Edgar Filing: CLIFFS NATURAL RESOURCES INC.

DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

SCHEDULE 14A

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CLIFFS NATURAL RESOURCES INC.

200 Public Square, Suite 3300, Cleveland, OH 44114

P 216.694.5700 cliffsnaturalresources.com

March 23, 2012

To the Shareholders of

CLIFFS NATURAL RESOURCES INC.

Our Annual Meeting of Shareholders will be held on the 3^rd floor of 200 Public Square, Cleveland, Ohio 44114-2315 on Tuesday, May 8, 2012 at 11:30 A.M. (Cleveland time), which we refer to as our 2012 Annual Meeting.

At the 2012 Annual Meeting, shareholders will be asked to: (i) elect Directors; (ii) approve an amendment to our Regulations to add a provision to allow the Board to amend the Regulations without shareholder approval as permitted under Ohio law; (iii) approve, on an advisory basis, our named executive officer compensation; (iv) approve the 2012 Incentive Equity Plan; (v) approve the 2012 Executive Management Performance Incentive Plan; and (vi) ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm. An explanation of each of these matters is contained in our proxy statement and proxy card, first being mailed or otherwise distributed to shareholders on or about March 23, 2012.

We urge you to exercise your voting rights by submitting your vote as soon as possible by Internet, mail or telephone to ensure that your shares will be represented whether or not you expect to be present at the 2012 Annual Meeting. We are furnishing proxy materials and our Annual Report to our shareholders primarily over the Internet this year, and the notice of Internet availability of those materials include instructions on how to access the materials, instructions on how to vote online and instructions on how to request a paper copy of the materials, including a proxy card. In addition, record shareholders have the opportunity to appoint proxies to vote their shares toll-free by telephone if they wish, and the proxy statement and proxy card include instructions for appointing proxies by telephone, over the Internet or by mail. Whichever of these methods you choose, the named proxies will vote your shares in accordance with your instructions. Please note that failure to vote surrenders voting power to those who exercise their voting right. If you attend the meeting, you will be entitled to vote in person.

Finally, Roger Phillips and Alan Schwartz will not be standing for re-election at the 2012 Annual Meeting pursuant to the retirement policy contained in our Corporate Governance Guidelines. Mr. Phillips has served as a Director of Cliffs Natural Resources Inc. since 2002 and Mr. Schwartz has served as a Director since 1991. We thank Messrs. Phillips and Schwartz for their important contributions and wish them well.

We look forward to meeting with you at the 2012 Annual Meeting.

Sincerely,

LOGO

Joseph A. Carrabba

Chairman, President and

Chief Executive Officer

CLIFFS NATURAL RESOURCES INC.

200 Public Square, Suite 3300, Cleveland, OH 44114

P 216.694.5700 cliffsnaturalresources.com

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 8, 2012

Dear Shareholder:

To elect the ten Directors named in the proxy statement to hold office until the next Annual Meeting of Shareholders or until their successors are elected;

To amend our Regulations to add a provision to allow the Board to amend the Regulations without shareholder approval as permitted under Ohio law;

To approve, on an advisory basis, our named executive officer compensation;

To approve the 2012 Incentive Equity Plan;

To approve the 2012 Executive Management Performance Incentive Plan;

To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm to examine our consolidated financial statements for the 2012 fiscal year; and

To consider such other matters as may properly come before the 2012 Annual Meeting and any adjournments or postponements thereof.

Shareholders of record at the close of business on March 9, 2012 are entitled to notice of and to vote at such meeting and any adjournments or postponements thereof.


March 23, 2012		Very truly yours,


		Carolyn E. Cheverine
		General Counsel, Corporate Affairs and Secretary

YOUR VOTE IS IMPORTANT. YOU CAN VOTE BY TELEPHONE, OVER THE INTERNET,

BY MAILING THE PROXY CARD OR BY BALLOT IN PERSON AT THE MEETING.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of

Shareholders to be held on May 8, 2012: The proxy statement and our 2011 Annual Report to

Shareholders are available at http://www.proxyvote.com.

If your shares are not registered in your own name, please follow the voting instructions from your bank, broker, trustee or other nominee to vote your shares and, if you would like to attend the 2012 Annual Meeting, please bring evidence of your share ownership with you. You should be able to obtain evidence of your share ownership from the bank, broker, trustee or other nominee that holds the shares on your behalf.

CLIFFS NATURAL RESOURCES INC.

200 Public Square, Suite 3300, Cleveland, OH 44114

P 216.694.5700 cliffsnaturalresources.com

PROXY STATEMENT

March 23, 2012

SOLICITATION, USE AND REVOCATION OF PROXIES

The accompanying proxy is solicited by and on behalf of our Board of Directors, which we refer to as the Board of Directors or Cliffs’ Board, for use at the Annual Meeting of Shareholders to be held on May 8, 2012, which we refer to as our 2012 Annual Meeting, and any adjournments or postponements thereof. Any proxy may be revoked by a later proxy, by written notice to our Secretary or in the open meeting, without affecting any vote previously taken.

OUTSTANDING SHARES AND VOTING RIGHTS

As of March 9, 2012, the record date for the determination of persons entitled to vote at the 2012 Annual Meeting, there were 142,469,891 Common Shares, par value $0.125 per share, of Cliffs Natural Resources Inc. (“we,” “Cliffs” or the “Company”) outstanding, which we refer to as Common Shares. Each Common Share is entitled to one vote in connection with each item to be acted upon at the 2012 Annual Meeting. This proxy statement and accompanying proxy card are being first mailed or otherwise distributed to shareholders on or about March 23, 2012.

How to Vote if Registered Holder. If your shares are registered in your name, you may vote in person or by proxy. If you decide to vote by proxy, you may do so over the Internet, by telephone or by mail.

Over the Internet. After reading the proxy materials and with your proxy card or your notice regarding the availability of the proxy materials in front of you, you may use a computer to access the website www.proxyvote.com. You will be prompted to enter your control number from your proxy card or your notice regarding the availability of the proxy materials. This number will identify you as a shareholder of record. Follow the simple instructions that will be given to you to record your vote.

By telephone. After reading the proxy materials and with your proxy card or your notice regarding the availability of the proxy materials in front of you, you may call the toll-free number appearing on the proxy card, using a touch-tone telephone. You will be prompted to enter your control number from your proxy card or your notice regarding the availability of the proxy materials. This number will identify you as a shareholder of record. Follow the simple instructions that will be given to you to record your vote.

By mail. If you received a paper copy of the proxy card by mail, after reading the proxy materials, you may mark, sign and date your proxy card and return it in the prepaid and addressed envelope provided.

The Internet and telephone voting procedures have been set up for your convenience and have been designed to authenticate your identity, allow you to submit voting instructions and confirm that those instructions have been recorded properly.

How to Vote if Shares Held by Bank or Broker. If your shares are held by a bank, broker, trustee or some other nominee, that entity will provide separate voting instructions. All nominee share interests may view the proxy materials using the link www.proxyvote.com.

If your Common Shares are held in the name of a brokerage firm, your Common Shares may be voted even if you do not provide the brokerage firm with voting instructions. Brokerage firms have the authority under applicable rules to vote Common Shares for which their customers do not provide voting instructions on certain “routine” matters. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is referred to as a “broker non-vote.” The ratification of Deloitte and Touche LLP as our registered independent public accounting firm is the only routine matter for which the brokerage firm that holds your Common Shares may vote your Common Shares without your instructions.

Proxies. The Common Shares represented by properly authorized proxies will be voted as specified. It is intended that the Common Shares represented by proxies on which no specification has been made will be voted: FOR the election of the nominees for Director named herein or such substitute nominees as the Board of Directors may designate, FOR the amendment of our Regulations to add a provision to allow the Board to amend the Regulations without shareholder approval as permitted under Ohio law, FOR the resolution approving the compensation of our named executive officers, FOR the 2012 Incentive Equity Plan, FOR the 2012 Executive Management Performance Incentive Plan, FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting firm and, at the discretion of the persons named as proxies, on all other matters that may properly come before the 2012 Annual Meeting.

Counting of Votes. At the 2012 Annual Meeting, the results of shareholder voting will be tabulated by the inspector of elections appointed for the 2012 Annual Meeting. We intend to treat properly authorized proxies as “present” for purposes of determining whether a quorum has been achieved at the 2012 Annual Meeting.

Abstentions and broker non-votes will have no effect with respect to the election of Directors. Abstentions and broker non-votes will have the effect of votes against the proposal to amend our Regulations to add a provision to allow the Board to amend the Regulations without shareholder approval as permitted under Ohio law. Abstentions will have the effect of votes against, and broker non-votes will have no effect, with respect to the advisory vote regarding the compensation of our named executive officers and the vote to approve the 2012 Management Performance Incentive Plan. Abstentions will have no effect on the ratification of Deloitte & Touche LLP as our independent registered public accounting firm. Abstentions will count as votes cast on Proposal No. 4 and will have the effect of votes against the approval of the 2012 Incentive Equity Plan. Broker non-votes will not be counted as votes cast with respect to the 2012 Incentive Equity Plan and will not affect whether enough affirmative votes are received to approve the plan, but will be counted in determining whether enough votes are cast on Proposal No. 4 for the 2012 Incentive Equity Plan to be approved.

Delivery of Documents to Shareholders Sharing an Address. If you are the beneficial owner, but not the record holder, of Cliffs Common Shares, your broker, bank or other nominee may only deliver one copy of our notice regarding the availability of proxy materials and, as applicable, any other proxy materials that are delivered until such time as you or other shareholders sharing an address notify your nominee that you want to receive separate copies. A shareowner who wishes to receive a separate copy of the notice regarding the availability of proxy materials, proxy statement and annual report should submit this request by writing to our Corporate Secretary at Cliffs Natural Resources Inc., 200 Public Square, Suite 3300, Cleveland, Ohio 44114, or calling our Investor Relations department at (800) 214-0739, and they will be delivered promptly. However, please note that if you want to receive a paper proxy or voting instruction form or other proxy materials for purposes of this year’s Annual

Meeting, follow the instructions included in the notice regarding the availability of proxy materials. Beneficial owners sharing an address who are receiving multiple copies of proxy materials and annual reports and who wish to receive a single copy of such materials in the future will need to contact their broker, bank or other nominee to request that only a single copy of each document be mailed to all shareowners at the shared address in the future.

Cumulative Voting. If notice in writing shall be given by any shareholder to the President, a Vice President or the Secretary of the Company, not less than 48 hours before the time fixed for the holding of the 2012 Annual Meeting, that such shareholder desires that the voting for the election of Directors shall be cumulative, and if an announcement of the giving of such notice is made upon the convening of the 2012 Annual Meeting by the Chairman or Secretary or by or on behalf of the shareholder giving such notice, each shareholder shall have the right to cumulate such voting power as he or she possesses at such election. Under cumulative voting, a shareholder may cast for any one nominee as many votes as shall equal the number of Directors to be elected, multiplied by the number of his or her Common Shares. All of such votes may be cast for a single nominee or may be distributed among any two or more nominees as he or she may desire. If cumulative voting is invoked, and unless contrary instructions are given by a shareholder who signs a proxy, all votes represented by such proxy will be cast in such manner and in accordance with the discretion of the person acting as proxy as will result in the election of as many of Cliffs’ Board’s nominees as is possible.

ELECTION OF DIRECTORS

(Proposal No. 1)

It is intended that proxies received will be voted, unless contrary instructions are given, to elect the 10 nominees named in the following table to serve until the next Annual Meeting of Shareholders or until their successors shall be elected. All of the nominees were elected by the shareholders at the Annual Meeting of Shareholders held on May 17, 2011.

Should any nominee decline or be unable to accept such nomination to serve as a Director, an event that we currently do not anticipate, the persons named as proxies reserve the right, in their discretion, to vote for a lesser number of nominees or for substitute nominees designated by the Directors, to the extent consistent with our Regulations.

We do not have a formal policy regarding Director attendance at our Annual Meeting of Shareholders; however, it is expected that all Directors will attend the 2012 Annual Meeting unless there are extenuating circumstances for nonattendance. Ten of our 12 current Directors attended the 2011 Annual Meeting.

INFORMATION CONCERNING DIRECTOR NOMINEES


Name, Age, Principal Occupation and Employment, and Experience During Past Five Years, Specific Qualifications to Serve as a Director and Committee Member		First Became Director
JOSEPH A. CARRABBA, 59, Chairman, President and Chief Executive Officer of Cliffs since May 2007. Mr. Carrabba served as our President and Chief Executive Officer from September 2006 through May 2007 and as our President and Chief Operating Officer from May 2005 to September 2006. Mr. Carrabba has served as a director of KeyCorp since November 2009 and a director of Newmont Mining Corporation since June 2007. In addition, he currently is a director of Great Lakes Science Center and Capital University and sits on the boards of American Iron and Steel Institute and National Mining Association.		2006

Mr. Carrabba is an experienced mining executive who came to Cliffs with over 20 years experience with Rio Tinto plc, a global mining company. While with Rio Tinto plc, he served in a variety of capacities in mining operations internationally, including locations in Asia, Australia, Canada and Europe. He brings a global mining and exploration perspective with experience in a variety of minerals, including bauxite, coal and diamonds to the Board.

SUSAN M. CUNNINGHAM, 56, Senior Vice President of Exploration and Business Innovation of Noble Energy Inc., an international oil and gas exploration and production company, since May 2007. Ms. Cunningham served as senior vice president of Exploration and Corporate Reserves of Noble Energy Inc. from 2005 to May 2007.		2005

Ms. Cunningham brings to the Board years of global exploration, geology and energy experience from her various roles with Noble Energy Inc. As we have grown internationally and expanded into mineral exploration and through mining acquisitions (metallurgical coal and chromite, as examples), her guidance has been a valuable asset to our Board in assessing the value of acquisition projects as well as providing guidance when we address energy usage and carbon-related issues.


Name, Age, Principal Occupation and Employment, and Experience During Past Five Years, Specific Qualifications to Serve as a Director and Committee Member		First Became Director
Committee Assignments: Governance and Nominating Committee and Strategy and Sustainability Committee
Ms. Cunningham’s leadership skills, developed as a senior executive of an international public company, are an asset to our Governance and Nominating Committee. Ms. Cunningham’s global exploration experiences and knowledge and understanding of global mining and exploration industries and reserve calculations strengthen our Strategy and Sustainability Committee. Ms. Cunningham’s executive experience is also a valuable resource for Cliffs’ Board in its dealings with senior management.

BARRY J. ELDRIDGE, 66, Currently retired. Mr. Eldridge previously served as the managing director and chief executive officer of Portman Limited, an international iron ore mining company in Australia, from October 2002 through April 2005. Mr. Eldridge formerly served as chairman of Vulcan Resources Ltd. from 2005 to 2008 and, chairman of Millennium Mining Pty. Ltd. from 2007 to 2008. Mr. Eldridge is currently the chairman of Mundo Minerals Limited. In addition, he serves as a director of Sundance Resources Ltd. All of these companies are or were listed on the Australian Stock Exchange.		2005

As a former executive of an international mining company and former or acting chairman of various Australian mining companies, Mr. Eldridge brings to the Board a wealth of international management experience as well as business perspectives specific to the Australian coal and iron mining industry, which is one of Cliffs’ strategic focuses.

Committee Assignments: Strategy and Sustainability Committee and Compensation and Organization Committee
Mr. Eldridge’s extensive international mining and exploration expertise is an asset to our Strategy and Sustainability Committee, particularly when evaluating new strategic opportunities. His management experience both on boards of other companies and as a former executive facilitates his ability to lead as Chairman of the Strategy and Sustainability Committee and strengthens the Compensation and Organization Committee through his understanding of compensation strategies necessary to retain and attract international exploration and mining talent.

ANDRÉS R. GLUSKI, 54, President and Chief Executive Officer of The AES Corporation, or AES, one of the world’s largest independent power producers with operations in 26 countries. Dr. Gluski served as senior vice president, Caribbean and Central America of AES from 2003 to 2006, executive vice president and regional president, Latin America of AES from 2006 to 2007 and as executive vice president and chief operating officer of AES from 2007 to 2011. Dr. Gluski currently is also chairman for AES Gener S. A. and AES Brasiliana. Previously, Dr. Gluski worked with the International Monetary Fund and served as director general of the Ministry of Finance and senior economic policy advisor to the Minister of Planning in Venezuela.		2011

Dr. Gluski’s years of experience with AES and other public and private initiatives throughout the Americas in a number of executive capacities provides the Board with valuable international business experience and knowledge, which particularly is relevant to Cliffs’ Board in light of Cliffs’ growing international operations. Dr. Gluski’s executive experience is also a valuable resource for Cliffs’ Board in its dealings with senior management.


Name, Age, Principal Occupation and Employment, and Experience During Past Five Years, Specific Qualifications to Serve as a Director and Committee Member		First Became Director
Committee Assignments: Audit Committee and Strategy and Sustainability Committee Dr. Gluski’s background in international finance and economics along with his knowledge of the power industry brings practical expertise to both committees.

SUSAN M. GREEN, 52, Deputy General Counsel, U.S. Congressional Office of Compliance since November 2007. Ms. Green served as aide to Council member Nancy Floreen, Montgomery County, Maryland from December 2002 to August 2005. Ms. Green originally was proposed as a nominee for the Board by the United Steelworkers, or USW, pursuant to the terms of our 2004 labor agreement.		2007

Ms. Green has served as both a labor organizer and as an attorney representing organized labor. She also has worked in government both as a member of former Massachusetts’ Senator Edward M. Kennedy’s staff and as a member of the U.S. Department of Labor during the Clinton administration. She brings her diverse experiences as a labor attorney and an alternative point of view to our Board. As someone who has represented organized labor, she is able to advocate the views of the majority of our North American workforce.

Committee Assignments: Audit Committee and Governance and Nominating Committee Ms. Green’s labor and governmental background brings practical experience to both committees.

JANICE K. HENRY, 60, Currently retired. Ms. Henry previously served as senior vice president from 1998 through June 2006, chief financial officer from 1994 to June 2005 and treasurer from 2002 to March 2006 of Martin Marietta Materials, Inc., or Martin Marietta, a producer of construction aggregates serving the public infrastructure, commercial and residential construction markets in the United States. Ms. Henry served in a consulting capacity for Martin Marietta from July 2006 through June 2009. Ms. Henry was a director of Inco Limited from June 2004 through October 2006 and of North American Galvanizing & Coatings, Inc. from February 2008 through August 2010. In January 2012, Ms. Henry became a director of W.R. Grace & Co., a global specialty chemicals and materials company. Since October 2009, Ms. Henry has been a member of The Charles Stark Draper Laboratory, Inc., a nonprofit corporation, which engages in activities that contribute to the support and advancement of scientific research, technology and development.		2009

Ms. Henry’s background with Martin Marietta brings significant accounting, financial, Securities and Exchange Commission, or SEC, reporting, risk analysis, and audit experiences to our Board. As a former director on the boards of Inco Limited and North American Galvanizing & Coatings, Inc., Ms. Henry contributes her board-level experience and background in mining and basic materials.

Committee Assignments: Audit Committee and Compensation and Organization Committee Ms. Henry’s extensive financial reporting and accounting background provides the additional expertise required for audit committees of public companies. Cliffs’ Board has determined that she is one of the two audit committee financial experts (as that term is defined in SEC regulations) on the Audit Committee. Additionally, her financial background complements the activities of the Compensation Committee and she is an important link between the Audit and Compensation Committees.


