General Manager of Labor & Employee Relations, who reports to the Executive Vice President of Human & Technical Resources. The company provides employees with training, awareness and educational programs to support the Code and our Core Values, and further the development of our workforce . Leadership Development and Advancement To lay the foundation for personal growth and fulfillment at Cliffs, we offer a fourstage leadership curriculum for employees. The program builds on Leadership Basics, a one-day introductory course that provides new supervisors with the key information they need to know as they orient themselves to their new role. “Leading the Business” I and II are two- or three-day, highly interactive workshops taught by line managers that explore such leadership imperatives as team-building, coaching for performance and driving for results. Closing the series, the feedback-rich “The Leader Within” provides 360° feedback and prepares the participants to create a personal development plan. In addition, all employees have access to Cliffs College, our online learning tool and knowledge base, where additional learning experiences are available. Equal Employment Opportunity Cliffs provides equal employment opportunity to all persons consistent with employment requirements and qualifications. Discrimination or harassment because of any status protected by applicable law is prohibited. Employee Development Provides Tools for Success Tomorrow’s leaders will represent a mixture of multicultural individuals in various organizational capacities. Cliffs has put in place an employee-development process designed to provide the tools for success. To help us attract, develop and retain the kind of people who share our vision of a new Cliffs and understand the value of its success to them, we build on a competitive compensation and benefits package with a leadership program that helps them take their skills to the next level. 43 › Cliffs 64 program – “Taking Your Potential to the Next Power” – is a formal orientation program designed to guide new employees through the first six hours, days, weeks and months of their experience at Cliffs. › Leadership Program – This educational program provides a four-stage curriculum to guide new leaders through intensive workshops to help them define a resultsoriented personal development plan. › Road to Zero – Cliffs is dedicated to maintaining a safe and healthful work environment by providing the necessary training, resources, encouragement and accountability to its employees. Enterprisewide initiatives under our One Cliffs umbrella underpin our commitment to continuous safety improvement, one of our core values. › Talent Management – Cliffs has a multifaceted annual talent management process focusing on employee development that includes establishment of a Balanced Scorecard, Managerial Assessment including identification of development plan items and in some cases special assignments, and one-onone feedback sessions . Each business unit completes a succession plan down to the department level and identifies employees who are ready to move up into new roles as well as specific development needed to prepare them. Talent Management is a structured approach targeting individual career development. These programs and more provide the foundation for building a safe, rewarding and personally satisfying career with Cliffs, one that is characterized by personal improvement that positively affects everyone in the organization . Compensation and Benefits for Salaried Employees We provide compensation and benefits designed to retain and reward employees as well as to help them be happy and productive. Among the offerings included in Cliffs’ comprehensive compensation and benefits package for its salaried employees are, but not limited to, medical and dental/vision coverage, disability and life insurance, pension plans, an Employee Assistance Program to address personal and family issues, and educational benefits such as tuition reimbursement and matching gifts for educational institutions. Comparison of Average Salary by Gender and Job Category Male Salary Executive / Senior Mgmt Middle Mgmt Administrative $413,429 $102,622 $59,625 Female Salary * $91,215 $48,095 Female to Male Ratio 102% 89% 81% Notes: * There is only one female in the executive/senior management labor category so average salary is not provided. ** Data are not available to allow a comparison of hourly employees’ wages by gender . Key areas of safety and occupational health focus include: › Training › Internal safety and occupational health audits › Occupational health surveillance and mitigation processes › Industrial hygiene balanced scorecards › Large-scale initiatives (addressing silica, weld fumes, etc.) 44 Protecting the Health and Safety of Our Employees Cliffs is committed to protecting the occupational health and well-being of our employees and contractors, which in turn improves the culture of our work environment. We believe that injuries, occupational illnesses and incidents are preventable. We expect our employees to have a zero-tolerance attitude toward unsafe behaviors . Through continuing education and diligent implementation of safety principles, programs and practices, workers at all levels of the company are committed to efforts designed to ensure zero injuries and incidents. Every employee is required to perform every task of their job in a safe manner, every time . It is our management’s responsibility to provide employees with the necessary resources to do so . Elimination of lost time from work due to accidents and occupational illnesses can only be achieved through the active participation of all employees. Using a process we developed for Potentially Serious Personal Injury Investigations, we analyze all incidents and near misses to determine root causes and then implement corrective actions to prevent their recurrence. This process involves site-based participation of cross-functional teams, which include representatives of management, hourly workers and support staff . Managers and work teams conduct routine and frequent observation of safe work behavior and provide feedback to employees on that behavior. Every site, except office locations not located within area operations, has a formal health and safety committee, with joint management and labor representation, which helps monitor and advise on occupational safety programs. All departments are represented on the committee . Our labor union agreements include provisions that support our safety culture. These provisions address issues including personal protective equipment, safety committees, incident investigations, inspections, training, medical records, medical surveillance and ergonomics, among others . Several safety training and development tools are used to raise employees’ safety awareness. These initiatives, along with others, are designed to reduce employee exposure to unsafe situations, resulting in fewer personal injuries and less property damage: › Safety leadership and safe production workshops teach proactive safety management techniques. Nearly two thousand employees have received this training over the past three years . › The Zero Incident Process (ZIP) is designed to help employees motivate themselves and others to utilize safe work practices. Since 2006, 450 employees have received this training . › Six Sigma methodologies focus resources on activities that lead to incidents and injuries . › Sort, Set, Shine, Standardize and Sustain (5S) is a method of improving safety, cleanliness and efficiency of an employee’s work space. › The Safety Interaction System (SIS) captures safety observations and allows employees to reinforce the company’s expectations of working safely. Building a Leadership Safety Culture We proactively identify prevention activities, establishing standards and evaluating performance to mitigate any potential injuries to our employees. Intensive employee training maintains a high level of personal awareness and knowledge of safety and health issues in the work environment. Focusing on health and safety improves the culture of our work environment, the efficiency of our operations and the quality of our products. Keeping Safety a Top Priority for Students Every summer, nearly 200 college students gain valuable job experience in Cliffs’ summer student program. Each new student starts the summer with a 24-hour training program on Cliffs’ core values, safe production methodologies and safety expectations. Returning students are required to repeat the preliminary safety training. Each student is assigned a mentor who is responsible for training the student for the required job. The mentor also goes over the operation and safety features of equipment in non-productive mode, and only after the student demonstrates proficiency in using the equipment in non-productive mode does the mentor allow the student to actually perform the job in productive mode. Students participate alongside employees in weekly safety meetings and are continuously monitored to ensure that they exhibit the work ethics, job performance, dependability and safety awareness expected of Cliffs employees. 45 Tracking Our Safety Performance In 2008, our injury rate (reportable injuries per 200,000 hours worked, also called “total reportable incident rate”) was 3.7 for all operations. Our lost days case rate (number of days away from work as a result of safety incidents, per 200,000 hours worked, also called “severity rate”) was 57.8. Data from our North American Iron Ore facilities has been collected for several years and from our North American Coal operations for 2008, the first full year under Cliffs ownership. Asia Pacific safety data includes employees and contractors, whereas North American data includes employees only. Cliffs does not collect data on absenteeism. In calculating “lost days,” the lost days begin on the first scheduled work day that an employee misses after the day of injury. In North America, Cliffs uses the U.S. Mine Safety and Health Administration (MSHA) reporting criteria in 30 CFR Part 50 to determine the injury and lost days rates, and only include first time personal injuries. In Asia Pacific, Cliffs reports injuries and lost days according to the Western