Name, Age, Principal Occupation and Employment, and Experience During Past Five Years, Specific Qualifications to Serve as a Director and Committee Member		First Became Director
JAMES F. KIRSCH, 54, Chairman, President and Chief Executive Officer of Ferro Corporation, or Ferro, a global supplier of technology-based materials for a broad range of manufacturers. Mr. Kirsch was elected chairman of Ferro’s board of directors in December 2006 and appointed chief executive officer and a director of Ferro in November 2005. Mr. Kirsch joined Ferro in October 2004 as its president and chief operating officer. Prior to joining Ferro from 2002 through 2004, Mr. Kirsch served as president of Premix Inc. and Quantum Composites, Inc., manufacturers of thermoset molding compounds, parts and subassemblies for the automotive, aerospace, electrical and HVAC industries. From 2000 through 2002, he served as president and director of Ballard Generation Systems, a company engaged in the design, development, manufacture and sale of clean energy fuel cell products, and vice president for Ballard Power Systems in Burnaby, British Columbia, Canada. Mr. Kirsch brings a wealth of senior management experience with major organizations with international operations. As chairman, president and chief executive officer of a New York Stock Exchange, or NYSE, listed company, he brings additional chairmanship and CEO experience to Cliffs’ Board and the committees on which he serves. Committee Assignments: Compensation and Organization Committee and Governance and Nominating Committee		2010
Mr. Kirsch, as chairman and chief executive officer of a public company, is experienced in the annual, quarterly and periodic filing obligations of the SEC. As an executive officer of a public company and chairman of its board, Mr. Kirsch is well versed in the mechanics of board compensation matters and corporate governance issues. Mr. Kirsch was a member of the Audit Committee until June 30, 2011 and became a member of the Governance and Nominating Committee and Compensation and Organization Committee on July 1, 2011. On September 1, 2011, Mr. Kirsch was named Chairman of the Compensation and Organization Committee.

FRANCIS R. McALLISTER, 69, Chairman and Chief Executive Officer of Stillwater Mining Company, a palladium and platinum producer, since February 2001. Mr. McAllister has served as a director of Stillwater Mining Company since January 2001.		1996

As a sitting chairman and chief executive officer of a North American mining company for 11 years, Mr. McAllister brings significant mining and leadership expertise to the Board. As a sitting chairman, Mr. McAllister’s experience in fostering good communication between directors and management is invaluable in his capacity as Lead Director. Mr. McAllister stepped down as Chairman of the Compensation and Organization Committee effective September 1, 2011, but remained Lead Director.

Committee Assignments: Strategy and Sustainability Committee, Compensation and Organization Committee and Lead Director A strong mining background provides Mr. McAllister with special insight into mineral exploration and reserve strategies to help direct our Strategy and Sustainability Committee towards new diverse steel industry-related mineral opportunities. Mr. McAllister’s leadership experience and perspective is invaluable to the Company as Lead Director.


Name, Age, Principal Occupation and Employment, and Experience During Past Five Years, Specific Qualifications to Serve as a Director and Committee Member		First Became Director
RICHARD K. RIEDERER, 68, Chief Executive Officer of RKR Asset Management, a consulting organization, since June 2006. Mr. Riederer served as president and CEO from January 1996 through February 2001 of Weirton Steel Corporation, a steel producing company. Mr. Riederer has been a director of First American Funds since September 2001. He also serves on the Board of Trustees of Franciscan University of Steubenville.		2002

Mr. Riederer’s long career in the steel industry as well as his experience as CEO and chief financial officer of Weirton Steel Corporation, a North American steel producer, brings executive management, accounting and finance and financial reporting expertise to Cliffs’ Board as well as an in depth knowledge of the North American steel industry. His insight as past chairman of North American Iron & Steel Institute is invaluable.

Committee Assignments: Audit Committee and Strategy and Sustainability Committee Mr. Riederer is one of two audit committee financial experts (as that term is defined in SEC regulations) based on years of financial and accounting experience and leadership as a member, as well as Chairman, of the Audit Committee. Mr. Riederer’s strong sense of leadership and knowledge of the steel industry supports the purpose of our Strategy and Sustainability Committee.

RICHARD A. ROSS, 54, Currently retired. Mr. Ross previously served as chairman and CEO of Inmet Mining Corporation, a Canadian-based global mining company. Mr. Ross was president and CEO of Inmet Mining Corporation from 2000 to 2005, chairman and CEO from 2005 to 2009 and chairman of the Board in 2009 of Inmet Mining Corporation. Mr. Ross’ executive leadership experience and knowledge of Canadian mining companies brings valuable skills and perspectives to the Board and the committees on which he serves.		2011

Committee Assignments: Audit Committee and Governance and Nominating Committee As a former chairman and CEO of a mining company, Mr. Ross is well versed in corporate governance and board compensation practices for a mining company as well as financial disclosure requirements.

In accordance with the retirement policy contained in our Corporate Governance Guidelines, Messrs. Roger Phillips and Alan Schwartz are not standing for re-election at the 2012 Annual Meeting.

In the election of Directors, the nominees receiving a plurality vote of the Common Shares will be elected. However, under our majority voting policy, any Director-nominee that is elected but fails to receive a majority of votes cast (which excludes abstentions and broker non-votes) is expected to tender his or her resignation, which resignation will be considered by the Governance and Nominating Committee and our Board.

The Board of Directors recommends a vote FOR each of the nominees listed above.

DIRECTOR INDEPENDENCE

Our Board of Directors has determined that each of the current Directors standing for re-election, other than Mr. Carrabba, and all of the current members of the Audit, Governance and Nominating, and Compensation and Organization Committees, have no material relationship with us (either directly or as a partner, shareholder or officer of an organization that has a relationship with us) and is independent within our director independence standards, which reflect exactly the NYSE director independence standards. Ronald C. Cambre served as a Director during 2011 until the 2011 annual meeting and the Board of Directors also determined that Mr. Cambre met these independence standards. Mr. Carrabba is our Chairman, President and Chief Executive Officer, or CEO, and as such, is not considered independent. He does not serve as a member of any of Cliffs’ Board committees.

Since January 1, 2011, there have been no transactions between Cliffs and any of its independent Directors other than compensation for service as a director as disclosed below.

BOARD OF DIRECTORS AND BOARD COMMITTEES

The members and nominees for Cliffs’ Board have diversified professional experience in general management, steel manufacturing, construction aggregates, mining, finance, labor, law, education, natural resource exploration, power generation and distribution, and other fields. There is no family relationship among any of our nominees and executive officers. Nine of the 10 nominees have no present or former employment relationship with Cliffs. The average age of the nominees currently serving on Cliffs’ Board is 59, ranging from ages 52 to 69. The average years of service of the nominees currently serving on Cliffs’ Board is five years, ranging from one year to 16 years of service.

Board Leadership Structure. The Chairman of our Board is Joseph A. Carrabba, who is also our CEO and President. Pursuant to our Corporate Governance Guidelines, when the positions of Chairman and CEO are held by one individual, then the Board designates our Lead Director. Francis R. McAllister currently serves as our Lead Director. The Board has determined that this leadership structure is appropriate for our Company.

Under this leadership structure, Mr. Carrabba is responsible for overseeing and facilitating communications between our management and the Board, for setting the meeting schedules and agendas, and leading Board discussions during Board meetings. In his combined role, Mr. Carrabba has the benefit of Cliffs’ personnel to help with extensive meeting preparation, responsibility for the process of recordkeeping of all Board deliberations, and the benefit of direct daily contact with management and internal audit departments. The Chairman works closely with the Lead Director in setting meeting agendas and in ensuring that essential information is effectively communicated to the Board. This leadership structure provides our Chairman with the readily available resources to manage the affairs of the Board while allowing our Lead Director to provide effective and timely advice and guidance.

Corporate Governance Guidelines. Our governance process is based on our Corporate Governance Guidelines, which are available on our website at http://www.cliffsnaturalresources.com.

Meetings; Committees. During 2011, eight meetings of Cliffs’ Board and 31 meetings of Cliffs’ Board committees were held. Our independent Directors held seven meetings in executive session without the presence of Mr. Carrabba in 2011. Mr. McAllister has served as Lead Director since May 2004. He chaired all of the Board’s executive session meetings in 2011. Directors also discharge their responsibilities by reviewing reports to Directors, visiting our facilities, corresponding with the CEO, and conducting telephone conferences with the CEO and Directors regarding matters of interest and

concern to Cliffs. In addition, Directors have regular access to senior management of Cliffs. The Directors have meetings of Audit, Governance and Nominating, Compensation and Organization, and Strategy and Sustainability Committees as well as ad hoc committee meetings when needed. The Board reviewed its committee structure and determined that it was advisable to rename the former Strategy and Operations Committee to Strategy and Sustainability Committee effective January 2012 to indicate that this committee also has oversight of our sustainability efforts.

All committees regularly report their activities, actions and recommendations to Cliffs’ Board. During 2011, one independent Director attended at least 90 percent of all meetings, while the remaining independent Directors attended at least 94 percent of the aggregate total of Cliffs’ Board and committee meetings. No Director attended less than 75 percent of Cliffs’ Board or committee meetings of which they were members.

Audit Committee. The members of the Audit Committee from January 1, 2011 through June 30, 2011 consisted of Messrs. Riederer (Chairman), Kirsch and Schwartz, and Mses. Green and Henry. Since July 1, 2011, the Audit Committee membership has consisted of Messrs. Riederer (Chairman), Gluski, Ross and Schwartz, and Mses. Green and Henry.

The Audit Committee reviews with our management, the internal auditors and the independent registered public accounting firm, the adequacy and effectiveness of our system of internal control over financial reporting; reviews significant accounting matters; reviews quarterly unaudited financial information prior to public release; approves the audited financial statements prior to public distribution; approves our assertions related to internal controls prior to public distribution; reviews any significant changes in our accounting principles or financial reporting practices; reviews, approves and retains the services performed by our independent registered public accounting firm; has the authority and responsibility to evaluate our independent registered public accounting firm; discusses with the independent registered public accounting firm their independence and considers the compatibility of non-audit services with such independence; annually selects and retains our independent registered public accounting firm to examine our financial statements; approves management’s appointment, termination or replacement of the Chief Risk Officer; and conducts a legal compliance review at least annually. The members of the Audit Committee are independent under applicable SEC rules and the NYSE listing standards. Cliffs’ Board identified Mr. Riederer and Ms. Henry as audit committee financial experts (as defined in Item 407(d)(5)(ii) of Regulation S-K of the SEC rules). No member of the Audit Committee serves on the audit committees of more than three public companies. The Audit Committee held 11 meetings during 2011. The charter of the Audit Committee is available at http://www.cliffsnaturalresources.com.

Governance and Nominating Committee. From January 1, 2011 through June 30, 2011, the members of the Governance and Nominating Committee consisted of Messrs. Phillips (Chairman), Kirsch and Schwartz, and Mses. Cunningham and Green. Since July 1, 2011, the members of the Governance and Nominating Committee have consisted of Messrs. Phillips (Chairman), Kirsch, Schwartz and Ross, and Mses. Cunningham and Green. The Governance and Nominating Committee is involved in determining Director compensation and reviews and administers our Director compensation plans; monitors the Board governance process and provides counsel to the CEO on Board governance and other matters; recommends changes in membership and responsibility of Board committees; and acts as the Board’s Nominating Committee and Proxy Committee in the election of Directors. The Governance and Nominating Committee held five meetings during 2011. The charter of the Governance and Nominating Committee is available at http://www.cliffsnaturalresources.com.

As noted above, the Governance and Nominating Committee is involved in determining compensation for our Directors. The Governance and Nominating Committee reviews and administers our Director compensation plans, and makes recommendations to the Board with respect to

compensation plans and equity-based plans for Directors. The Governance and Nominating Committee annually reviews Director compensation in relation to comparable companies and other relevant factors. Any change in Director compensation must be approved by Cliffs’ Board. Other than Mr. Carrabba in his capacity as a Director, no executive officers participate in setting Director compensation. From time to time, the Governance and Nominating Committee or Cliffs’ Board may engage the services of a compensation consultant to provide information regarding Director compensation at comparable companies.

Compensation and Organization Committee. The Compensation and Organization Committee, which we refer to as the Compensation Committee, consisted of Messrs. McAllister (Chairman), Eldridge and Phillips, and Ms. Henry from January 1, 2011 through June 30, 2011. Mr. Cambre was a member of the Compensation Committee from January 1, 2011 to May 16, 2011. Since July 1, 2011, the Compensation Committee members were Messrs. McAllister (Chairman), Eldridge, Kirsch and Phillips and Ms. Henry. As of August 11, 2011, Mr. Kirsch assumed the role of chairman while Mr. McAllister remained Lead Director and a member of the Committee. The Compensation Committee recommends to Cliffs’ Board the election and compensation of officers; administers our executive compensation plans for officers; reviews management development; evaluates the performance of the CEO and the other executive officers; and obtains the advice of outside experts with regard to compensation matters. The Compensation Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee.

The Compensation Committee obtains analysis and advice from an external compensation consultant to assist with the performance of its duties under its charter. The Compensation Committee directly retained Semler Brossy Consulting Group, or Semler Brossy, for 2011, and Semler Brossy helped the Compensation Committee develop an appropriate agenda for performing the Compensation Committee’s responsibilities. In this regard, Semler Brossy advised and assisted the Compensation Committee in determining the appropriate objectives and goals of our executive compensation programs; in designing compensation programs that fulfill those objectives and goals; in seeking to align executive compensation programs with shareholder interests; in evaluating the effectiveness of our compensation programs; in identifying appropriate pay positioning strategies and pay levels in our executive compensation programs; and in identifying mining industry and general industry peers and identifying compensation surveys for the Compensation Committee to use to benchmark the appropriateness and competitiveness of our executive compensation program.

The Compensation Committee makes all decisions regarding the CEO’s compensation, subject to ratification by the independent members of the Board, after consulting with its advisors in executive session where no management employees are present. For the other executive officers, the CEO is asked by the Compensation Committee to conduct and present an assessment on the achievement of specific goals established for those officers and on the performance of Cliffs taking into account external market forces and other considerations. While the CEO and Executive Vice President, Finance and Administration and Chief Financial Officer attend Compensation Committee meetings regularly by invitation, the Compensation Committee is the final decision maker for the compensation of the executive officers. For additional information regarding the operation of the Compensation Committee, see “Executive Compensation—Compensation Discussion and Analysis” beginning on page 20 of this proxy statement. The Compensation Committee held eight meetings during 2011. The charter of the Compensation Committee is available at http://www.cliffsnaturalresources.com.

Strategy and Sustainability Committee (formerly known as the Strategy and Operations Committee). From January 1, 2011 to June 30, 2011, the Strategy and Sustainability Committee consisted of Messrs. Eldridge (Chairman), McAllister and Riederer, and Ms. Cunningham. Mr. Cambre was a member of the Strategy and Sustainability Committee until May 16, 2011. Since July 1, 2011, the members of the Strategy and Sustainability Committee have been Messrs Eldridge (Chairman),

Gluski, McAllister and Riederer, and Ms. Cunningham. The purpose of the Strategy and Sustainability Committee is to oversee Cliffs’ strategic plan, annual management objectives and operations and to oversee and monitor risks relevant to its strategy, as well as operational, safety and environmental risks. The Strategy and Sustainability Committee provides advice and assistance with developing our Company’s current and future strategy; provides follow up oversight with respect to the comparison of actual results with estimates for major projects and post-deal integration; ensures that Cliffs has appropriate strategies for managing exposures to financial, economic and hazard risks; assesses Cliffs’ overall capital structure and its capital allocation priorities; assists management in determining the resources necessary to implement Cliffs’ strategic and financial plans; monitors the progress and implementation of the Company’s strategy; acts in an advisory capacity to the Board and management with respect to Cliffs’ global sustainability strategies and its social license to operate; and reviews the adequacy of Cliffs’ insurance programs.

The Strategy and Sustainability Committee held seven meetings in 2011. The charter of the Strategy and Sustainability Committee is available at http://www.cliffsnaturalresources.com.

THE BOARD’S ROLE IN RISK OVERSIGHT

The Board of Directors as a whole oversees our enterprise risk management, or ERM, process. The Board executes its risk oversight role in a variety of manners. The full Board regularly discusses the key strategic risks facing Cliffs, and the Board has an annual meeting devoted to strategic planning, including discussion of Cliffs’ principal strategic risks.

In addition, the Board delegates oversight responsibility for certain areas of risk to its committees. Generally, each committee oversees risks that are associated with the purpose of and responsibilities delegated to that committee. For example, the Audit Committee oversees risks related to accounting and financial reporting, treasury, legal, compliance and information technology. In addition, pursuant to its charter, the Audit Committee periodically reviews our ERM process. The Strategy and Sustainability Committee addresses strategic, operational, safety and environmental risks. The Compensation and Organization Committee monitors risks related to development and succession planning for executive officers, and compensation and related policies and programs for executive and non-executive officers and management. The Governance and Nominating Committee handles risks with respect to board organization, membership and structure, director succession planning and corporate governance matters. As appropriate, the respective committees’ Chairpersons provide reports to the full Board.

Through the ERM process, management is responsible for the day-to-day management of Cliffs’ risks. Cliffs’ Chief Risk Officer leads the administration of the ERM process, which includes the involvement of management in the identification, assessment, mitigation and monitoring of Cliffs’ key risks. The Chief Risk Officer and/or executive management regularly reports to the Board or relevant Committees regarding Cliffs’ key risks and the actions being taken to manage these risks.

The Company believes that its leadership structure supports the risk oversight function of the Board. While the Company has a combined Chairman of the Board and Chief Executive Officer, strong Directors chair our committees, which are each involved with risk oversight, there is open communication between management and Directors, and all Directors are involved actively in the risk oversight function.

CONSIDERATION OF DIRECTOR NOMINEES

Shareholder Nominees

The policy of the Governance and Nominating Committee is to consider properly submitted shareholder nominations for candidates for membership on the Board as described below under “Identifying and Evaluating Nominees for Directors.” In evaluating nominations, the Governance and Nominating Committee seeks to achieve a balance of knowledge, experience and capability on Cliffs’ Board and to address the membership criteria set forth below under “Board Diversity and Director Qualifications.” Any shareholder nominations proposed for consideration by the Governance and Nominating Committee should include: (i) complete information as to the identity and qualifications of the proposed nominee, including name, address, present and prior business and/or professional affiliations, education and experience, and particular fields of expertise; (ii) an indication of the nominee’s consent to serve as a Director if elected; and (iii) the reasons why, in the opinion of the recommending shareholder, the proposed nominee is qualified and suited to be a director. Shareholder nominations should be addressed to Cliffs Natural Resources Inc., 200 Public Square, Suite 3300, Cleveland, Ohio 44114-2315, Attention: Secretary. Our Regulations provide that at any meeting of shareholders at which directors are to be elected, only persons nominated as candidates will be eligible for election.

Board Diversity and Director Qualifications

Although there is no specific board diversity policy in place presently, the Governance and Nominating Committee does consider such factors as it deems appropriate and consistent with our Corporate Governance Guidelines, the charter of the Governance and Nominating Committee and other criteria established by Cliffs’ Board, which includes diversity. The Governance and Nominating Committee’s goal in selecting directors for nomination to Cliffs’ Board generally is to seek to create a well-balanced team that combines diverse experience, skill and intellect of seasoned directors in order to enable us to pursue our strategic objectives. The Governance and Nominating Committee has not reduced the qualifications for service on Cliffs’ Board to a checklist of specific standards or minimum qualifications, skills or qualities. Rather, we seek, consistent with the vacancies existing on Cliffs’ Board at any particular time and the interplay of a particular candidate’s experience with the experience of other Directors, to select individuals whose business experience, knowledge, skills, diversity and integrity would be considered a desirable addition to our Board and any committees thereof. In addition, the Governance and Nominating Committee annually conducts a review of incumbent Directors in order to determine whether a Director should be nominated for re-election to Cliffs’ Board.

The Governance and Nominating Committee makes determinations as to Director selection based upon the facts and circumstances at the time of the receipt of the Director candidate recommendation. Applicable considerations include: whether the Governance and Nominating Committee currently is looking to fill a new position created by an expansion of the number of Directors, or a vacancy that may exist on Cliffs’ Board; whether the current composition of Cliffs’ Board is consistent with the criteria described in our Corporate Governance Guidelines; whether the candidate submitted possesses the qualifications that generally are the basis for selection of candidates to Cliffs’ Board; and whether the candidate would be considered independent under the rules of the NYSE and our standards with respect to Director independence. Final approval of any candidate is determined by the full Cliffs’ Board.

Identifying and Evaluating Nominees for Directors

The Governance and Nominating Committee utilizes a variety of methods for identifying and evaluating nominees for Director. The Governance and Nominating Committee regularly reviews the appropriate size of Cliffs’ Board and whether any vacancies on Cliffs’ Board are expected due to

retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Governance and Nominating Committee considers various potential candidates for Director. Candidates may come to the attention of the Governance and Nominating Committee through current Board members, professional search firms, shareholders or other persons. As described above, the Governance and Nominating Committee considers properly submitted nominations for candidates for Cliffs’ Board. Following verification of the recommending shareholder’s status, recommendations are considered by the Governance and Nominating Committee at its next regularly scheduled meeting.

MAJORITY VOTING POLICY

In 2010, the Board adopted a majority voting policy whereby, in an uncontested election, any nominee for director who fails to receive a majority of the votes cast (which excludes abstentions and broker non-votes) is expected to tender his or her resignation. In such an event, the Governance and Nominating Committee will consider the tendered resignation and make a recommendation to the Board.

MEETINGS OF NON-MANAGEMENT DIRECTORS; COMMUNICATIONS WITH DIRECTORS

In accordance with the NYSE’s corporate governance listing standards, our non-management directors meet at regularly scheduled executive sessions without management present. Shareholders and interested parties may communicate with the Lead Director, our non-management directors as a group or Cliffs’ Board, by writing to the Lead Director at Cliffs Natural Resources Inc., 200 Public Square, Suite 3300, Cleveland, Ohio 44114-2315, Attn: Lead Director. As set forth in the Corporate Governance Guidelines, the Lead Director will report to the full Board any communications that are directed at all members of Cliffs’ Board.

BUSINESS ETHICS POLICY

We have adopted a Code of Business Conduct and Ethics, or Code, which applies to all of our Directors, officers and employees. The Code is available on our website at http://www.cliffsnaturalresources.com in the Corporate Governance section under “Investors.” We intend to post amendments to or waivers from our Code (to the extent applicable to our principal executive officer, principal financial officer or principal accounting officer) on our website. Reference to our website and the contents thereof do not constitute incorporation by reference of the information contained on our website, and such information is not part of this proxy statement.

DIRECTORS’ COMPENSATION

Directors who are not Cliffs’ employees receive an annual retainer fee, fees for meeting attendance and an annual equity award. The Lead Director and Committee Chairpersons receive additional retainer fees. Employee Directors receive no additional compensation for their service as Directors. Certain changes to the retainer and per-meeting fees were made during 2011, which were effective April 1, 2011. The following table sets forth the retainer and per-meeting fee schedules in effect for the first quarter of 2011 and each quarter thereafter, respectively:


Board Function	January 1, 2011 - March 31, 2011		April 1, 2011 - Present
Annual Retainer	$	50,000	$	60,000
Board Meeting Fees	$	2,000/meeting	$	2,000/meeting
Committee Meetings Fees	$	1,500/meeting	$	1,500/meeting
Lead Director Annual Retainer	$	40,000	$	40,000
Audit Committee Annual Chair Retainer	$	15,000	$	15,000
Compensation and Organization Committee Annual Chair Retainer	$	10,000	$	12,500
Governance and Nominating and Strategy and Sustainability Committees Annual Chair Retainers	$	7,500	$	10,000

The Directors’ annual equity grants are made under the Nonemployee Directors’ Compensation Plan (as Amended and Restated as of December 31, 2008), which we refer to as the Directors’ Plan. Effective May 17, 2011, the Directors’ Plan provides for $80,000 worth of restricted or unrestricted Common Shares, as described below, to be awarded on the annual meeting date, unless otherwise determined by the Board. The Board has increased the value of the annual equity grants to $85,000 starting with the May 8, 2012 annual meeting. Nonemployee Directors who are under age 69 on the date of the annual meeting receive an automatic annual grant of restricted shares with a three-year vesting requirement. Nonemployee Directors who are 69 years of age or older on the date of the annual meeting receive an automatic annual grant of Common Shares (with no restrictions). Three Directors received their annual equity awards in the form of unrestricted shares in May 2011, and one will receive unrestricted shares in the May 2012 annual equity grant. Any Directors who join the Board after the annual meeting receive a prorated award of restricted shares pursuant to the Directors’ Plan. Directors receive dividends on their annual equity grants and may elect that all cash dividends with respect to restricted shares be deferred and reinvested in additional Common Shares. Those additional Common Shares are subject to the same restrictions as the underlying award. Cash dividends not subject to a deferral election will be paid to the Director without restriction.

We have established Director Share Ownership Guidelines and assess each Director’s compliance with the guidelines in December of each year. If a nonemployee Director meets the guidelines as of that assessment, the Director may elect to receive all or a portion of his or her annual retainer for the following year in cash. If the Director does not meet these guidelines, the Director is required to receive an equivalent value of a specified portion of the annual retainer in Common Shares until he or she meets the guidelines. Whether or not they are required to receive part of their retainer as Common Shares, nonemployee Directors may elect to receive up to 100 percent of their retainer and other fees in Common Shares. The cash portions of the annual retainers are paid quarterly, and Common Shares are issued at the beginning of the next fiscal year for the portion of each quarter’s retainer that is paid in Common Shares. For those Directors who were required (or elected) to receive payment of their 2011 annual retainers in the form of Common Shares, $5,000 of the retainer paid for the first quarter of 2011 was paid in Common Shares, and $6,000 of the retainer for the remaining quarters of 2011 was paid in Common Shares.

The Director Share Ownership Guidelines that were in effect as of the December 2010 assessment, and which determined whether or not Directors were required to receive a portion of their

2011 retainers in Common Shares, provided that a Director should hold or acquire by the end of a four-year period the lesser of either (i) 4,000 or more Common Shares, or (ii) Common Shares having a market value of at least $100,000. We amended our Director Share Ownership Guidelines at the beginning of 2011. The amended guidelines, which applied to the December 2011 assessment with respect to Director elections for 2012 retainer payments, require a Director to hold or acquire Common Shares having a market value of at least $250,000 within five years of becoming a Director.

The Directors’ Plan gives nonemployee Directors the opportunity to defer all or a portion of their annual retainer and other fees, whether payable in cash or Common Shares. If a Director elects to defer part of his or her retainer or fees in shares, then the number of shares credited to the Director’s account is equal to the portion of retainer or fee elected to receive in shares divided by the fair market value of the shares on the first day of the period to which the retainer or fee relates. The portion of a fee that is deferred will be credited following each plan year to the respective Director’s account as of the date it would have otherwise been paid. Nonemployee Directors may elect to receive deferred shares in lieu of their annual equity award with the same three-year vesting requirements. Amounts held in deferred cash accounts earn interest at the end of each quarter based on the Moody’s Corporate Average Bond Yield, or such other rate as may be fixed by the plan administrator. Deferred share accounts earn dividend equivalents at the end of each quarter based on any cash dividends we pay during the quarter, which dividend equivalents are credited to the accounts in the form of additional deferred shares. The amounts in the Director’s deferral accounts, whether cash or shares, together with any deferred dividends, will be paid to the Director in the form elected after such Director’s death, disability, termination of service, or change in control of the Company.

Cliffs has a trust agreement with KeyBank National Association relating to the Directors’ Plan in order to fund and pay our deferred compensation obligations under the plan.

Director Compensation for 2011

The following table, supported by the accompanying footnotes and narrative, sets forth for fiscal year 2011 all compensation earned by the individuals who served as our nonemployee Directors at any time during 2011.


Name	Fees Earned or Paid in Cash ($)(1)		Stock Awards ($)(2)		Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)(3)		All Other Compensation ($)(4)		Total ($)
R. C. Cambre(5)		47,500		—		—		—		47,500
S. M. Cunningham		89,500		80,013		—		4,033		173,546
B. J. Eldridge		103,875		80,013		—		4,033		187,921
A. R. Gluski		97,611		104,670		—		762		203,043
S. M. Green		99,500		80,013		—		4,033		183,546
J. K. Henry		104,000		80,013		—		3,424		187,437
J. F. Kirsch		95,644		80,013		—		1,309		176,966
F. R. McAllister		141,731		80,013		101		4,088		225,933
R. Phillips		104,375		80,013		—		225		184,613
R. K. Riederer		117,500		80,013		—		—		197,513
R. A. Ross		98,111		104,670		—		763		203,544
A. Schwartz		97,500		80,013		—		225		177,738

(1)

The amounts listed in this column reflect the aggregate cash dollar value of all earnings in 2011 for annual retainer fees, chairman retainers and meeting fees, whether received in required retainer shares, voluntary shares, cash or a combination thereof. Unless otherwise noted below, the amounts indicated were elected to be paid in cash.

Messrs. Eldridge and Schwartz and Ms. Cunningham met the Director Share Ownership Guidelines and elected to continue to receive $23,000 each in Common Shares. Messrs. Gluski and Ross joined our Board in January 11, 2011 and received a pro rata amount of $22,444 each, which they were required to receive in Common Shares. Messrs. Kirsch and Riederer met the Director Share Ownership Guidelines and elected to defer $23,000 in Common Shares pursuant to the Directors’ Plan.

(2)

The amounts reported in this column reflect the aggregate grant date fair value computed in accordance with FASB ASC 718 for the nonemployee Directors’ annual equity awards of either restricted shares or unrestricted shares granted during 2011, which awards are further described above, and whether or not deferred by the Director. The grant date fair value of the nonemployee Directors’ annual equity award on May 17, 2011 was $86.50 per share. Among the nonemployee Directors, only Messrs. Phillips and Schwartz (who were 69 years of age or older on the Annual Meeting date in May 2011) received 925 unrestricted Common Shares each as his annual equity award for 2011 under the Directors’ Plan. Messrs. Kirsch and Riederer elected to defer their 925 restricted shares under the Directors’ Plan. Messrs. Gluski and Ross joined our Board January 11, 2011 and each received a prorated annual equity award of 290 restricted shares at a grant date fair value of $84.96 per share in addition to the May 17, 2011 grants. Messrs. Kirsch, McAllister and Riederer have elected to defer their dividends on certain of their annual equity awards into additional Common Shares subject to the same risk of forfeiture as their original grants pursuant to the Directors Plan. As of December 31, 2011, the aggregate number of restricted shares subject to forfeiture held by each nonemployee Director was as follows: Ms. Cunningham—4,842; Mr. Eldridge—4,842; Dr. Gluski—1,215; Ms. Green—4,842; Ms. Henry—4,384; Mr. Kirsch—1,569.8753; Mr. McAllister—4,934.0351; Mr. Phillips—0; Mr. Riederer—0; Mr. Ross—1,224.9801; and Mr. Schwartz—0.

As of December 31, 2011, the aggregate number of unvested deferred shares, including dividend reinvestments, allocated to the deferred share accounts of Messrs. Kirsch and Riederer under the Directors’ Plan were 936 and 4,947, respectively.

(3)	Mr. McAllister recognized above-market earnings in his deferred cash account of $101.

(4)	These amounts reflect dividends earned in 2011 on restricted stock awards.

(5)	Mr. Cambre served as a Director until the 2011 Annual Meeting, at which he did not stand for re-election in accordance with the retirement policy contained in our Corporate Governance Guidelines.

SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN OTHER PERSONS

The following table sets forth the amount and percent of Common Shares that, as of March 9, 2012 (except as otherwise indicated), are deemed under the rules of the SEC to be “beneficially owned” by each Director, by each nominee for Director, by our CEO, Chief Financial Officer, or CFO, and the other named executive officers as identified in the Summary Compensation Table below by such persons, individually and collectively by the Directors, nominees for Director and the other executive officers as a group, and by any person or “group” (as the term is used in the Securities Exchange Act of 1934, which we refer to as the Exchange Act) known to us as of that date to be a “beneficial owner” of more than five percent or more of the outstanding Common Shares. No Directors, Director nominees or executive officers hold any outstanding stock options as of March 9, 2012.


	Amount and Nature of “Beneficial Ownership”(1)
Name of Beneficial Owner	Beneficial Ownership(2)		Investment Power				Voting Power				Percent of Class(3)
Name of Beneficial Owner	Beneficial Ownership(2)		Sole		Shared		Sole		Shared		Percent of Class(3)
Non-employee Directors/ Nominees
Susan M. Cunningham		12,396		12,396		—		12,396		—		—
Barry J. Eldridge		15,828		15,828		—		15,828		—		—
Andrés R. Gluski		2,651		2,651		—		2,651		—		—
Susan M. Green		6,388		6,388		—		6,388		—		—
Janice K. Henry		4,591		4,591		—		4,591		—		—
James F. Kirsch		3,093		3,093		—		3,093		—		—
Francis R. McAllister		22,066		22,066		—		22,066		—		—
Roger Phillips		39,659		39,659		—		39,659		—		—
Richard K. Riederer		19,763		19,763		—		19,763		—		—
Richard A. Ross		4,536		4,536		—		4,536		—		—
Alan Schwartz		19,342		19,342		—		19,342		—		—

Named Executive Officers
Joseph A. Carrabba		212,738		212,738		—		212,738		—		—
Laurie Brlas		71,380		71,380		—		71,380		—		—
Donald J. Gallagher		131,147		131,147		—		131,147		—		—
Duncan P. Price		—		—		—		—		—		—
P. Kelly Tompkins		9,080		9,080		—		9,080		—		—
William R. Calfee		393,417		393,417		—		393,417		—		—
Richard R. Mehan		10,604		10,604		—		10,604		—		—
All Directors, Nominees and Executive Officers as a group (26 Persons)		804,506		804,506		—		804,506		—		—

Other Persons
Capital World Investors		10,570,117		10,570,117		—		10,570,117		—		7.42	%
333 South Hope Street Los Angeles, CA 90071(4)

The Vanguard Group, Inc.		7,717,296		7,514,623		202,673		202,673		—		5.42	%
100 Vanguard Blvd. Malvern, PA 19355(5)

BlackRock Inc.		7,420,691		7,420,691		—		7,420,691		—		5.21	%
40 East 52^nd Street New York, NY 10022(6)

(1)

Under the rules of the SEC, “beneficial ownership” includes having or sharing with others the power to vote or direct the investment of securities. Accordingly, a person having or sharing the power to vote or direct the investment of securities is deemed to “beneficially own” the securities even if he or she has no right to receive any part of the dividends on or the proceeds from the sale of the securities. Also, because “beneficial ownership” extends to persons, such as co-trustees under a trust, who share power to vote or control the disposition of the securities, the very same securities may be deemed “beneficially owned” by two or more persons shown in the table. Information with respect to “beneficial ownership” shown in the table above is based upon information supplied by our Directors, nominees and executive officers and filings made with the SEC or furnished to us by any shareholder.

(2)

The amounts include the indirect share ownership held by directors and officers under various deferred compensation plans described in this proxy statement. The indirect share ownership as of March 9, 2012 is as follows: Mr. Kirsch—1,238; Mr. McAllister—11,103; Mr. Riederer—17,421; Mr. Carrabba—6,515; Ms. Brlas—15,784; Mr. Gallagher—99,777; Mr. Price—0; Mr. Tompkins—3,580; and all Directors, nominees and executive officers as a group (26 Persons)—218,479.

(3)	Less than one percent, except as otherwise indicated.

(4)	Capital World Investors reported its ownership on Amendment No. 2 to Schedule 13G filed with the SEC on February 10, 2012.

(5)	The Vanguard Group, Inc. reported its ownership on a Schedule 13G filed with the SEC on February 10, 2012.

(6)	BlackRock Inc. reported its ownership on a Schedule 13G filed with the SEC on February 9, 2012.

EXECUTIVE COMPENSATION

In this section of the proxy statement, we discuss in detail our executive compensation program for 2011 for our CEO, Joseph A. Carrabba, our CFO, Laurie Brlas, and our three next highest paid executive officers employed as of December 31, 2011—Duncan Price, Executive Vice President and President—Global Operations, Donald J. Gallagher, Executive Vice President and President—Global Commercial, and P. Kelly Tompkins, Executive Vice President, Legal, Governmental Affairs and Sustainability & Chief Legal Officer. We also discuss the compensation of William R. Calfee, our former Executive Vice President, Commercial Projects, who retired during 2011, and the compensation of Richard Mehan, our former Senior Vice President, President and Chief Executive Officer, Asia Pacific, whose employment terminated during 2011. Messrs. Calfee and Mehan are included because they had served as executive officers during 2011 and their total compensation in 2011, including retirement and/or severance benefits, qualified them as being among the three highest paid executive officers other than the CEO and CFO. We collectively refer to these individuals as our named executive officers, or NEOs. Due to their departures, Messrs. Mehan and Calfee are not included in certain sections of the discussion where Cliffs did not make material compensation decisions with respect to those executives for 2011, and they are omitted from tables where they did not receive the type of compensation shown.

The following discussion focuses primarily on compensation actions taken and decisions made during our 2011 fiscal year, but also contains information regarding compensation actions taken and decisions made both before and after fiscal year 2011 to the extent that information enhances the understanding of our executive compensation program. It includes a description of the principles underlying our executive compensation policies and our most important executive compensation decisions for 2011, and provides analysis of these policies and decisions. The discussion gives context for and should be read together with the data presented in the compensation tables, the footnotes and the narratives to those tables and the related disclosures appearing elsewhere in this proxy statement.

Compensation Discussion and Analysis

Executive Summary

2011 Business Results

We trace our corporate history back to 1847. Today, we are an international mining and natural resources company. A member of the S&P 500 Index, we are a major global producer of iron ore and a significant producer of high- and low-volatile metallurgical coal. Our business strategy is designed to achieve growth in the global mining industry and focus on serving the world’s largest and fastest growing steel markets, while continuing to manage our operations in an efficient, safe and responsible manner. Driven by the core values of safety, social, environmental and capital stewardship, Cliffs associates across the globe endeavor to provide all stakeholders operating and financial transparency.

2011 was a year of record achievement for us, driven by a combination of strong demand for our products and excellent operational execution. Specifically:

•

Global crude steel production, a significant driver of our business, was up approximately 5 percent in 2011, compared to a 15 percent increase of production in 2010;

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Average prices in 2011 in the seaborne market for iron ore products, a significant driver of Cliffs’ revenues, increased over 15 percent from 2010 levels;

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We generated record revenues of approximately $6.8 billion for 2011, up nearly 45 percent over 2010; and

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Consistent with our focus on operational excellence, our operating margin improved from 27 percent to 35 percent year-over-year, and our pre-tax earnings and cash flows from operations were at record levels of $2.2 billion and $2.3 billion, respectively, as compared to $1.3 billion and $1.3 billion for 2010, respectively.

In 2011, we executed a number of strategic transactions and accomplished several financial, operational and sustainability milestones, positioning us among the fastest growing businesses in North America. These included:

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Achieving record-breaking annual revenues, operating income, net income, diluted earnings per share and cash from operations;

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Successfully marketing over 40 million tons of iron ore, more than 40 percent of which was delivered into markets outside of North America. This allowed us to take advantage of all-time high pricing for seaborne iron ore;

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Completing the transformational acquisition of Consolidated Thompson Iron Mines Limited;

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Reaching favorable final outcomes in the two 2010 arbitrations with ArcelorMittal and Essar Algoma, both of which are among Cliffs’ largest customers;

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Achieving the Fortune 500 ranking;

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Achieving the rank of No. 7 on the 2011 Barron’s 500 America’s Top Companies List;

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Increasing the quarterly cash dividend by 100 percent; and

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Achieving a 93.1 percent favorable vote of shareholders of our executive pay practices disclosed in the 2011 proxy statement.