Australian Mines Safety and Inspection Act 1994, Mines Safety and Inspections Regulations 1995, and AS 1885.1-1990 National Standard for Workplace Injury and Disease Recording. The safety data in this report represent management’s best estimates . We experienced three fatalities at our operations during 2006 and one fatality each in 2007 and 2008. We are deeply saddened by these events and continue to work on addressing root causes to prevent workplace fatalities in the future. Sentinels of Safety Award for Northshore Mining-Babbitt Mine In recognition of more than 366,000 employee hours without a reportable incident, our Northshore operations received the 2007 Sentinels of Safety Award from the U.S. Department of Labor-MSHA and the National Mining Association. This prestigious award, established in 1925, is given to the mine location with the greatest number of work hours without a lost workday incident. Northshore – Babbitt Mine won this award for the Large Open Pit category. Providing a Healthy Workplace Through industrial hygiene (IH) and occupational medical programs at our North American facilities, we seek to prevent occupational illness and to provide healthy workplaces. Our approach to occupational health incorporates engineering controls, employee monitoring, health testing and education. Cliffs has performed qualitative exposure assessments to identify potential health risks in the workplace and prioritize findings based on risk and probability. This process allows us to develop exposure monitoring plans that will quantify actual employee exposures. We use an online record tracking system to manage employee training, regulatory information and incident investigations . Cliffs’ strategy is to create a consistent and sustainable IH program, based on hazard assessment and exposure control. Site-specific IH plans address the needs of each location, while largescale initiatives address multi-location issues, such as chemical processes, weld fumes, silica and noise. Yearly IH balanced scorecards measure progress at the site level as well as aggregated to the area and organizational level. In 2008, Cliffs developed 14 fundamental IH standards as well as programs that can be customized to fit site-specific needs, guidance documents and training programs. The company developed an audit process that measures implementation of and compliance with IH standards. Corporate will use the audit results to supplement the existing site IH programs. Site-specific IH programs include proactive initiatives such as exposure assessments, sampling plans, respirators protection programs, hearing conservation, task-specific exposure assessment and occupational health training . In addition, Cliffs assessed existing engineering controls at key sites, developed methods to optimize effectiveness of existing controls and provided recommendations for repair, enhancement and capital improvements. A balanced scorecard was developed to measure the implementation status of IH programs . In order to achieve the 2008 benchmark of 70 a site had to demonstrate continued progress on fundamental components, perform a self audit to establish baseline levels, implement components of Cliffs’ IH standards and show continued work on site-specific projects. The average for North American Iron Ore in 2008 was 77 and is tied to personal performance goals and variable pay for iron ore operations staff . Key strategies for achieving this goal include the IH scorecard, operations accountability and site-specific initiatives. Cliffs began tracking and reporting occupational illnesses across the enterprise during 2008 . Total Reportable Incident Rate (per 200,000 hours worked) 4.0 3.7 Total Severity Rate (per 200,000 hours worked) 60 50 40 30 57.8 28.3 3.5 8.76 2.26 6.66 1.93 3.0 2.5 2.0 1.5 1.0 0.5 0 20 * data for 2006 and 2007 includes North American iron ore operations only 10 0 06 07 08 06 07 08 46 25.9 Electronic Blasting Increases Productivity and Job Safety Electronic blasting generates precise, energy-driven explosions that cannot be duplicated with non-electric explosives alone. Communication between the electronic detonator and the explosive material is far more sophisticated than when using traditional methods. An integrated circuit and capacitor system greatly reduces the risk of misfire. Detonation timing is also more accurate and adjustable — typically within one-thousandth of a second. This allows for increased control of explosion vibrations without a loss of energy, resulting in good rock fragmentation. Cliffs employees have been fully trained in the process, reducing the possibility of accidental detonation. The new technology also helps to reduce potential anxiety and damage in neighboring towns during blasting. Research Related to Fibrous Particles As with most mining and quarrying operations, a small percentage of the host rock can fracture into tiny particles with a fiber-like appearance. These particles are created through the mining, crushing and processing of the ore. Since the 1970s, these particles have been known to exist within Northshore mine’s Peter Mitchell pit and can sometimes make up a small