Our total shareholder return, or TSR, was 151 percent from 2009 – 2011 resulting in a market capitalization of over $8.9 billion at year end. This total shareholder return performance placed us near the top of our peer group as discussed below and is substantially above the S&P 500 performance over the same period.

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Impact of Performance on 2011 Compensation

Our historical compensation approach has been to reward for the achievement of explicit operational and strategic objectives while mitigating the impact of industry volatility on uncontrollable results. In 2011, we modified specific design elements to account for changes in our business, but we maintained this fundamental design philosophy.

Key components of our 2011 compensation design that help achieve this balance between controllable and uncontrollable results include:

Executive Management Performance Incentive Plan

Payment of 2011 awards under this plan was subject to the achievement of performance measures that fall into four categories, which are weighted at 25 percent each:

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Price achievement for each of our major products is measured on a relative basis as compared to changes in relevant pricing indices, so that success is based on performance-driven industry conditions, rather than an absolute standard;

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Sales volume;

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Production cost control; and

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Achievement of strategic objectives, which are less subject to variable industry conditions than the other three goals.

In addition, we measure success of each of our major business units separately so that outperformance across our business portfolio is required in order to achieve superior rewards.

Performance Share Measurement

Payment of the performance shares granted for the 2011 – 2013 performance period is subject to the achievement of two goals, which are weighted 50 percent each:

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Total shareholder return over a multi-year period relative to our peers, requiring outperformance in order to earn target awards rather than being tied to absolute increases in share price; and

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Free cash flow over a multi-year period as measured against our business plan.

Long-Term Incentive Pay Mix

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75 percent of our annual total long-term incentive opportunity is in the form of performance shares, measured as described above; and

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25 percent of our annual total long-term incentive opportunity is granted as restricted stock, which is subject to less variability than performance-based shares.

As a result of this balanced approach, our total realized compensation for executives for 2011 was not substantially different than 2010. For example:

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Our Executive Management Performance Incentive Plan paid out at 127 percent, compared to 121.8 percent for 2010, driven by:

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Sales volume achievement above target for North American Iron Ore (note that for purposes of the 2011 EMPI performance metrics, the North American Iron Ore business segment consisted of what is now our United States Iron Ore business segment and the Wabush mine as we revised our business segments later in 2011 after acquiring additional Eastern Canadian operations);

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Sales volume achievement above target for Asia Pacific Iron Ore;

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Sales volume achievement below threshold for North American Coal;

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Price achievement above maximum for North American Iron Ore;

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Price achievement below target for North American Coal and Asia Pacific Iron Ore;

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Above target cost control performance for North American Iron Ore;

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Above threshold cost control performance for Asia Pacific Iron Ore;

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Below threshold performance for cost control for North American Coal; and

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Strategic objectives evaluated at maximum performance.

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Performance shares for the 2009 – 2011 performance period paid out at 150 percent of target, similar to the 2008 – 2010 performance period, which is the maximum possible level of performance, based on:

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Three-year total shareholder return of 151 percent placing us near the top of the peer group for the 2009 – 2011 period; and

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Cumulative free cash flows for the 2009 – 2011 period well in excess of the long-term goal for the period.

These results reflect the objective of mitigating the impact of short-term swings in industry conditions on compensation while continuing to recognize excellent long-term results.

Relationship between Company Performance and CEO Compensation

The following chart illustrates the relationship between our CEO’s total compensation (as shown in the “2011 Summary Compensation Table”) and two common measures of our financial performance.

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*	CEO Total Compensation consists of base salary, annual incentives, grant date fair values of equity awards (not cash actually received) and all other compensation reported in the “2011 Summary Compensation Table”.

Other Key Policies and Practices

The Compensation Committee has adopted the following key policies and practices in response to evolving good governance practices in executive compensation and changes in our business and industry:

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Elimination of all tax gross-ups in executive severance agreements as of January 1, 2012, including tax gross-ups related to excise taxes following a change in control and tax gross-ups related to cash payments in lieu of certain health and welfare benefits, and industry service credits related to the supplemental retirement plan benefit provided upon termination after a change in control.

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Retention of an independent compensation consultant to advise the Compensation Committee and keep it apprised of evolving market practice.

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Maintenance of minimal non-compensatory perquisites and benefits for our executive officers.

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Determination that the maximum payout for long-term incentive performance shares would be 200 percent of the target number of shares granted rather than 150 percent in order to align maximum performance share opportunities with peer company equity practices.

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Elimination of the stock-based match in the Voluntary Non-Qualified Deferred Compensation Plan as we determined that such a match was not market competitive and was no longer needed to encourage executive stock ownership, which was the initial intention when this match was introduced.

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In addition, it is our intention to adopt a compensation recovery—or “clawback”—policy in compliance with requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act once the final rules are promulgated by the Securities and Exchange Commission, or SEC, expected in 2012.

A summary of our 2011 select executive compensation policies and practices discussed above and further in this proxy statement are as follows:


Compensation Element or Practice	2011 Modification	Rationale
Compensation Peer Group	Expanded to include 20 companies	Revised to reflect Cliffs’ increased market capitalization and globalization

Executive Management Performance Incentive Plan	Revised metrics	Alignment with business strategy

Performance Shares	Maximum payout increased to 200 percent	Alignment with peer practices

Performance Share Peer Group	Revised to S&P Metals and Mining ETF Index	Broadened to reflect steel, metals and commodity mining companies

Deferred Compensation	Eliminated executive stock match on annual incentive deferral	Align with best practices

Change In Control	Eliminated gross-ups for excise taxes and cash paid in lieu of health and welfare benefits imposed upon any change in control payments and industry service credits related to the supplemental retirement plan benefit paid upon a change in control	Align with best practices

Executive Compensation Philosophy and Core Principles

The Compensation Committee has designed our compensation structure to attract, motivate, reward and retain high-performing executives. The goal is to align pay with Cliffs’ performance in the short term through fixed and variable cash compensation based on measures of financial performance and operational and strategic excellence, and over the long term through stock-based incentives. Our compensation philosophy is to place a significant portion of compensation at risk based on our performance, and increasing this portion of compensation at risk as the responsibility level of the individual increases, consistent with market practices. We also seek to balance this performance focus with sufficient retention incentives, including a competitive fixed salary, and a focus on controllable results to limit the risk of losing key executives during periods of unfavorable industry conditions, all in a manner that the Compensation Committee, in its judgment, considers balanced between the interests of the executives and the shareholders given the potential volatility of business results in the global mining industry.

Our guiding compensation principles for 2011 were as follows:

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Align pay with results delivered to shareholders, while recognizing the potentially cyclical nature of the industry in which we operate. The goal is to avoid undue windfalls to executives in years of strong industry performance and, in the case of down cycles, to avoid loss of all compensation opportunities while still motivating performance.

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Focus performance measures on a combination of absolute performance objectives tied to our business plan (profitability-related objectives, cost control and cash flow), achievement of key initiatives that reflect the business strategy (for example, sales initiatives, cost control activities, growth and diversification of mineral resources), and relative performance reflecting market conditions (including relative total shareholder return, measured by share price appreciation plus dividends, if any).

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Provide competitive fixed compensation elements over the short term (base salary) and long term (restricted share units and retirement benefits) to encourage long-term retention of our executives.

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Design pay programs to be as simple and transparent as possible to facilitate executives’ focus and understanding.

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Target total pay opportunity for executive officers between the median and 75th percentile of the market in which we compete for talent in order to enable us to attract and retain the caliber of executive talent needed to meet our business and strategic objectives.

Oversight of Executive Compensation

The Compensation Committee administers our executive compensation program, including compensation for our named executive officers.

The specific responsibilities of the Compensation Committee related to executive compensation include:

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Overseeing development and implementation of our compensation policies and programs for executive officers, including benefit, retirement and severance plans;

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Reviewing and approving CEO and certain other elected officer compensation, including setting goals, evaluating performance and determining results with the independent members of the Board ratifying the compensation for the CEO;

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Overseeing our equity-based employee incentive compensation plans and approving grants;

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Ensuring that the criteria for grants and awards under our incentive and equity plans are appropriately related to its operating and strategic performance objectives;

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Overseeing regulatory compliance with respect to certain other compensation matters;

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Reviewing and approving any proposed severance agreements, retention plans or other agreements; and

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Retaining and managing its relationship with any external compensation consultant.

When making individual compensation decisions for executives, the Compensation Committee takes many factors into account, including the individual’s performance, tenure and experience, our overall performance, any retention considerations, the individual’s historical compensation and internal fairness considerations. These factors are considered by the Compensation Committee in a subjective manner without any specific formula or weighting.

The Compensation Committee relies significantly on the CEO’s input and recommendations when evaluating these factors relative to the executive officers other than the CEO. The Compensation Committee also reviews a pay history for each executive officer and considers the progression of salary increases over time compared to the individual’s development and performance, the unvested and vested value inherent in outstanding equity grants and awards, and the cumulative impact of all previous compensation decisions. The CEO, in partnership with the Human Resources department, conducts an assessment of each executive officer at the end of each year against a spectrum of behaviors and strategic goals established for each executive officer at the beginning of the year. The CEO then provides the Compensation Committee with his assessment of the performance of the executive officer and his perspective on the factors described above along with developing his recommendations for each executive officer’s compensation, including salary adjustments, annual incentive payouts and equity grants. The Compensation Committee discusses the CEO’s recommendations, including how the recommendations compare against external market data and how the compensation levels of the executives compare to each other, to the CEO’s compensation level and to the historic pay for each executive officer. Based on this discussion, the Compensation Committee then approves or modifies the recommendations after collaboration with the CEO.

Decisions and approvals relating to the CEO’s pay are made by the Compensation Committee in executive session, without management present, and are subject to ratification by the independent members of the Board. In assessing the CEO’s pay, the Compensation Committee considers the Company’s performance, the CEO’s contribution to that performance and other factors as described above in the same manner as for any other executive. The Compensation Committee approves the CEO’s salary, incentive plan payment (consistent with the terms of the plan as described below) and long-term incentive grants each year subject to Board ratification.

The Compensation Committee uses an executive compensation consultant to assess the competitiveness of the executive compensation program, to provide input regarding the program design based on prevailing market practices and business conditions, to advise the Compensation Committee on the level of each executive officer’s compensation, and to conduct research as directed by the Compensation Committee. The compensation consultant attends portions of all Compensation Committee meetings at the request of the Compensation Committee. The compensation consultant is engaged by and reports directly to the Compensation Committee, frequently meets separately with the Compensation Committee with no members of management present and periodically works separately with the Compensation Committee Chairman between meetings.

For 2011, the Compensation Committee retained Semler Brossy Consulting Group, or Semler Brossy, as its compensation consultant. Semler Brossy was retained directly by the Compensation Committee and has helped the Compensation Committee develop an appropriate agenda for performing the Compensation Committee’s responsibilities. In this regard, Semler Brossy advised and assisted the Compensation Committee in:

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Determining the appropriate objectives and goals of our executive compensation programs;

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Designing compensation programs that fulfill those objectives and goals;

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Seeking to align executive compensation programs with shareholder interests;

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Evaluating the effectiveness of our compensation programs;

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Identifying appropriate pay positioning strategies and pay levels in our executive compensation programs; and

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Identifying mining industry and general industry peers and identifying compensation surveys for the Compensation Committee to use to benchmark the appropriateness and competitiveness of our executive compensation programs.

Additional services requested of Semler Brossy in 2011 included a review of the Directors’ compensation practices at the request of the Governance and Nominating Committee and a separate compensation review of the Chief Risk Officer at the request of the Audit Committee. The additional services provided did not exceed a cost of $120,000. Semler Brossy performs no services for Cliffs or our management except as requested by the Compensation Committee, the Governance and Nominating Committee or the Audit Committee.

Market for Talent. The Compensation Committee conducts an annual review of market pay practices for executive officers with the assistance of its outside compensation advisor. Semler Brossy conducted a review of market pay practices in late 2010 for 2011 executive compensation decisions. This review was based on several published compensation surveys, including Hewitt Associates’ and Towers Watson’s executive compensation general industry surveys, as well as a detailed proxy analysis of certain compensation comparison peers. For Australian executives, survey sources that focused on the Australian mining industry were used, including the Hay Group Global Mining compensation survey.

Based on its detailed evaluation of the compensation peer group used for the proxy analysis, Semler Brossy noted that, due to consolidation in the mining industry, the compensation peer group was becoming too small to draw meaningful conclusions on executive pay, and the focus of comparisons was being over-weighted by smaller coal mining companies. In addition, Semler Brossy noted that Cliffs’ market capitalization, which reflects the margins, growth profile and expanding globalization of our business, was significantly higher than the market capitalization of many of the peers used in the 2010 analysis. As a result, Semler Brossy recommended, and the Compensation Committee approved, a significant adjustment to the criteria for selecting the compensation peer group for assessing 2011 compensation decisions. The Compensation Committee believed that the resulting new, expanded compensation peer group for 2011 more accurately reflected our business scale complexity and continued growth potential. The expanded compensation peer group also provided for a more robust data set that was less likely to be driven by individual outliers.

Specifically, the 2011 compensation peer group included a broader cross-section of North American companies in the Materials sector with both revenue (measured on a trailing four-quarter average and the year-end fiscal average) and market capitalization (as of the end of September 2010 and on a three-year average) in the range of one-third to three times those of Cliffs. Semler Brossy recommended relatively broad selection criteria of between one-third and three times the size of Cliffs in order to obtain an appropriately large sample set and to reflect Cliffs’ market capitalization and expanding globalization. Semler Brossy did not believe that a more narrow definition (e.g., one-half to two times revenue, which was utilized previously) would have included sufficient results.

The resulting 20 compensation peer companies used for the 2011 analysis were as follows:


Agrium Inc.		Kinross Gold Corporation
Airgas, Inc.		Martin Marietta Materials, Inc.
Allegheny Technologies Incorporated		Mosaic Company (The)
Alpha Natural Resources, Inc.		Newmont Mining Corporation
Arch Coal, Inc.		Peabody Energy Corporation
Celanese Corporation		Steel Dynamics, Inc.
CF Industries Holdings, Inc.		Teck Resources Limited
CONSOL Energy Inc.		Vulcan Materials Company
Eastman Chemical Company		Walter Energy, Inc.
FMC Corporation		Yamana Gold Inc.

For 2012 compensation planning, Semler Brossy completed a further detailed evaluation of the compensation peer group used for the proxy analysis using the same criteria as above. Given our continued growth and aggressive acquisition strategy in 2011, the compensation peer group is being modified further for 2012 and is comprised of the following 19 companies:


Agrium Inc.		FMC Corporation
Airgas, Inc.		Goldcorp Inc.
Air Products and Chemicals, Inc.		Kinross Gold Corporation
Allegheny Technologies Incorporated		Mosaic Company (The)
Alpha Natural Resources, Inc.		Newmont Mining Corporation
Arch Coal, Inc.		Peabody Energy Corporation
Celanese Corporation		Praxair, Inc.
CONSOL Energy Inc.		Teck Resources Limited
CF Industries Holdings, Inc.		Vulcan Materials Company
Eastman Chemical Company

Market Positioning. During 2011, the Compensation Committee targeted total compensation between the median and 75th percentile of competitive market practices. This above-market pay positioning reflects the rapid pace of our growth and the Compensation Committee’s desire to attract, retain and motivate the needed level of talent for the organization while managing costs to an objectively reasonable level. Above-market pay positioning is achieved by targeting base salary at the median and short-term and long-term incentives at above-market medians in order to emphasize performance-based pay. Actual pay positioning for any individual executive officer was higher or lower than this overall target positioning based on individual performances, including factors such as individual skills, experience, contribution, performance, internal fairness or other factors that the Compensation Committee took into account that were relevant to the individual executive.

Compensation positioning for senior executives outside of the United States generally was managed in a similar fashion; however, internal fairness considerations were also a significant factor. As a result, while we evaluated pay for internationally based executives relative to local market context, actual target pay opportunity generally (with the exception of Mr. Price) was positioned between local market practices and practices for their U.S. counterparts. Concurrent with our Global Reorganization in January 2011, Mr. Price’s new global operations responsibilities were considered and thus his pay positioning was targeted to the same levels as his U.S. counterparts.

Pay Mix. Because our executive officers are in a position to directly influence our overall performance, a significant portion of their compensation is variable through short- and long-term incentive programs so that executive officers’ compensation is aligned to our short- and long-term goals and shareholder interests. The variable pay component includes the annual incentive (cash-

based) and long-term incentive grant values (equity-based). Approximately 83 percent of the CEO’s total target compensation and approximately 75 percent of the other NEO’s total target compensation is variable as illustrated by the charts below. Additionally, a greater portion of each executive’s pay is driven by long-term compensation rather than short-term compensation. The levels of performance-based variable pay are consistent with each executive’s level of responsibility and impact and are consistent with market practices for fixed versus variable pay.


	Target Pay Mix*
	Base Salary		Annual Incentive		Long-Term Incentives
Carrabba		16.6%		23.2%		60.2%
Brlas		24.8%		19.8%		55.4%
Gallagher		24.8%		19.8%		55.4%
Price		26.6%		21.3%		52.1%
Tompkins		25.6%		20.5%		53.9%

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*	Figures are rounded to the nearest decimal.

Principal Elements of 2011 Compensation

During 2011, our executive compensation and benefits consisted of the components listed in the following table, which provides a brief description of the principal elements of compensation, how performance factors into each type of compensation and the objectives served by each element. These elements are discussed in more detail in the sections that follow.

Fiscal Year 2011 Principal Compensation Elements


Element	Description	Performance Considerations	Frequency of Review	Primary Objectives
Base Salary	Fixed cash payment	Based on level of responsibility, experience and individual performance	Annual	Attraction and retention

Executive Management Performance Incentive Plan	Short-term incentive (annual cash payment)	Based on volume, price achievement, cost reduction initiatives and strategic performance objectives	Annual	Achievement of short-term strategic and financial objectives

Performance Shares	Long-term incentive (equity-based payment)	Based on total shareholder return relative to a peer group and free cash flow	Annual	Attraction, retention and promotion of long-term strategic and financial objectives and long-term share performance

Restricted Share Units	Long-term retention (equity-based payment)	Share performance	Annual	Attraction, retention and promotion of long-term share performance

Retirement and Welfare Benefits	Health and welfare benefits, deferred compensation, 401(k) regular and performance-based company contributions, superannuation, defined benefit pension participation and supplemental executive retirement plans	Based on profit / ton for the 401(k) performance contribution and competitive market levels for the other benefits	Annual	Attraction and long-term retention

Executive Perquisites	Financial services and company-paid parking	—	Annual	Financial services and appropriate tax and financial guidance and company-paid parking to avoid distraction from Cliffs’ duties

Analysis of 2011 Compensation Decisions

Base Salary. Cliffs’ philosophy is that base salaries should meet the objective of attracting and helping retain the executive talent needed to run the business. We seek to target base pay levels for executives initially at the 50th percentile of market data. The Compensation Committee believes that base salary positioning at the median is competitive against the compensation peer group and sufficient to attract and retain high quality executives when combined with above-market performance-based compensation opportunities. However, each executive may have a base salary above or below the median of the market because actual salaries reflect responsibility, performance and experience, among other factors described above.

The Compensation Committee considered the following factors when approving 2011 annual base salaries: base pay levels at the market median, individual performance, tenure and experience, retention considerations, the individual’s historical compensation and internal fairness considerations. Salaries approved for the named executive officers in 2011 were as follows (Mr. Price’s base salary of $532,000 Australian dollars (“AUD”) is converted at the 2011 average rate of $1.00 AUD : $1.033 U.S. dollars (“USD”)):


	2011		Percent Change from 2010
Carrabba	$	1,000,000		21.7	%
Brlas	$	528,000		10.0	%
Gallagher	$	488,000		9.9	%
Price	$	549,556		9.9	%
Tompkins	$	430,000		4.4	%
Calfee	$	400,000		3.1	%

The 2011 changes in annual salary levels noted above reflect both the competitive market practices as well as our Global Reorganization in January 2011. Increases for Mr. Carrabba, Ms. Brlas and Mr. Tompkins reflect our increased business scale and complexity and higher median salary levels among the companies included in the competitive benchmarking assessment provided by Semler Brossy. The size of the increases was intended to keep our salary levels competitive with the median of peers. The Compensation Committee approved Messrs. Gallagher’s and Price’s base salaries in early January 2011 to account for changes in job responsibilities due to our January 2011 Global Reorganization.

As Mr. Mehan’s employment terminated on February 4, 2011, he did not receive a base salary adjustment, an Executive Management Performance Incentive Plan award opportunity or a long-term incentive grant for 2011.

Annual Incentive Plan. Our annual Executive Management Performance Incentive Plan, or EMPI Plan, provides an opportunity for the senior executive officers, including the named executive officers, to earn an annual cash incentive based on our financial performance relative to business plans and achievement against key corporate objectives. The objective of this plan is to provide our executives with a competitive annual cash compensation opportunity while aligning actual pay results with Cliffs’ short-term financial and strategic performance.

2011 EMPI Award Opportunities. For each senior executive officer, the Compensation Committee established a threshold, target and maximum EMPI Plan opportunity at the beginning of 2011, expressed as a percentage of base salary. Actual incentive payouts were determined under a weighted scoring system, with the scoring of each performance element expressed as a percentage of the maximum payout that is attributable to that element. The target level of overall performance would

produce a payout equal to 50 percent of the total maximum award, and an overall scoring at the threshold level would produce a payout equal to 25 percent of the maximum award. There was no change to 2011 award opportunities for the named executive officers.

EMPI award opportunities (expressed as a percentage of base salary) approved for each of the named executive officers on March 8, 2011 were as follows:


	Threshold			Target			Maximum
Carrabba		70	%		140	%		280	%
Brlas		40	%		80	%		160	%
Gallagher		40	%		80	%		160	%
Price		40	%		80	%		160	%
Tompkins		40	%		80	%		160	%
Calfee		40	%		80	%		160	%

For each of these named executive officers other than Messrs. Carrabba and Calfee, a second EMPI bonus opportunity was made available in addition to the above 2011 awards. The additional EMPI awards had a potential maximum payout of eight percent of base salary, a target of four percent of base salary and a threshold of two percent of base salary. The additional EMPI awards were subject not only to the achievement of one of our nine financial performance objectives, but also to further reduction based on individual negative discretion eligibility requirements, as determined by the Compensation Committee based upon the CEO’s recommendation. The 2011 EMPI awards, expressed as dollar amounts, are shown in the “2011 Grants of Plan-Based Awards” table below. Mr. Mehan was not eligible for any EMPI award opportunity in 2011.

2011 EMPI Plan Performance Measures. The EMPI Plan uses a “performance scorecard” with multiple performance standards that are related to our annual business plan and strategic priorities in order to determine payouts under the plan.

In early 2011 the Compensation Committee approved a substantial revision to the performance scorecard used for the EMPI as compared to prior years in order to reflect changes to our business and markets. Prior to 2011, our EMPI scorecard historically emphasized pre-tax earnings as a major driver of incentive pay, along with cost control measures for each major business unit and corporate strategic objectives. In addition, for our EMPI Plan prior to 2011, the Compensation Committee had approved an adjustment to the pre-tax earnings and cost goals to reflect changes in world iron ore prices, which have a major impact on earnings results but are not controlled by management, consistent with the philosophy of mitigating performance results for industry conditions.

However, over recent years there has been a shift in the industry from annual pricing in iron ore markets toward shorter-term pricing arrangements linked to spot prices, including the Platts iron ore Fe 62% index. In addition, as we have sought to strategically diversify our portfolio of mineral products, a greater portion of our business is expected to be outside of iron ore over time. As a result, the process of adjusting performance metric targets for changes in prices on a continuous basis became highly complex and difficult for management to track and communicate, undermining the intended effect of incentive plans to motivate management performance toward specific goals. In addition, with the shift toward spot prices, management and the Compensation Committee explicitly wanted to emphasize and incentivize the commercial aspects of our business with a focus on price realization as a key driver for 2011.

In order to address these changing business needs, we modified the EMPI scorecard for 2011 to separate pre-tax earnings into specific volume and price metrics, measured at the business segment level. Management and the Compensation Committee believe that this balance of factors better reflects the controllable elements of our business in light of the changes discussed above.

The specific elements and their respective weightings for 2011 were as follows:


EMPI Performance Metrics	Weighting			Target
North American Iron Ore Sales Volume*		10	%		26.7 million tons
Asia Pacific Iron Ore Sales Volume		10	%		9.0 million tonnes
North American Coal Sales Volume		5	%		6.8 million tons
North American Iron Ore Price / Ton Realized		10	%		—
Asia Pacific Iron Ore Price / Ton Realized		10	%		—
North American Coal Price / Ton Realized		5	%		—
North American Iron Ore Cost Control**		10	%		—
Asia Pacific Iron Ore Cost Control**		10	%		—
North American Coal Cost Control		5	%		—
Corporate Strategic Objectives		25	%		—

Total		100	%

Subsequent to establishing the 2011 EMPI performance metrics, we acquired additional operations in Eastern Canada during second quarter of 2011 and separated our previous North American Iron Ore business segment into two new reportable business segments: U.S. Iron Ore and Eastern Canadian Iron Ore. For 2011 EMPI scorecard purposes, U.S. Iron Ore and Wabush mine operations were classified as North American Iron Ore as the formation of separate business units occurred subsequently to the Compensation Committee’s approval of the 2011 EMPI scorecard.

**	These cost metrics were normalized to account for uncontrollable impacts of energy rates and/or foreign currency translation.

The specific performance goals for the EMPI measures, with the exception of volume, are not disclosed as we believe, and the Compensation Committee concurs, that providing this information may adversely affect us by limiting our ability to negotiate supply agreements or spot sales on terms that would be favorable to us and our shareholders. Likewise, management and the Compensation Committee believe that disclosing specific, non-quantitative corporate objectives for the year would affect us adversely by providing confidential information on business operations and forward-looking strategic plans to our customers and competitors that could result in substantial competitive harm. General corporate strategic objectives include areas such as business development, acquisition integration, workplace safety, specific cost initiatives, sales initiatives and growth and diversification of mineral resources.

The Compensation Committee believes that the range of performance measures are appropriately difficult to attain and tested the performance history for those that were included in the former EMPI Plan, specifically cost control and corporate strategic objectives. Additionally, the target-setting methodology used in prior years was consistent with the target-setting methodology used for 2011 performance metrics. Actual historical results have been as follows:


Year	North American Iron Ore Cost Control	Asia Pacific Iron Ore Cost Control	North American Coal Cost Control	Corporate Strategic Objectives
2006	Below threshold	—	—	Between target and maximum
2007	Between target and maximum	—	—	At maximum
2008	Between threshold and target	Between target and maximum	Below threshold	Between target and maximum
2009	At maximum	At maximum	Below threshold	Between target and maximum
2010	At maximum	Between target and maximum	Below threshold	Between target and maximum
2011	Between target and maximum	Between threshold and target	Below threshold	At maximum

2011 EMPI Plan Target Setting and 2011 Results. Actual payouts are determined based on the weighted aggregate attainment on each performance element using the weights assigned above.

Performance targets for the financial objectives under the EMPI Plan were established at the beginning of 2011. Each performance element was assigned a minimum threshold level, a target level and a maximum level, representing attainment of 25 percent, 50 percent and 100 percent, respectively, of the maximum award opportunity associated with that element. For performance below the minimum threshold performance requirement for each metric, funding would be zero percent for that factor. The maximum payout under the Corporate Strategic Objectives in the EMPI Plan is 25 percent of the maximum bonus opportunity and requires the attainment of at least one financial performance metric. The Compensation Committee can exercise negative discretion for the Corporate Strategic Objectives down to zero percent of the maximum bonus opportunity. The Compensation Committee approves performance targets and ranges for each of the financial performance measures, taking into consideration management financial plans for the coming year. Performance targets are approved each year by the Compensation Committee in the first quarter.

For 2011, the performance results under the EMPI Plan produced an overall payout level equal to 127 percent of the target bonus opportunities for the named executive officers. The Compensation Committee arrived at this funding level by taking the following factors into consideration:


EMPI Performance Metrics	Weighting			Resultant Funding*
North American Iron Ore Sales Volume		10	%		13	%
Asia Pacific Iron Ore Sales Volume		10	%		12	%
North American Coal Sales Volume		5	%		0	%
North American Iron Ore Price / Ton Realized		10	%		20	%**
Asia Pacific Iron Ore Price / Ton Realized		10	%		9	%
North American Coal Price / Ton Realized		5	%		4	%
North American Iron Ore Cost Control		10	%		14	%
Asia Pacific Iron Ore Cost Control		10	%		6	%
North American Coal Cost Control		5	%		0	%
Corporate Strategic Objectives		25	%		50	%

Total		100	%		127	%

*	Figures have been rounded.

**	Resultant funding exceeded the maximum of 20 percent due to our strategic decision to export North American Iron Ore to the seaborne market.

Total bonuses for 2011 under the EMPI Plan were paid in the amounts set forth in the following table to the named executive officers (Mr. Price’s bonus of $542,597 AUD was converted at the 2011 average rate of $1.00 AUD : $1.033 USD). These amounts include a second EMPI bonus opportunity, as noted on page 32, of an additional 7.6 percent of base salary awarded to Ms. Brlas, an additional seven percent awarded to Mr. Tompkins and an additional two percent awarded to Mr. Gallagher.


Carrabba	$	1,784,860	Price	$	560,503
Brlas	$	578,518	Tompkins	$	468,566
Gallagher	$	507,721	Calfee	$	407,968

Mr. Mehan was not eligible for an EMPI payment for 2011 performance.

2012 Award Opportunities and EMPI Plan Performance Measures. The EMPI award opportunities for 2012 continue to use a “performance scorecard” with multiple performance standards that are related to our annual business plan and current strategic priorities in order to determine payouts under the plan.

For 2012, the Compensation Committee approved additional adjustments to the plan design. These changes reflect a change in philosophy for annual incentives, with the Compensation

Committee allowing for greater variability in payouts under the EMPI Plan based on industry conditions rather than seeking to mitigate the impact of uncontrollable results. This change in philosophy only affects the annual incentive plan, and long-term incentives will still include a significant emphasis on relative stock price performance, as discussed in more detail below.

The objectives of this shift in compensation strategy are to better align the results of executive compensation with results for shareholders, so that management will more likely realize above-target awards in years of exceptional financial results and below-target awards in years where results have fallen more than expected, regardless of management’s ability to control these outcomes. In addition, by eliminating price adjustments from the plan, we will be able to simplify significantly the process of communicating and administering the plan.

The specific performance elements and their respective weightings for 2012 will be as follows:


EMPI Performance Metrics	Weighting
Net Income		20	%
US Iron Ore Production Volume		10	%
US Iron Ore Cost / Ton		10	%
Eastern Canadian Iron Ore Production Volume		7.5	%
Eastern Canadian Iron Ore Cost / Ton		7.5	%
North American Coal Production Volume		5	%
North American Coal Cost / Ton		5	%
Asia Pacific Iron Ore Production Volume		5	%
Asia Pacific Cost / Ton		5	%
Corporate Strategic Objectives		25	%

Total		100	%

On February 13, 2012, the Compensation Committee recommended to the Board of Directors and, on March 13, 2012, the Board of Directors approved, subject to shareholder approval, the Cliffs Natural Resources Inc. 2012 Executive Management Performance Incentive Plan, or 2012 EMPI Plan, in order to continue to provide annual incentive compensation to selected senior executive officers in a method to qualify as “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code, or Code. The 2012 EMPI Plan is not substantially different from our EMPI Plan approved in 2007. Under the 2012 EMPI Plan, the Compensation Committee will determine eligible participants and establish target levels for incentive-based cash awards to be paid upon the achievement in whole or in part of certain pre-determined performance goals in compliance with Section 162(m). The Compensation Committee will select the method for computing the amount that a participant will be paid under each award, and such method will be stated in terms of an objective formula or standard. At the end of each plan year, the Compensation Committee will determine each participant’s award payout, including, through the use of negative discretion, any reduction or elimination of award payouts, and will certify achievement of the goals prior to payment for any award. See Proposal No. 5 for additional information.

Long-Term Incentives. The objectives of our long-term incentives are to reward executives for sustained performance over multiple years while recognizing the potential volatility of industry conditions and limiting the potential for undue windfalls or losses to executives for factors outside of management’s control. In addition, our long-term incentive programs are designed to enhance retention of executives by delaying the vesting of compensation opportunities and to align the long-term interests of executives with shareholders through the use of equity to deliver compensation value.

For long-term incentives, we use performance shares and restricted share units as the primary vehicles to reward and retain executives. The performance shares and restricted share units are denominated and payable in Cliffs’ Common Shares in order to align the interests of our executives with our shareholders through direct ownership.

Each year, we establish a target long-term incentive award value for each executive based on market practices as a pre-determined percentage of base salary. Semler Brossy reviewed the values in 2011. Actual awards to each executive may vary from this target based on the CEO’s assessment of individual performance in the case of executives other than the CEO, and based on the Compensation Committee’s assessment of the CEO’s performance in the case of grants made to the CEO.

Administrative Process. Long-term incentive awards for executives generally are made annually. Actual grants are based on the methodology discussed above, but can be adjusted based on the executive’s position, experience, performance, prior equity-based compensation awards and competitive equity-based compensation levels. The grant date is the date of the Compensation Committee approval or a later date as set by the Compensation Committee. Grants for executive new hires or promotions are approved by the Compensation Committee at the next regularly scheduled Compensation Committee meeting following the hire or promotion date or in a special meeting, as needed. The grant date for executive new hires or promotions is the date of such approval or such later date as the Compensation Committee determines. We do not time grants to coordinate with the release of material non-public information.

Performance Shares. Under the Amended and Restated Cliffs 2007 Incentive Equity Plan, or 2007 Incentive Equity Plan, performance shares are the primary vehicle we use to deliver long-term incentives. A performance share granted in 2011 provides an opportunity to earn Common Shares based on our performance over a three-year period, with potential funding between zero percent and 200 percent of the target grant depending on the level of performance against goals. Beginning with performance share grants for the 2011 – 2013 performance period, we determined that the maximum payout would be 200 percent of the target number of shares granted rather than 150 percent in order to align maximum performance share opportunities with our peer company equity practices. We use performance shares to reward for shareholder results relative to industry conditions, taking into consideration returns to our shareholders as compared to other companies’ returns in the steel and mining industries, and our free cash flow in relation to our business plan. Performance shares comprise 75 percent of the total target annual long-term grant.

Each executive officer is granted a target number of performance shares at the beginning of each three-year period. For the 2011 grant, our total shareholder return, or TSR, and that of our performance peers (identified below) are measured on a cumulative basis from the beginning of the performance period to the end of the performance period. At the end of three years, our TSR is compared to the TSR performance of our peers to determine the total performance over the three-year period and the number of shares earned at the end of the period. Funding for TSR performance below threshold is zero percent and funding at the maximum performance is capped at 200 percent. In addition to TSR, performance shares also are subject to a three-year cumulative free cash flow performance metric. The remaining 50 percent of the total target payout opportunity, or 100 percent at the payout opportunity at maximum performance, of the performance share vesting is related to free cash flow, defined as cash from operations less capital expenditures. Adjustments can be made to free cash flow for merger and acquisition activities, non-operational businesses, significant expansions and other unusual items. The calibration of the pay-for-performance relationship for 2011 grants is as follows and payout is interpolated for performance between threshold, target and maximum levels:


		Performance Level
Performance Factor	Weight	Below Threshold	Threshold	Target	Maximum
Relative TSR	50%	Below 35th percentile	35th percentile	55th percentile	75th percentile
3-Year Cumulative Free Cash Flow	50%	More than 25% below plan	25% below plan	At plan	150% above plan
Payout		0%	50%	100%	200%

Free cash flow targets are based on our business plan for the first year of cash flow and our five-year strategic plan for the next two years of cash flow. Due to the confidential nature of Cliffs’ long-term business plans and potential for substantial competitive harm, the specific targets are not disclosed.

Restricted Share Units. Restricted share units are earned based on continued employment and are retention-based awards. A restricted share unit award vests in full at the end of the performance period used for the performance shares, and is payable in our Common Shares. Restricted share units comprise 25 percent of each named executive officer’s total annual long-term incentive grant.

2011 – 2013 Performance Share and Restricted Share Unit Awards. On March 8, 2011, the Compensation Committee approved performance share and restricted share unit awards under the 2007 Incentive Equity Plan for our executives, including its named executive officers. The number of shares granted to each executive was then determined by dividing the total grant values by the 60-day average closing price of our Common Shares ending on the date of grant ($86.48 for grants made in 2011). The use of the 60-day average price to calibrate the number of shares granted limits the potential to grant an unusually high or low number of shares due to an exceptionally low or high share price on the date of the grant. In order to calibrate the grant made to Mr. Price in 2011, a 60-day average foreign exchange rate ending on March 8, 2011 was used to convert Mr. Price’s salary from Australian to U.S. dollars. The following amounts of performance shares and restricted share units were awarded to our named executive officers for the 2011 – 2013 performance period:


	Total Grant Value ($)		Target Performance Shares (#)		Restricted Share Units (#)
Carrabba	$	3,634,953		28,200		9,390
Brlas		1,181,674		9,170		3,050
Gallagher		1,091,743		8,470		2,820
Price		1,041,459		8,080		2,690
Tompkins		904,145		7,020		2,330

The total grant value noted above is based on the closing fair market price of $96.70 per share on March 8, 2011, the date of grant. Messrs. Calfee and Mehan were not eligible for a 2011 – 2013 long-term incentive grant.

The performance peer group used for the performance share plan is the constituents of the S&P 500 Metals and Mining ETF Index on the last day of trading of the three-year performance period, or December 31, 2013. As of December 31, 2011, the index included the following companies:


AK Steel Holding Corporation	CONSOL Energy Inc.	Patriot Coal Corporation
Alcoa, Inc.	Freeport-McMoRan Copper & Gold Inc.	Peabody Energy Corp.
Allegheny Technologies Incorporated	General Moly, Inc.	Reliance Steel & Aluminum Co.
Allied Nevada Gold Corp.	Globe Specialty Metals, Inc.	Royal Gold, Inc.
Alpha Natural Resources, Inc.	Haynes International Inc.	RTI International Metals, Inc.
Amcol International Corp.	Hecla Mining Co.	Schnitzer Steel Industries Inc.
Arch Coal, Inc.	Horsehead Holding Corp.	Steel Dynamics Inc.
Carpenter Technology Corp.	Kaiser Aluminum Corporation	Stillwater Mining Co.
Century Aluminum Co.	Materion Corporation	Titanium Metals Corporation
Cloud Peak Energy Inc.	Molycorp, Inc.	US Gold Corp.
Coeur d’Alene Mines Corporation	Newmont Mining Corporation	United States Steel Corporation
Commercial Metals Company	Noranda Aluminum Holding Corporation	Walter Energy, Inc.
Compass Minerals International Inc.	Nucor Corporation	Worthington Industries Inc.