percentage of the airborne dust . There has been exhaustive testing, analysis and research performed to determine the health effects of these particles. All health studies performed to date have demonstrated that these particles do not cause diseases generally related to asbestos. In October 2008, a supplemental publication in the scientific journal Regulatory Toxicology and Pharmacology was released which contained articles resulting from the “International Symposium on the Health Hazard Evaluation of Fibrous Particles Associated with Taconite and the adjacent Duluth Complex.” Supported by the Minnesota Department of Natural Resources, the Minnesota Pollution Control Agency and the Minnesota Department of Health, this symposium assessed the current state of knowledge concerning health hazards that might be associated with the ingestion and inhalation of fibrous particles produced from the processing of taconite ore. The overwhelming conclusion of the symposium was that these fiberlike particles produced in the mining and processing of iron ore do not cause health effects that are associated with exposure to commercial asbestos. There have been a number of cases of asbestos-related disease called mesothelioma recently diagnosed among past taconite workers in Minnesota. Initial cases were studied by the Minnesota Department of Health concluded that they were caused by exposures to commercial asbestos, not fiber-like particles from iron ore mining . The State of Minnesota has expanded this research to include a more comprehensive five-year study of any potential respiratory hazards associated with iron ore (taconite) dust. Cliffs Natural Resources is actively partnering with the state research entities to ensure that researchers have the most accurate information available and can perform the study in the most scientifically sound manner possible. Employee Assistance Program Contributes to a Healthy Workforce Cliffs recognizes that employee health encompasses a worker’s emotional and mental well-being also. To help our workforce manage the stresses of life, we have an Employee Assistance Program (EAP) available for all Cliffs employees and their families. This free, confidential service provides information and referrals on a variety of work and personal issues, including substance abuse, family mental health, elder care and child care, work-life balance and healthy lifestyles. Preparing for Emergencies Each site is responsible for maintaining and routinely updating a site-specific emergency procedure manual and notification plan. Plans cover topics such as internal and external communications, evacuation routes, training and response procedures . In 2008, a Disaster Management Response Team was established to coordinate with corporate Risk Management in developing a companywide disaster management response protocol along with site-specific manuals. 47 Environmental and Safety Data Summary Table Indicator 2006 2007 2008 Energy Use (million gJ) (see page 23) Direct 44 .0 35.8 44.7 Indirect 16.3 17.3 18 .3 Total 60.2 53.2 63.0 Greenhouse Gas Emissions (million metric tons CO2e) (see page 20) Direct 4 .01 3 .38 4.36 Indirect 3 .30 3.46 3.60 Total 7.31 6.84 7.96 Water Use (million m3) (see page 24) Ground water 1 .12 1.61 1 .89 Municipal water 0 .21 0 .19 1 .34 Surface water withdrawal and 280 295 313 pit/mine dewatering Air Emissions (metric tons) (see page 26) NOX 22,602 22,530 21,459 SOX 10,514 12,485 11,484 PM 4,069 4,905 6,354 PM10 4,861 5,308 6,540 PM2.5 204 232 280 VOC 234 253 437 Lead 1 .01 0.97 0 .94 CO 1,229 1,334 1,557 Hazardous Waste (metric tons) (1) (see page 27) Exported for disposal 0 0 0 Recycled 15.0 13 .0 26.2 Incinerated or used as fuel 71.9 22 .4 35.7 Landfilled 3 .8 3.7 12 .8 Deep well injection 0 0 0 Other (2) 483.5 318.7 229.6 Total Hazardous Waste Generated 574.2 357.8 304.3 Indicator 2006 2007 2008 Non-hazardous Waste (thousand metric tons) (1) (see page 27) Composted 0 0 0 Reused onsite 17.7 6.2 11 .4 Recycled offsite 48 .8 41 .0 30 .3 Incinerated or burned as fuel 0 .30 0 .42 0.15 Landfilled 3.37 3.54 7.46 Onsite disposal 14 .3 18 .9 34 .9 Onsite storage 0 .30 0.07 0 Deep well injection 0 0 0 Total Hazardous Waste Generated 84.8 70.1 84.2 Waste Water (see page 27) Treated Process Wastewater Discharged 28 .4 26.5 34.5 to Surface Waters (million m3) Total Suspended Solids in Process Wastewater Discharged to Surface Waters (thousand kilograms) 127.4 117.2 140.6 Mine Water Discharged to Surface Waters (million m3) 21.5 85.4 80.6 Total Suspended Solids in Mine Water Discharged to Surface Waters (thousand kilograms) 23.5 34 .3 62.9 Non-Contact Cooling Water Discharged to Surface Waters (million m3) 171.1 177.1 176.0 Total Discharge to Subsurface Waters (million m3) 0 0 0 Spills (see page 28) Number of Spills 159 171 179 Spill Volume (m3) 181 3,895 11,339 Safety Performance (per 200,000 hours worked) (3) (see page 46) Total Reportable Incident Rate 2.26 1 .93 3.7 Severity Rate 28 .3 25.9 57.8 Notes: 1. Waste generation and disposal figures do not include Asia Pacific operations, which are de minimis . 