The performance peer group focuses on steel, metals and commodity mineral mining companies that generally will be affected by the same long-term market conditions as those that affect us. The

Compensation Committee evaluates this peer group for each new cycle of the performance share plan based on recommendations made by its compensation consultant and makes adjustments as needed based on changes in the industry makeup and relevance of our specific peers. The performance TSR peer group used to assess performance for performance share grants is not the same as the peer group used to assess competitiveness of our compensation. For the performance TSR peers, we utilized a broader peer group that was not determined solely by size or location, which are more critical factors when taking into consideration payout comparisons.

Prior to 2011 and for long-term incentives vested in 2011 and vesting in 2012, for Asia-Pacific executive officers, performance share units were substituted for performance shares and retention units were substituted for restricted share units. Performance share units and retention units are paid in cash to Asia-Pacific participants at the end of the performance period, based on the product of the exchange rate and our Common Share price on the date the Common Shares are paid to U.S. participants for grants made prior to 2011. Cash payments are made in lieu of Common Shares due to unfavorable tax liability consequences related to equity grants to Australian residents at the time of grant. All other features of the performance share units and retention units were identical to the U.S. long-term incentive vehicles. Beginning in 2011, grants made to Asia-Pacific participants are paid in Common Shares and all other features of the grants have remained the same. We made this determination so that long-term incentive awards would continue to be tied to shareholder return and in light of favorable changes in Australian tax legislation.

Payouts Determined for 2009 – 2011 Long-Term Incentive Grant. In February 2012, the Compensation Committee determined that for the three-year performance period ended December 31, 2011, we achieved total shareholder return performance near the top of our peer group and free cash flow performance above the maximum value set in 2009. This provided a total performance factor of 150 percent for the 2009 – 2011 performance period. A payout for such performance period was made in Common Shares in February 2012 to all participants, including all named executive officers with the exception of Messrs. Price and Mehan. Messrs. Price and Mehan received cash payments based upon the closing price of our Common Shares and the foreign exchange rate at the end of the performance period. Mr. Mehan’s cash payment was prorated based on his termination with us in 2011. The performance share award for the named executive officers for the 2009 – 2011 performance period is disclosed under the “2011 Option Exercises and Stock Vested Table” in footnote (2). The payout calculation for the 2009 – 2011 grants is as follows:

Performance Level

Performance Factor

Weight

Below Threshold

Threshold

Target

Maximum

Actual
Performance

Relative TSR

50%

Below 35th
percentile

35th
percentile

55th
percentile

75th

percentile

88th
percentile

3-Year Cumulative Free Cash Flow

50%

More than 50%
below plan

50% below
plan

At plan

200% above
plan

Above maximum
level

Payout

50%

100%

150%

2009 and 2010 Strategic Initiative Grant. On December 17, 2009 and March 8, 2010, the Compensation Committee approved an additional grant of 67,009 performance shares and 18,720 performance shares, respectively, to Mr. Carrabba in order to further motivate and reward the CEO to grow the value of our Common Shares through effective strategic initiatives. The 2009 and 2010 Strategic Initiative Grants were designed to provide an overall target grant value of $2.6 million, which was approximately equal to one times Mr. Carrabba’s annual long-term incentive award target at the time of grant. Due to maximum annual grant limitations imposed under our 2007 Incentive Equity Plan, the total grant needed to be divided into two separate grants. The Compensation Committee believes that the magnitude of the grants is commensurate with the magnitude of business improvement included in our confidential strategic plans. The grants were determined using a 60-day average closing price ending on the date of grant (producing a maximum value at grant of approximately $3,900,000 and a target value at grant of approximately $2,600,000). The grants expire on December 31, 2013.

Under the terms of the grants, the first condition to earn the performance shares may be triggered anytime between the date of the grant and December 31, 2013 if our aggregate value, defined as market capitalization, increases by 50 percent or more over the aggregate value as of the last 60 trading days of 2009. We refer to this condition as the “Performance Trigger”. If the Performance Trigger occurs, then the grant would be eligible to pay out at the end of the term of the grant, assuming Mr. Carrabba still is employed by Cliffs at that time. If the Performance Trigger does not occur, or if Mr. Carrabba voluntarily terminates his employment before December 31, 2013, then there would be no payout under the grant. The Performance Trigger was achieved in 2010.

Following the achievement of this Performance Trigger, the number of shares to be paid out will be determined by the Compensation Committee based on Mr. Carrabba’s achievement of certain performance factors evaluated in the Compensation Committee’s discretion:

•

Our aggregate value relative to our peers;

•

Increase in our equity trading multiples;

•

Our degree of diversification into minerals other than iron ore and metallurgical coal; and

•

Other factors to be determined by the Compensation Committee, such as timing of results relative to goals, sustainability of market values, and quality of new commodities and operations.

Pursuant to the terms of the grants, the Compensation Committee may exercise negative discretion to reduce the size of the payout under the grants based on Mr. Carrabba’s performance relative to these performance factors. As a result of this uncertainty of the final grant amount and under applicable accounting guidance, a grant date fair value has not yet been determined for these grants for purposes of measuring and recognizing compensation cost. The total target payout under the grants would be 57,153 Common Shares taking into account both grants made in December 2009 and March 2010, with a potential maximum payout of 85,729 Common Shares.

2012 – 2014 Performance Share and Restricted Share Unit Grants. On March 12, 2012, the Compensation Committee approved performance share and restricted share unit grants under the 2007 Incentive Equity Plan for our executives, including our named executive officers. The grants were determined using a 60-day average closing price of our Common Shares ending on March 12, 2012 of $68.00 per share and the grant targets described above. The following amounts of performance shares and restricted share units were granted to our named executive officers for the 2012 – 2014 performance period:


	Total Grant Value(s)		Performance Shares		Restricted Share Units
Carrabba	$	3,976,250		46,880		15,620
Brlas		1,229,138		14,490		4,830
Gallagher		1,007,105		11,880		3,950
Price		972,114		11,460		3,820
Tompkins		908,494		10,710		3,570

The total grant value noted above is based on the fair market value of $63.62 per share on March 12, 2012, the date of grant.

Beginning in 2012, the Compensation Committee has determined that free cash flow will no longer be a factor in performance share target payout. Management and the Compensation Committee believe that Total Shareholder Return, as the sole objective in performance share metrics, is best aligned with the interests of our shareholders and changes in our business and strategy.

The calibration of the pay-for-performance relationship for 2012 grants is as follows and payout will be interpolated for performance between threshold, target and maximum levels.


	Performance Level
Performance Factor	Below Threshold	Threshold	Target	Maximum
Relative TSR	Below 35th percentile	35th percentile	55th percentile	75th percentile
Payout	0%	50%	100%	200%

2012 Incentive Equity Plan. On March 12, 2012, the Compensation Committee recommended to the Board of Directors and, on March 13, 2012, the Board of Directors approved, subject to shareholder approval, the Cliffs Natural Resources Inc. 2012 Incentive Equity Plan (or 2012 Plan) to replace the 2007 Incentive Equity Plan. The 2012 Plan authorizes up to 6,000,000 Common Shares to be issued pursuant to stock options, stock appreciation rights, restricted shares, retention units, deferred shares, performance shares and performance units granted under the 2012 Plan. The Compensation Committee will have the power and authority to administer the 2012 Plan, to interpret the terms and intent of the 2012 Plan, to determine eligibility for and the terms of awards for participants and make other determinations for the administration of the 2012 Plan. See Proposal No. 4 for additional information.

Retirement and Deferred Compensation Benefits

Defined Benefit Pension Plan. We maintain a defined benefit pension plan for all U.S.-based employees, which we refer to as the Pension Plan, and a Supplemental Executive Retirement Plan, which is referred to as the SERP, in which all of the named executive officers, excluding Messrs. Price and Mehan because of their non-U.S. employee status, are eligible to participate following one year of service. The Compensation Committee believes that pension benefits are a typical component of total remuneration for employees and executives at companies in industries similar to ours, and that providing such benefits is important to delivering a competitive package to attract and retain employees. The objective of the SERP is to provide benefits above the statutory limits for qualified pension plans for highly paid executives. Additional detail is shown in the “2011 Pension Benefits Table”.

401(k) Savings Plan. Our U.S.-based executives are eligible to contribute up to 35 percent of their base salary under Cliffs’ 401(k) Savings Plan. Annual pre-tax contributions are limited by Internal Revenue Service regulations. For the 2011 calendar year, employee pre-tax contributions were limited to $16,500 ($22,000 for persons age 50 or older). We historically have matched 100 percent of employee contributions up to the first 3 percent and 50 percent for the next 2 percent of contributions. Additionally, we have utilized a performance-based contribution that can be made annually to the 401(k) Savings Plan. The performance-based contribution was established to deliver as much as 10 percent of eligible wages into the 401(k) Savings Plan when we meet certain profit-per-ton performance targets.

Superannuation. Australian employees, including Messrs. Price and Mehan, are eligible for a company cash contribution known as superannuation, of up to 15 percent of all cash payments made to the employee. Australian regulations require a superannuation contribution of at least nine percent on base salary up to $175,280 per individual per year. For company superannuation contributions in excess of $50,000 per annum, executives can opt to be credited with cash as a taxable superannuation cash allowance. This benefit is disclosed below in the “2011 Summary Compensation Table” under “All Other Compensation” and described in footnote (6).

Deferred Compensation Plan. Under the Voluntary Non-Qualified Deferred Compensation Plan in effect in 2011, or VNQDC Plan, the named executive officers and other senior executives, excluding non-U.S. executives, are permitted to defer, on a pre-tax basis, up to 50 percent of their base salary, all or a portion of their annual incentive under the EMPI Plan and their share award that may be payable as a long-term incentive award. The Compensation Committee believes the opportunity to defer compensation is a competitive benefit that addresses the goal of attracting and retaining talent. Additional detail is shown in the “2011 Non-Qualified Deferred Compensation Table”.

Under our VNQDC Plan, annual incentive payments for the 2011 plan year could be deferred into a cash deferral account or a share unit account. Share awards could only be deferred into share units. Cash deferrals earn interest at the Moody’s Corporate Average Bond Yield, which was approximately 4.9 percent for 2011. Share unit deferrals are denominated in Common Shares and vary with our share price performance.

The Board of Directors froze the VNQDC Plan at the end of 2011 and approved the 2012 Non-Qualified Deferred Compensation Plan, which is referred to as the 2012 NQDC Plan, to be effective as of the beginning of 2012 and pursuant to which executives are eligible for only cash-based deferrals, including base salary and payments under the EMPI Plan.

In order to encourage share ownership and the alignment of executive interests with shareholder interests, as well as to assist executives in meeting their share ownership guidelines (as discussed below under “Share Ownership Guidelines”), we matched any annual incentive cash compensation payments deferred into share units in 2011 with a 25 percent match that vests at the end of five years. This feature is not a component of the 2012 NQDC Plan as we determined that such a match was not market competitive and was no longer needed to encourage executive stock ownership, which was the initial intention when this match was introduced. The amount of our Common Shares matched to VNQDC Plan-bonus exchange deferrals is disclosed in the “2011 Non-Qualified Deferred Compensation Table”.

The VNQDC Plan and 2012 NQDC Plan both provide, to the extent the performance-based 401(k) Savings Plan contributions exceed Internal Revenue Code limits for a qualified deferred compensation plan, that the contributions are to be credited to the accounts of executives under the applicable non-qualified deferred compensation plan. These specific cash accounts are not convertible to share units. Similarly, if a named executive officer’s salary contributions to the 401(k) Savings Plan are limited by Internal Revenue Code limits, the amount that exceeds the limit will be credited to the executive’s account under the VNQDC Plan together with the Cliffs’ match he or she would have had under the 401(k) Savings Plan.

Other Benefits. Our other benefits and perquisites for senior executives, including named executive officers, are limited to company-paid parking and personal financial services. The Compensation Committee believes that providing financial services and company-paid parking will prevent distraction from duties as an executive officer of Cliffs. Due to the location of our corporate offices, we provide company-paid parking to our upper-level management and executive officers. These benefits are disclosed below in the “2011 Summary Compensation Table” under “All Other Compensation” and described in footnote (6).

Supplementary Compensation Policies

Cliffs uses several additional policies to ensure that the overall compensation structure is aligned with shareholder interests and is competitive with market practices. Specific policies include:

Share Ownership Guidelines. Our Board adopted share ownership guidelines to ensure that senior executives, including named executive officers, have a meaningful direct ownership stake in Cliffs and that the interests of executives thereby are aligned with our shareholders. The guidelines are as follows:


Position	Multiple of Base Pay
CEO		4.5x
Executive / Senior Vice President		2.5x
Vice President		1.5x

Our share ownership guidelines were revised in 2010 to allow for an executive to sell a limited number of Common Shares prior to meeting the ownership guidelines so long as the executive officer can demonstrate a long-term plan in achieving the share ownership guidelines. For grants made after January 1, 2007 under our 2007 Incentive Equity Plan, executives only are permitted to sell up to 50 percent of their shares received under the performance share program or the restricted share unit program unless the executive is in compliance with the share ownership guidelines, except as may be necessary to pay income taxes. An executive’s direct ownership of shares, including restricted shares and share units held in the VNQDC Plan, count toward meeting the share ownership guidelines. The Compensation Committee annually reviews compliance with the share ownership guidelines.

Change in Control Severance Agreements. We have entered into Change in Control Severance Agreements with all of our currently employed named executive officers, with the exception of Mr. Price, as he has a broader employment contract with us, which includes a change in control provision. The Compensation Committee believes that such agreements support the goals of attracting and retaining highly talented individuals by clarifying the terms of employment and reducing the risks to the executive in situations where the executive believes that we may undergo a merger, be acquired in a hostile tender offer or involved in a proxy contest. In addition, the Compensation Committee believes that such agreements align the interests of executives with the interests of our shareholders if a qualified offer is made to acquire Cliffs, in that each of our named executive officers would likely be aware of or involved in any such negotiation and it is to the benefit of our shareholders to have the executives negotiating in the shareholders’ best interests without regard to the executive’s personal financial interests. The level of benefits was determined consistent with market practices at the time that the agreements were established. The agreements generally provide for the following change in control provisions (see accompanying narrative below for more details):

•

Automatic vesting of unvested equity incentives upon change in control;

•

Two or three times annual base salary and target annual incentive as severance upon termination following a change in control, and continuation of welfare benefits for two or three years under certain circumstances;

•

Non-compete, confidentiality and non-solicitation restrictions on executives who receive severance payments following a change in control; and

•

Prior to 2012, full tax gross-up payments would have been provided on any excise taxes and cash paid in lieu of health and welfare benefits imposed upon any change in control payments. Effective January 1, 2012, we entered into new change in control severance agreements with our executives. All elements of the severance agreements remained the

same, with the exception of not providing for gross-ups related to excise taxes following a change in control and tax gross-ups related to cash payments in lieu of certain health and welfare benefits. Additionally, industry service credits related to the supplemental retirement plan benefit provided upon termination after a change in control were eliminated.

Employment Agreements. One of our Australian subsidiaries has entered into an employment agreement with Mr. Price. Mr. Price’s employment agreement generally provides for the following:

•

For immediate termination without notice or payment in lieu of notice for cause, payment up to the date of termination only;

•

For termination with three months notice or three months payment in lieu of notice or a combination of notice and payment in lieu of notice, payment calculated on Mr. Price’s remuneration;

•

For resignation with three months notice, a payment in lieu of notice calculated on Mr. Price’s base salary;

•

For termination for reason of redundancy, a redundancy payment calculated at 4.083 times Mr. Price’s annual base salary, plus any accrued but untaken annual leave and a prorated long service leave payment and monies and shares due under the 2007 Incentive Equity Plan; and

•

For termination following a change in control or Mr. Price’s voluntary termination following a change in control, severance compensation comprised of:

•

lump sum payment in an amount equal to three years from separation of service multiplied by the sum of Mr. Price’s remuneration, plus incentive pay;

•

provision of medical, dental and welfare benefits for three years from the date of separation from service;

•

lump sum amount equal to remuneration earned through the period up until Mr. Price’s termination or separation from service, plus the value of any annual bonus or long-term incentive pay;

•

reasonable outplacement services up to 15 percent of Mr. Price’s remuneration; and

•

post-retirement medical, hospital, surgical and prescription drug coverage for Mr. Price’s lifetime, his spouse and any eligible dependents.

Mr. Mehan had an employment agreement, which generally provided for the following change in control and other termination provisions:

•

For immediate termination without cause, 1.5 times base salary plus superannuation;

•

For termination without cause and three months written notice, 0.75 times base salary plus superannuation;

•

For disability, one times base salary plus superannuation;

•

In the event of a change in control and Mr. Mehan’s voluntary termination, 2.25 times base salary plus superannuation and an amount equal to pro rata annual incentive payouts; and

•

Automatic vesting of unvested long-term incentives upon change in control.

Effective February 4, 2011, we terminated Mr. Mehan’s employment. Mr. Mehan received the following involuntary termination payments in consideration of his employment agreement (amounts are converted at a February 4, 2011 rate of $1.00 AUD : $1.0138 USD):

•

A lump sum payment equal to $940,857 representing 1.5 times base salary plus superannuation;

•

A lump sum payment equal to $179,662 representing accrued annual leave; and

•

A lump sum payment equal to $154,934 representing accrued long service leave.

Pursuant to the terms of our 2007 Incentive Equity Plan, unvested amounts of long-term incentives will be prorated and paid at the end of the performance period, subject to Compensation Committee approval. See note (4) to footnote (6) to the “2011 Summary Compensation Table” for more information.

Consulting Agreement and Retirement Arrangement. Effective July 1, 2011, we entered into a Consulting Agreement with Mr. Calfee upon his retirement. The term of the agreement ends on June 29, 2012, unless extended by Mr. Calfee’s and our mutual agreement. Mr. Calfee was eligible for:

•

an initial $30,000 upfront consulting fee payment; and

•

monthly consulting fee payments equal to $8,000 per month, which may be increased by $2,000 per day if he works in excess of four days per month.

Payouts made in respect to Mr. Calfee’s 2009 – 2011 and 2010 – 2012 performance shares and restricted share units and annual incentive plan were not prorated pursuant to the terms of his retirement with Cliffs. Lastly, the retirement arrangement also includes a provision for reimbursement of tax or interest payments on his incentive awards if not in compliance with Section 409A of the Code. See note (3) to footnote (6) to the “2011 Summary Compensation Table” for additional information on his retirement-related payments and benefits. See “Potential Payments Upon Termination or Change in Control—Payments in Connection with Mr. Calfee’s Retirement” for further information on the Consulting Agreement and possible future payments under it.

Certain Material Tax and Accounting Implications. Section 162(m) of the Code limits our deductibility of certain executive compensation in excess of $1 million. The aggregate combination of salary, distributions from the VNQDC, payout from the EMPI Plan, the issuance of Common Shares from the 2007 Incentive Equity Plan, vesting of restricted shares and dividends on restricted shares has caused, with respect to 2011, the $1 million limit to be exceeded with respect to all of the named executive officers, and is expected to cause the $1 million limit to be exceeded in subsequent years with respect to one or more of the named executive officers. In 2007, our shareholders approved the EMPI Plan and the 2007 Incentive Equity Plan, which replaced the predecessor plans. Performance-based compensation under the EMPI Plan and the 2007 Incentive Equity Plan will be exempt from the $1 million limit. However, certain forms of compensation, including retention units, restricted share unit grants and restricted share grants still will not qualify as performance-based compensation and thus will be included in the calculation of the $1 million limit.

Consideration of Say-on-Pay. The Compensation Committee values the input of our shareholders in the design and administration of our executive compensation programs and practices. The Compensation Committee therefore carefully assesses the vote results of our Annual Advisory Vote on Named Executive Officer Compensation — commonly referred to as “Say-on-Pay” — which we view as an important opportunity for shareholders to express their support or concerns in relation to executive pay.

The Compensation Committee noted that, at our annual meeting on May 17, 2011, 93.1 percent of our voting shareholders at the time voted in favor of our named executive officer compensation as disclosed in the related proxy statement. As a result, the Compensation Committee determined that no changes were required to our executive compensation practices in direct response to the shareholder advisory vote on named executive officer compensation.

Nevertheless, both senior leadership and the Compensation Committee remain dedicated to adopting best practices in the governance of executive pay even where shareholders have not expressed direct concern. For example, in 2011, we decided to eliminate all tax gross-ups from

executive change in control agreements, recognizing that such provisions are not preferred by most shareholders and their advisors. We continue to monitor changes in good governance practices, our alignment to peer company best practices and changes to our business and industry and will continue to evaluate appropriate policies proactively with the goal of maintaining high levels of shareholder support.

COMPENSATION COMMITTEE REPORT

The following report has been submitted by the Compensation and Organization Committee of the Board of Directors:

The Compensation and Organization Committee of the Board of Directors has reviewed and discussed the Company’s Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation and Organization Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the definitive proxy statement on Schedule 14A for its 2012 Annual Meeting, which is incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, each as filed with the Securities and Exchange Commission.

This report is furnished on behalf of the Compensation and Organization Committee of the Board of Directors.

James F. Kirsch, Chairman

Barry J. Eldridge

Janice K. Henry

Francis R. McAllister

Roger Phillips

Compensation-Related Risk Assessment

In 2011, a team lead by our Chief Risk Officer reviewed employee compensation plans in which all employees (including the named executive officers) participate, in order to identify whether these arrangements had any features that might encourage unnecessary and excessive risk taking that would have a material adverse effect on Cliffs. The review team analyzed a series of risk factors and concluded the risk mitigation factors in our compensation plans provide adequate safeguards that would either prevent or discourage excessive risk taking. The review team did not identify any risk related to our compensation policies and practices for our named executive officers and our employees generally that are, either individually or in the aggregate, reasonably likely to have a material adverse effect on Cliffs. The Compensation and Organization Committee received a report summarizing the work of the review team and concurs with this conclusion.

2011 SUMMARY COMPENSATION TABLE

The following table sets forth the compensation earned by the named executive officers for services rendered to Cliffs and our subsidiaries for the fiscal years ended December 31, 2011, 2010 and 2009.


Name and Principal Position(a)	Year(b)		Salary($) (1)(2)(c)		Stock Awards($) (1)(3)(d)		Non-Equity Incentive Plan Compensation ($)(1)(4)(e)		Change in Pension Value and Non-Qualified Deferred Compensation Earnings($)(5)(f)		All Other Compensation ($)(6)(g)		Total ($)(h)
Joseph A. Carrabba		2011		955,500		3,104,793		1,880,410		446,046		50,430		6,437,179
Chairman, President and Chief Executive Officer		2010		814,000		2,859,784		1,483,074		394,057		44,677		5,595,592
Chairman, President and Chief Executive Officer		2009		750,500		2,728,150		1,328,306		461,699		82,012		5,350,667

Laurie Brlas		2011		516,000		1,009,278		630,118		110,867		33,820		2,300,083
Executive Vice President, Finance and Administration & Chief Financial Officer		2010		445,412		756,241		550,654		95,495		30,940		1,878,742
		2009		406,265		267,611		424,722		86,353		21,600		1,206,551


Donald J. Gallagher		2011		486,167		932,507		556,338		416,628		21,537		2,413,177
Executive Vice President and President—Global Commercial		2010		439,750		733,542		494,369		382,220		21,188		2,071,069
Executive Vice President and President—Global Commercial		2009		412,055		235,802		430,775		294,777		22,647		1,396,056

Duncan P. Price(7)(8)		2011		548,284		889,555		560,503		—		287,945		2,286,287
Executive Vice President and President—Global Operations

P. Kelly Tompkins(8)		2011		425,500		772,169		511,116		78,117		41,367		1,828,269
Executive Vice President-Legal, Government Affairs and Sustainability & Chief Legal Officer

William R. Calfee(9)		2011		197,000		—		427,822		443,574		4,422,633		5,491,029
Former Executive Vice President, Commercial Projects		2010		385,250		555,471		416,592		184,802		24,110		1,566,225
Former Executive Vice President, Commercial Projects		2009		363,805		180,482		367,349		90,868		18,966		1,021,470

Richard Mehan(7)(8)(10)		2011		54,863		—		—		—		2,957,898		3,012,761
Former Senior Vice President and CEO Asia Pacific		2010		495,121		297,836		301,529		—		352,709		1,447,195

(1)

2011 amounts in columns (c), (d) and (e) reflect the salary, equity compensation and non-equity incentive compensation of each named executive officer, respectively, before pre-tax reductions for contributions to the 401(k) Savings Plan, the VNQDC Plan and our benefits plans. Any amounts by which salary, equity compensation and non-equity incentive compensation were reduced in 2011 pursuant to the named executive officers’ elections to make contributions to the VNQDC Plan appear in column (b) of the “2011 Non-Qualified Deferred Compensation Table” below on page 55.

(2)

The 2011 salary of the named executive officers includes their base salary before salary reductions for the Benefits Choice Plan (our salaried health and welfare benefits plan), the 401(k) Savings Plan and the VNQDC Plan. Messrs. Carrabba, Tompkins and Calfee and Ms. Brlas received a salary increase effective April 1, 2011. Messrs. Gallagher and Price received an increase in their salaries effective January 16, 2011 and January 11, 2011, respectively.

The following table summarizes salary reductions for the 401(k) Savings Plan and VNQDC Plan for executives in 2011:


	401(k) Contribution ($)		Catch-Up Contribution ($)		VNQDC Pre-Tax Salary Deferral ($)		Total ($)
Joseph A. Carrabba		16,500		5,500		47,775		69,775
Laurie Brlas		16,000		5,500		77,400		98,900
Donald J. Gallagher		16,500		5,016		—		21,516
Duncan P. Price		—		—		—		—
P. Kelly Tompkins		16,500		5,488		—		21,988
William R. Calfee		14,890		2,821		19,700		37,411
Richard Mehan		—		—		—		—

(3)

2011 amounts in column (d) reflect the aggregate grant date fair value computed in accordance with FASB ASC 718 for awards of performance shares and restricted share units granted during 2011. For performance shares granted during 2011, the amounts reported are based on the probable outcome of the performance conditions as of the grant date. For additional information, refer to Item 8, Note 11 in our Form 10-K. For 2011, these types of awards are discussed in further detail in the “Compensation Discussion and Analysis” section above, under the heading “2011 – 2013 Performance Share and Restricted Share Unit Awards”.

See the “2011 Grants of Plan-Based Awards” table for more detail on the awards of performance shares and restricted share units.

The grants were determined using the 60-day average closing market price of the Common Shares of $86.48 per share. The fair values for the performance shares on March 8, 2011, assuming a maximum payout of 200 percent and using a grant date fair value computed in accordance with FASB ASC 718 of $77.90 per share, were (Messrs. Calfee and Mehan were not eligible for a 2011 grant of performance shares):


Joseph A. Carrabba	$	4,393,560
Laurie Brlas		1,428,686
Donald J. Gallagher		1,319,626
Duncan P. Price		1,258,864
P. Kelly Tompkins		1,093,716

(4)

The 2011 amounts in column (e) reflect the sum of (i) incentive bonus awards earned in 2011 under the Executive Management Performance Incentive Plan (EMPI), which is discussed in further detail in the “Compensation Discussion and Analysis” section above under the heading “Annual Incentive Plan,” and (ii) amounts allocated to the named executive officers as special performance-based contributions under the 401(k) Savings Plan, for all eligible participants under the 401(k) Savings Plan equal to 10 percent of their eligible base earnings. To the extent that such performance-based contributions exceeded Internal Revenue Code limits for a qualified defined contribution plan, they were credited to the accounts of the executives under the VNQDC Plan.

The following table summarizes annual incentive plan payments for 2011:


	EMPI Award ($)		401(k) Performance Contribution ($)		Total ($)
Joseph A. Carrabba		1,784,860		95,550		1,880,410
Laurie Brlas		578,518		51,600		630,118
Donald J. Gallagher		507,721		48,617		556,338
Duncan P. Price		560,503		—		560,503
P. Kelly Tompkins		468,566		42,550		511,116
William R. Calfee		407,968		19,854		427,822
Richard Mehan		—		—		—

Of the amounts noted above for the 401(k) performance contribution, the following amounts were credited to the 401(k) Savings Plan and VNQDC:


	401(k) Savings Plan ($)		VNQDC ($)
Joseph A. Carrabba		23,500		72,050
Laurie Brlas		23,200		28,400
Donald J. Gallagher		22,164		26,453
Duncan P. Price		—		—
P. Kelly Tompkins		24,080		18,470
William R. Calfee		19,854		—
Richard Mehan		—		—

(5)

The 2011 amounts in column (f) reflect the actuarial increase in the present value of the named executive officer’s benefits under the Pension Plan and the SERP, both of which are discussed in the “Compensation Discussion and Analysis” section above under the heading “Defined Benefit Pension Plan,” determined using interest rate and mortality assumptions consistent with those used in our financial statements and may include amounts in which the named executive officer is not fully vested. This column also includes amounts for above-market interest for the executives’ deferrals into the VNQDC Plan.

The following table summarizes changes in pension values and above-market earnings on deferred compensation in 2011:


	Present Value of Pension Accruals ($)		Above-Market Interest on Deferred Compensation ($)		Total ($)
Joseph A. Carrabba		440,800		5,246		446,046
Laurie Brlas		109,300		1,567		110,867
Donald J. Gallagher		415,400		1,228		416,628
Duncan P. Price		—		—		—
P. Kelly Tompkins		78,100		17		78,117
William R. Calfee		439,900		3,674		443,574
Richard Mehan		—		—		—

(6)

The 2011 amounts in column (g) reflect the combined value of the named executive officer’s perquisites attributable to our paid parking, financial services, matching contributions made by and on behalf of the executives under the 401(k) Savings Plan, Australian Superannuation and the VNQDC Plan and payments related to Mr. Calfee’s retirement and Mr. Mehan’s termination.

The following table summarizes perquisites and other compensation in 2011:


	Paid Parking ($)		Financial Svcs. ($)		401K Savings Plan Matching Contributions ($)			VNQDC Plan Matching Contributions ($)		Other ($)		Total ($)
Joseph A. Carrabba		3,180		9,030		9,000			29,220		—		50,430
Laurie Brlas		3,180		10,000		9,800			10,840		—		33,820
Donald J. Gallagher		2,820		9,030		9,687			—		—		21,537
Duncan P. Price		9,297		—		51,650	(1)		—		226,998(2)		287,945
P. Kelly Tompkins		3,180		525		8,420			29,242		—		41,367
William R. Calfee		2,820		7,200		7,942			—		4,404,671(3)		4,422,633
Richard Mehan		—		—		5,587	(1)		—		2,952,311(4)		2,957,898

(1)

Reflects employer contribution to the Australian Superannuation fund after conversion to U.S. dollars.

(2)

Includes company superannuation contributions in excess of $50,000 per annum, which were credited to Mr. Price as a taxable superannuation cash allowance of $226,998.

(3)

In connection with Mr. Calfee’s retirement on July 1, 2011, the Compensation Committee approved a consulting agreement and special treatment of his awards under the 2007 Incentive Equity Plan and EMPI Plan. Additional information on the terms of the consulting agreement is provided in the “Compensation Discussion and Analysis” under the heading “Supplementary Compensation Policies—Consulting Agreement” and in the “Potential Payments Upon Termination or Change in Control—Payments in Connection with Mr. Calfee’s Retirement”.

Under his retirement arrangement, Mr. Calfee’s 2011 EMPI award was not prorated on account of his retirement, and he received the full amount of his 2011 EMPI award (which amount is disclosed in the “Non-Equity Incentive Plan Compensation” column of this “2011 Summary Compensation Table”). In addition, Mr. Calfee’s 2009 – 2011 performance shares and restricted share units were not prorated on account of his retirement, and his 2010 – 2012 performance shares and restricted share units will not be prorated as a result of his retirement. We also agreed to reimburse Mr. Calfee for any additional tax or interest on the payments of the 2011 EMPI award or the 2009 – 2011 or 2010 – 2012 LTIP awards if those payments do not comply with Section 409A of the Code.

The following pertains to the agreement: “Other” column of Mr. Calfee’s “All Other Compensation” amount includes the following compensation in connection with his retirement:

•

consulting fees for 2011 ($54,000);

•

one-time payment upon signing the consulting agreement ($30,000);

•

accrued vacation ($46,154);

•

value of performance shares and restricted share units earned in connection with the vesting of Mr. Calfee’s long-term incentive award for the 2009 – 2011 performance period $2,579,952. This amount also is reported in the “2011 Options Exercises and Stock Vested Table” on page 52; and

•

an estimate of the value of Mr. Calfee’s outstanding performance shares and restricted share units under his long-term incentive award for the 2010 – 2012 performance period. This estimated amount of

$1,694,565 has been calculated using the closing price of Cliffs’ Common Shares on Mr. Calfee’s retirement date of $93.70 and assuming that maximum performance is achieved. The ultimate payout and value thereof will depend on the cumulative level of performance achieved during the performance period and the value of our shares at the time payment is made.

(4)

A separation (redundancy) letter was given to Mr. Mehan due to an involuntary termination on February 4, 2011. The “Other” column of Mr. Mehan’s “All Other Compensation” amount includes the following compensation in connection with his termination:

•

the following involuntary termination payments (amounts in USD and converted at a February 4, 2011 rate of $1.00 AUD : $1.0138 USD):

•

A lump sum payment equal to $940,857 representing 1.5 times base salary plus superannuation;

•

A lump sum payment equal to $179,662 representing accrued annual leave; and

•

A lump sum payment equal to $154,934 representing accrued long service leave;

•

2011 payment of superannuation ($159,463);

•

2011 payment of 2010 EMPI award ($301,529) (amount in USD and converted at the 2010 average rate of $1.00 AUD : $0.9203 USD). This amount also is reflected in Mr. Mehan’s 2010 Non-Equity Incentive Plan amount;

•

the value of performance share units and retention units earned in connection with the vesting of Mr. Mehan’s long-term incentive award for the 2009 – 2011 performance period, which was prorated for the performance period based on his termination ($733,494). This amount also is reported in the “2011 Options Exercises and Stock Vested Table” on page 52;

•

the value of superannuation and super cash out payments in connection with Mr. Mehan’s 2009 – 2011 long-term incentive award ($110,003);

•

an estimate of the value of Mr. Mehan’s outstanding performance shares units and retention units under his long-term incentive award for the 2010 – 2012 performance period, prorated based on his termination. This estimated amount of $323,799 has been calculated using the closing price of Cliffs’ Common Shares on Mr. Mehan’s termination date of $90.27 and assuming that maximum performance is achieved. The ultimate payout and value thereof will depend on the cumulative level of performance achieved during the performance period and the value of our shares at the time payment is made; and

•

estimate of anticipated superannuation and super cash out payments with respect to Mr. Mehan’s 2010 – 2012 long-term incentive award of $48,570. This estimate is based on the estimate of the value of the 2010 – 2012 long-term incentive award described in the preceding bullet and on the closing price of Cliffs’ Common Shares on the termination date of $90.27.

(7)	Amounts for Messrs. Price and Mehan are converted using the 2011 average rate of $1.00 AUD : $1.033 USD unless footnoted otherwise.

(8)	2011 was the first year of disclosure for Messrs. Price and Tompkins and only compensation information for 2011 is shown. 2010 was the first year of disclosure for Mr. Mehan and compensation information is shown for 2010 and 2011 only.

(9)	Mr. Calfee retired effective July 1, 2011. For additional compensation details related to Mr. Calfee’s retirement, please refer to page 44.

(10)	Mr. Mehan’s employment was terminated effective February 4, 2011. For additional compensation details related to Mr. Mehan’s termination, please refer to page 43.

2011 GRANTS OF PLAN-BASED AWARDS

This table discloses in columns (c), (d) and (e) the potential payouts at the threshold, target and maximum levels of the awards under the EMPI Plan for 2011. See “Compensation Discussion and Analysis—Annual Incentive Plan” above for a description of the EMPI Plan. Actual payouts for the 2011 EMPI awards are shown in the “2011 Summary Compensation Table.”

This table shows in columns (f), (g) and (h) the potential payouts at the threshold, target and maximum levels of the 2011 performance share awards under our 2007 Incentive Equity Plan. Such performance shares are for a three-year period ending December 31, 2013. Column (j) shows the grant date fair value of the performance shares computed in accordance with FASB ASC 718 based on the probable outcome of performance conditions.

The table also shows in columns (i) and (j) the number of restricted share units granted in connection with the 2011 – 2013 long-term incentive awards and the grant date fair value of those restricted share units under FASB ASC 718, respectively.


Name (a)	Grant Date(b)		Estimated Possible Payouts under Non-Equity Incentive Plan Awards (EMPI) ($)(1)						Estimated Future Payouts under Equity Incentive Plan Awards (Performance Shares)(#)(2)						All Other Stock Awards: Numbers of Shares Of Stock or Units (#)(i)		Grant Date Fair Market Value of Stock and Option Awards ($)(j)
Name (a)	Grant Date(b)		Threshold (c)		Target (d)		Maximum (e)		Threshold (f)		Target (g)		Maximum (h)
Joseph A. Carrabba		3/8/2011		700,000		1,400,000		2,800,000		—		—		—		—		—
		3/8/2011		—		—		—		14,100		28,200		56,400		—		2,196,780
		3/8/2011		—		—		—		—		—		—		9,390		908,013

Laurie Brlas		3/8/2011		211,200		422,400		844,800		—		—		—		—		—
		3/8/2011		10,560		21,120		42,240		—		—		—		—		—
		3/8/2011		—		—		—		4,585		9,170		18,340		—		714,343
		3/8/2011		—		—		—		—		—		—		3,050		294,935

Donald J. Gallagher		3/8/2011		195,200		390,400		780,800		—		—		—		—		—
		3/8/2011		9,760		19,520		39,040		—		—		—		—		—
		3/8/2011		—		—		—		4,235		8,470		16,940		—		659,813
		3/8/2011		—		—		—		—		—		—		2,820		272,694

Duncan P. Price(3)		3/8/2011		219,822		439,645		879,290		—		—		—		—		—
		3/8/2011		10,991		21,982		43,964		—		—		—		—		—
		3/8/2011		—		—		—		4,040		8,080		16,160		—		629,432
		3/8/2011		—		—		—		—		—		—		2,690		260,123

P. Kelly Tompkins		3/8/2011		172,000		344,000		688,000		—		—		—		—		—
		3/8/2011		8,600		17,200		34,400		—		—		—		—		—
		3/8/2011		—		—		—		3,510		7,020		14,040		—		546,858
		3/8/2011		—		—		—		—		—		—		2,330		225,311

William R. Calfee		3/8/2011		160,000		320,000		640,000		—		—		—		—		—

(1)

The amounts in column (c) reflect the threshold payment level for 2011 awards under the EMPI Plan, which is 25 percent of the maximum amount shown in column (e). The amount shown in column (d) is 50 percent of the amount shown in column (e). Column (e) is the total maximum award opportunity for 2011. These amounts are based on the individual’s 2011 salary and position that had been approved prior to or on the same day as the grant. Actual payouts under the EMPI Plan are disclosed in the “2011 Summary Compensation Table” under the “Non-Equity Incentive Plan Compensation” column. For the named executive officers other than Mr. Carrabba, an additional EMPI bonus opportunity was made available in conjunction with the other 2011 awards equaling a potential maximum payout of 8 percent of base salary (with a 4 percent opportunity at target performance and a 2 percent opportunity at the minimum or threshold performance level) payable only upon achievement of one of the EMPI performance objectives, but also subject to reduction based on further discretionary eligibility requirements, as determined by the Compensation Committee, based upon the CEO’s recommendation.