2. Under Hazardous Waste, the disposal category “Other” includes all hazardous waste generated at the Pointe Noire processing facility (further breakdown is not available). 3. Safety data for 2008 includes all Cliffs North American operations as well as Asia Pacific Iron Ore. Safety data for 2006 and 2007 includes North American Iron Ore only. Asia Pacific safety statistics include employees and contractors; North America safety statistics include employees only. gJ ton CO2e m 3 gigajoule ton of carbon dioxide equivalent cubic meter nitrogen oxides sulfur oxides particulate matter PM with diameter less than 10 microns PM with diameter less than 2.5 microns volatile organic compound carbon monoxide NOx SOx PM PM10 PM2.5 VOC CO 48 GRI Index GRI Description Standard Disclosures 1 .1 CEO statement 1 .2 Key impacts, risks and opportunities 2 .1 Name 2 .2 Primary brands, products and/or services 2 .3 Operational structure 2 .4 Headquarters 2.5 Countries of operation 2.6 Nature of ownership 2.7 Markets served 2 .8 Scale of organization 2 .9 Significant changes during reporting period 2 .10 Awards 3 .1 Reporting period 3 .2 Date of most recent report 3 .3 Reporting cycle 3 .4 Contact person Materiality Boundary of report Limitations on scope and boundary Reporting on joint ventures and subsidiaries Data measurement Restatements Changes in boundary or scope GRI index External assurance Governance structure Chair vs . CEO Board structure Mechanism for feedback to Board Compensation and performance linkage Avoiding conflicts of interest Qualifications of the Board Internal statements of mission, values and code of conduct Overseeing sustainability performance Evaluating governance and performance Precautionary principle External charters Memberships and associations Stakeholders Stakeholder identification Stakeholder engagement Stakeholder topics and responses Page 1 6 2 6 5 2 5 5 5 6, 39-40 5 46 5 1 3 inside front cover 3.5 3.6 3.7 3 .8 3 .9 3 .10 3 .11 3 .12 3 .13 4 .1 4 .2 4 .3 4 .4 4.5 4.6 4.7 4 .8 4 .9 4 .10 4 .11 4 .12 4 .13 4 .14 4.15 4.16 4.17 3, 7 5 5, 48 5 18 n/a n/a 49 3 9 9 9 9 9 11 9 3, 11 9 9 9 9 10 7 7 7 7 GRI Description Page Economic Indicators DMA 39 EC1 Direct economic impacts 39 (including salaries, taxes paid, donations) EC2 Financial implications and other 19 risks and opportunities for the organization’s activities due to climate change EC6 Policy and practices, and 37, 39 proportion of spending on locallybased suppliers at significant locations of operation EC8 Development and impact of 32 infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement EC9 Understanding and describing 40 (add’l) significant indirect economic impacts, including the extent of impacts Environmental Indicators DMA 15, 29 EN1 Materials used by weight or 25 volume EN3 Direct energy consumption by 23 primary energy source EN4 Indirect energy consumption by 23 primary source EN8 Total water withdrawal by source 24 EN9 Water sources significantly 24 (add’l) affected by withdrawal of water EN10 Percentage and total volume of 24 (add’l) water recycled and reused EN14 Strategies, current actions and 21-22 future plans for managing impacts on biodiversity EN16 Total direct and indirect 20 greenhouse gas emissions by weight EN18 Initiatives to reduce greenhouse 18-21 gas emissions and reductions achieved EN20 NOX, SOX and other significant air 26 emissions by type and weight EN21 Total water discharge by quality 27 and destination EN22 Total weight of waste by type and 27 disposal method EN23 Total number and volume of 28 significant spills EN25 Identify, size, protected status and 28 biodiversity value of water bodies and related habitats significantly affected by the reporting organization’s discharges of water and runoff GRI Description Page EN26 Initiatives to mitigate 15 environmental impacts of products and services, and extent of impact mitigation EN28 Monetary value of significant 16 fines and total number of nonmonetary sanctions for noncompliance with environmental laws and regulations. Human Rights Indicators11 DMA 11 HR6 Child labor Labor Indicators LA1 Employees by type LA2 Employee turnover LA3 Benefits LA6 Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programs LA7 Rates of injury, occupational diseases, lost days and absenteeism, and number of work-related fatalities by region LA8 Education, training, counseling, prevention and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases LA11 Employee education LA14 Comparison of average salary between men and women Society Indicators DMA SO5 Public policy positions and participation in public policy development and lobbying. SO6 Total value of financial and in-kind contributions to political parties, politicians and related institutions by country . Product Responsibility Indicators DMA PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction n/a DMA not applicable Disclosures on Management Approach (goals and performance, policy, organizational responsibility, training and awareness, monitoring and follow up, contextual information) 11 40 40 44 45 46 45 43 44 31 12 12 36 36 49 CLIFFS NATURAL RESOURCES INC. 200 Public Square, Suite 3300, Cleveland, OH 44114-2315 cliffsnaturalresources.com