(2)	The amounts in column (f) reflect the threshold payout level of 2011 – 2013 performance shares under our 2007 Incentive Equity Plan, which is 50 percent of the target amount shown in column (g). The amounts shown in column (h) represent 200 percent of such target amount.

(3)	Amounts for Mr. Price in columns (c), (d) and (e) are converted using the 2011 average rate of $1.00 AUD : $1.033 USD.

Our named executive officers are parties to change in control agreements or employment agreements with Cliffs. For more information, refer to the “Potential Payouts Upon Termination or Change in Control” below.

Outstanding Equity Awards At Fiscal Year-End

The following table shows in columns (b) and (c) the actual numbers of shares and the fair market value, respectively, of all unvested restricted share units under the 2007 Incentive Equity Plan outstanding on December 31, 2011. The fair market value of each restricted share unit and retention unit on December 30, 2011 was $62.35 (the closing market price of our Common Shares on December 30, 2011, the last business day of the year).

The table also shows in columns (d) and (e) the actual numbers of performance shares and the fair market value, respectively, as of December 31, 2011 of all unvested and unearned performance shares assuming a market value of $62.35 per share (the closing market price of our Common Shares on December 30, 2011) and assuming that the performance shares pay off at the maximum level. Normally, outstanding options would be listed on this table; however, there are no outstanding stock options for any named executive officer.

OUTSTANDING EQUITY AWARDS AT 2011 FISCAL YEAR-END TABLE


Name(a)	Number of Shares or Units of Stock That Have Not Vested (#)(b)(1)			Market Value of Shares or Units of Stock That Have Not Vested ($)(c)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(d)			Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested($)(e)
Joseph A. Carrabba		13,370	(2)		833,620		60,165	(3)		3,751,288
		9,390	(4)		585,467		56,400	(5)		3,516,540
		—			—		67,009	(6)		4,178,011
		—			—		18,720	(6)		1,167,192

Laurie Brlas		4,470	(2)		278,705		20,145	(3)		1,256,041
		3,050	(4)		190,168		18,340	(5)		1,143,499

Donald J. Gallagher		4,340	(2)		270,599		19,530	(3)		1,217,696
		2,820	(4)		175,827		16,940	(5)		1,056,209

Duncan P. Price		1,810	(2)		112,854		8,145	(3)		507,841
		2,690	(4)		167,722		16,160	(5)		1,007,576

P. Kelly Tompkins		4,020	(2)		250,647		18,120	(3)		1,129,782
		2,330	(4)		145,276		14,040	(5)		875,394

William R. Calfee		3,280	(2)		204,508		14,805	(3)		923,092

Richard Mehan(7)		634	(2)		39,530		2,856	(3)		178,072

(1)	The amounts shown in this column reflect the number of unvested restricted share units granted under our 2007 Incentive Equity Plan.

(2)	This represents a grant of restricted share units, or retention units in the case of Mr. Price, for the 2010 – 2012 vesting period granted on March 8, 2010. If these shares vest, it will be on December 31, 2012, as approved by the Compensation Committee.

(3)

This represents a grant of performance shares for the 2010 – 2012 performance period granted on March 8, 2010. If these shares vest, it will be on December 31, 2012, as approved by the Compensation Committee. These numbers are being reported at maximum of 150 percent based on actual multi-year performance as of December 31, 2011.

(4)	This represents a grant of restricted share units for the 2011 – 2013 vesting period granted on March 8, 2011. If these shares vest, it will be on December 31, 2013, as approved by the Compensation Committee.

(5)

This represents a grant of performance shares for the 2011 – 2013 performance period granted on March 8, 2011. If these shares vest, it will be on December 31, 2013, as approved by the Compensation Committee. These numbers are being reported at maximum of 200 percent based on actual multi-year performance as of December 31, 2011.

(6)

This represents the 2009 and 2010 CEO Strategic Initiative grants made on December 17, 2009 and March 8, 2010. The number of shares paid out under these awards will be determined by the Compensation Committee in December 2013 based upon the achievement of certain performance factors noted above that are evaluated at the Compensation Committee’s discretion and may be reduced from the 85,729 shares, the maximum amount allowed under this plan. Under Rule ASC 718 and, as a result of this uncertainty of the final award amount, a grant date value has not yet been determined for this award for purposes of measuring and recognizing compensation cost. These numbers are being reported at maximum based on actual multi-year performance as of December 31, 2013.

(7)	Mr. Mehan’s outstanding retention units and performance shares have been prorated based on his February 4, 2011 termination.

Option Exercises and Stock Vested

Columns (b) and (c) in the following table set forth certain information regarding performance shares, retention units and restricted share awards that vested during 2011 for the named executive officers based on the applicable fair market value. None of our named executive officers had outstanding stock options during the fiscal year ended December 31, 2011.

2011 OPTION EXERCISES AND STOCK VESTED TABLE


	Stock Awards
Name (a)	Number of Shares Acquired on Vesting (#)(b)			Value Realized on Vesting ($)(c)(1)
Joseph A. Carrabba		118,462.50	(2)		8,516,269	(2)
		26,325	(3)		1,892,504	(3)

Laurie Brlas		43,537.50	(2)		3,129,911	(2)
		9,675	(3)		695,536	(3)

Donald J. Gallagher		38,362.50	(2)		2,757,880	(2)
		8,525	(3)		612,862	(3)

Duncan P. Price		9,675	(2)		695,536	(2)
		2,150	(3)		154,564	(3)

P. Kelly Tompkins(4)		—			—
		—			—

William R. Calfee		29,362.50	(2)		2,110,870	(2)
		6,525	(3)		469,082	(3)

Richard Mehan(5)		8,349	(2)		600,210	(2)
		1,854	(3)		133,284	(3)

(1)	The value realized shown in column (c) is computed by multiplying the number of restricted shares and performance shares by the closing price of a Common Share on the date of vesting. Except as otherwise noted, all awards vested on December 31, 2011.

(2)

This represents a performance share award granted during 2009 for the 2009 – 2011 performance period that paid out to participants on February 13, 2012 at a fair market value of $71.89 per share. The performance shares paid out at 150 percent of the award based on the performance criteria. For Messrs. Price and Mehan, performance share units are substituted in lieu of performance shares and are paid in cash based on the closing price of Cliffs Common Shares on February 13, 2012 and converted to AUD at a rate of $1.00 USD : $0.93412 AUD.

(3)	This represents an award of restricted share units granted during 2009 for the 2009 – 2011 performance period that paid out to participants on February 13, 2012 at a fair market value of $71.89 per share. For Messrs. Price and Mehan, retention units are substituted in lieu of restricted

share units and are paid in cash based on the closing price of Cliffs Common Shares on February 13, 2012 and converted to AUD at a rate of $1.00 USD : $0.93412 AUD.

(4)	Mr. Tompkins was not employed by the Company in 2009 and did not receive a performance share or restricted share unit grant for the 2009 – 2011 performance period.

(5)	Mr. Mehan’s performance share units and retention units are prorated for the 2009 – 2011 performance period based on his termination effective February 4, 2011.

Pension Benefits

The table below shows the present value of accumulated benefits payable to each named executive officer and the number of years of service credited to each such named executive officer under the Pension Plan and the SERP. The calculation was determined using interest rate and mortality rate assumptions consistent with those used in Cliffs’ financial statements.

The Pension Plan provides a participant, including the named executive officers, with the greater of:

(a) the sum of:

(1)

For service with Cliffs through June 30, 2008, his or her accrued benefit under the plan’s Final Average Pay Formula described below; and

(2)

For service with Cliffs after June 30, 2008, his or her cash balance credits and interest under the Cash Balance Formula described below; or

(b) the sum of:

(1)

For service with Cliffs through June 30, 2003, his or her accrued benefit under the Final Average Pay Formula described below; and

(2)

For service with Cliffs after June 30, 2003, his or her cash balance credits and interest after June 30, 2003 under the Cash Balance Formula described below.

The Final Average Pay Formula provides a benefit that generally is based on a 1.65 percent pension formula. For each year of service up to June 30, 2003 or June 30, 2008, as the case may be, the plan provides 1.65 percent of Average Monthly Compensation. Average Monthly Compensation is defined as the average annual compensation earned during the 60 consecutive months providing the highest such average during the last 120 months preceding the applicable date. The benefit is subject to an offset of 50 percent of Social Security benefits through the applicable date. Benefits are payable as an annuity, unreduced for early commencement, upon the attainment of normal retirement at age 65, or at 30 years of service. None of the named executive officers were eligible for an accrued benefit under the Final Average Pay Formula on December 31, 2011 other than Mr. Gallagher and Mr. Calfee.

The Cash Balance Formula provides a benefit payable at any time equal to the value of a notional cash balance account. For each calendar quarter, after the applicable date a credit is made to the account equal to a percentage of his or her pay ranging from four percent to 10 percent based upon his or her age and service with transitional pay credits up to 13 percent during the transition period from June 30, 2003 to June 30, 2008. Interest is credited to the account balance on a quarterly basis. At retirement or termination of employment, the accumulated account balance can be paid as either a lump sum or actuarially equivalent annuity.

The compensation used to determine benefits under the Pension Plan is the sum of salary and annual incentive compensation paid under the EMPI Plan to a participant during a calendar year. Pensionable earnings for each of Cliffs’ named executive officers during 2011 include the amount shown for 2011 in column (c) of the “2011 Summary Compensation Table” above, plus the amount of incentive compensation earned in 2011 and paid in 2012, respectively.

The SERP generally provides the named executive officers with the benefits that would have been payable under the Pension Plan if certain Internal Revenue Code limitations did not apply to the Pension Plan. The SERP was amended effective for 2006 and future accruals to eliminate the payment of annual accruals and to provide that SERP accruals will instead be paid at retirement.

2011 PENSION BENEFITS TABLE


Name(a)	Plan Name(b)	Number of Years Credited Service (#)(c)		Present Value of Accumulated Benefit ($)(d)		Payments During Last Fiscal Year ($)(e)
Joseph A. Carrabba	Salaried Pension Plan		6.7		148,700		—
	SERP		6.7		2,312,700		—

Laurie Brlas	Salaried Pension Plan		5.1		102,500		—
	SERP		5.1		260,500		—

Donald J. Gallagher	Salaried Pension Plan		30.4		1,218,400		—
	SERP		30.4		1,956,800		—

Duncan P. Price	Salaried Pension Plan		—		—		—
	SERP		—		—		—

P. Kelly Tompkins(1)	Salaried Pension Plan		1.6		38,800		—
	SERP		15.3		61,800		—

William R. Calfee	Salaried Pension Plan		39.0		1,429,200		157,300
	SERP		39.0		1,538,200		—

Richard Mehan	Salaried Pension Plan		—		—		—
	SERP		—		—		—

(1)	For the purpose of calculating the Supplemental Retirement Benefit for Mr. Tompkins, the Compensation Committee approved a hire date of 1996.

Non-Qualified Deferred Compensation

Pursuant to the VNQDC Plan, in 2011 the named executive officers were permitted to defer, on a pre-tax basis, up to 50 percent of their base salary, all or a portion of their annual incentive under the EMPI Plan, and their share award that may be payable as a long-term incentive award. We matched 25 percent of the EMPI awards deferred into stock units in 2011. Matched amounts vest at the end of five years.

Cash deferrals earn interest at the Moody’s Corporate Average Bond Yield rate. Stock awards, which can only be deferred into stock units, are denominated in Cliffs Common Shares and vary with our share price performance.

Additionally, the VNQDC Plan provides to the extent the performance-based 401(k) Savings Plan contributions exceed Internal Revenue Code limits for a qualified deferred compensation plan, the contributions are credited to the accounts of executives under the non-qualified deferred compensation plan. These specific cash accounts are not convertible to share units. Similarly, if a named executive officer’s salary reduction contributions to the 401(k) Savings Plan are limited by Internal Revenue Code limitations, the amount that exceeds the limit will be credited to the executive’s account under the VNQDC Plan together with the Cliffs’ match he or she would have had under the 401(k) Savings Plan.

This table discloses in column (b) “Executive Contributions in Last Fiscal Year,” the contributions by each named executive officer to the VNQDC Plan. The contributions include any pre-tax contributions of salary, EMPI awards and stock awards for 2011.

Column (c) “Registrant Contributions in Last Fiscal Year” of the table below includes matching contributions we made on behalf of the named executive officers to the VNQDC Plan and performance-based contributions authorized under the 401(k) Savings Plan that were credited to the VNQDC Plan.

Column (d) “Aggregate Earnings in Last Fiscal Year” of the table below includes interest earned on cash deferrals and dividends earned on deferred shares.

2011 NON-QUALIFIED DEFERRED COMPENSATION TABLE


Name(a)	Executive Contributions in Last Fiscal Year ($)(b)(1)		Registrant Contributions in Last Fiscal Year ($)(c)(2)		Aggregate Earnings in Last Fiscal Year ($)(d)(3)			Aggregate Withdrawals / Distributions ($)(e)			Aggregate Balance at Last Fiscal Year-End ($)(f)(4)
Joseph A. Carrabba		226,261		101,270		51,831			—			1,708,866
Laurie Brlas		77,400		39,240		22,806			(44,478	)(5)		1,345,206
Donald J. Gallagher		—		26,453		79,499			—			6,483,756
Duncan P. Price		—		—		—			—			—
P. Kelly Tompkins		117,142		47,712		(33,481	)		—			244,866
William R. Calfee		19,700		—		65,691			—			3,200,080
Richard Mehan		—		—		—			—			—

(1)	The amounts disclosed in column (b) are also included in the “Salary” or “Non-Equity Incentive Plan Compensation” columns in the “2011 Summary Compensation Table”, as applicable.

(2)	The amounts shown in column (c) consist of registrant matching contributions or performance contributions disclosed in the “Non-Equity Incentive Plan Compensation” or “All Other Compensation” column in the “2011 Summary Compensation Table”, as applicable.

(3)	The amounts shown in column (d) include above-market earnings disclosed in the “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” column in the “2011 Summary Compensation Table”.

(4)	The aggregate balances in column (f) include compensation earned in prior years that previously was reported in prior Summary Compensation Tables as follows:


	2006 ($)		2007 ($)		2008 ($)		2009 ($)		2010 ($)
Joseph A. Carrabba		60,646		222,731		294,408		298,881		265,884
Laurie Brlas		—		47,537		67,242		42,080		1,546,957
Donald J. Gallagher		9,967		16,563		20,373		1,977		22,435
Duncan P. Price		—		—		—		—		—
P. Kelly Tompkins		—		—		—		—		133,571
William R. Calfee		27,519		53,630		62,310		41,949		63,062
Richard Mehan		—		—		—		—		—

(5)	Reflects a 2011 distribution from base salary deferred in 2009.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

The tables and discussion below reflect the compensation payable to each of the named executive officers other than Messrs. Calfee and Mehan in the event of termination of such executive’s employment under a variety of different circumstances, including voluntary termination, involuntary not-for-cause termination, and termination following a change in control. The amounts shown assume in all cases that such termination was effective as of December 30, 2011. All amounts shown are

estimates of the amounts that would be paid out to the executives upon their termination. The actual amounts to be paid out can only be determined at the time of such executive’s separation from Cliffs.

A discussion of the payments and benefits to Messrs. Calfee and Mehan in connection with their respective terminations of employment during 2011 is provided following the tables for the other named executive officers.

Payments Made Upon All Terminations

If a named executive officer’s employment terminates, he or she is entitled to receive certain amounts earned during his or her term of employment no matter the cause of termination. Such amounts may include:

•

Salary through the date of termination;

•

Unused vacation pay;

•

Accrued and vested benefits under the Pension Plan, SERP, 401(k) Savings Plan and VNQDC Plan; and

•

Undistributed performance shares, performance share units, restricted shares, restricted share units and retention units for periods that have been completed.

The terms of Mr. Price’s employment agreement is described in “Employment Agreements” on page 43.

Additional Payments Upon Involuntary Termination Without Cause

In the event that a named executive officer is terminated involuntarily without cause, he or she typically would receive the following additional payments or benefits in the sole discretionary judgment of the Compensation Committee, taking into account the nature of the termination, the length of the executive’s service with Cliffs, and the executive’s grade level. There is no legally binding agreement requiring that any such payments or benefits be paid to any named executive officer except in the case of a change in control prior to the termination, with the exception of Mr. Price:

•

Severance payments;

•

Continued health insurance benefits;

•

Outplacement services;

•

Pursuant to the terms of our 2007 Incentive Equity Plan, a pro rata portion, subject to the Compensation Committee’s discretion, in which it can increase or decrease the proration, from time to time, of his or her performance shares, retention units and restricted share units. Such shares will be paid when such shares and units would otherwise be paid; and

•

Financial services.

Since all such benefits are at the discretion of the Compensation Committee in each instance, it is impossible to estimate the amount that would be paid in such circumstances.

Additional Payments Upon Retirement

Messrs. Carrabba and Gallagher were eligible to retire on December 30, 2011. Executives are eligible for retirement at age 65 or eligible for early retirement at age 55 with at least five years of service. In the event of any named executive officer’s retirement, the following amounts will be paid and benefits will be provided, in addition to the amounts payable to all terminated salaried employees:

•

A pro rata portion of the annual incentive award under the EMPI Plan for the year in which he or she retires unless otherwise determined by the Compensation Committee;

•

Any unpaid annual incentive award under the EMPI Plan for the year prior to the year of retirement;

•

A pro rata portion, subject to the Compensation Committee’s discretion, in which it can increase or decrease the proration, from time to time, of his or her performance shares, retention units and restricted share units. Such shares will be paid when such shares and units would otherwise be paid;

•

A pro rata portion of any performance-based contribution to the 401(k) Savings Plan and the VNQDC Plan for the year of retirement;

•

He or she will keep his or her restricted shares and the restrictions on sale of the shares will lapse at the end of the restriction period;

•

If the employee was hired prior to 1993, and in the case of Mr. Gallagher, he or she will be entitled to retiree medical and life insurance for the rest of his or her life and the life of his or her spouse on the same terms as any other salaried employee hired prior to 1993; and

•

He or she will become vested in certain matching contributions under the VNQDC Plan provided that the amounts are not withdrawn until the end of the five-year vesting period.

Additional Payments Because of Change in Control Without Termination

Under the terms of the Participant Long-Term Incentive Grant Agreements, the named executive officers are entitled to the following benefits upon the occurrence of a change in control, regardless of whether the employment of the named executive officer is terminated:

•

The restrictions on the restricted shares lapse immediately; and

•

The performance shares at the original target grant, retention units and restricted share units vest immediately.

For this purpose, a “change in control” generally means the occurrence of any of the following events:

(1)

Any one person, or more than one person acting as a group, acquires ownership of stock of Cliffs that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of Cliffs (subject to certain exceptions);

(2)

Any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of Cliffs possessing 35 percent or more of the total voting power of the stock of Cliffs;

(3)

A majority of members of Cliffs’ Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of Cliffs’ Board prior to the date of the appointment or election; or

(4)

Any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from Cliffs that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of Cliffs immediately prior to such acquisition or acquisitions.

Acquisitions of Cliffs stock pursuant to certain business combination or similar transactions described in Cliffs’ equity incentive plans, however, will not constitute a change in control if, generally speaking, in each case, immediately after such business transaction:

•

Owners of Cliffs stock immediately prior to the business transaction own more than 55 percent of the entity resulting from the business transaction in substantially the same proportions as their pre-business transaction ownership of Cliffs stock;

•

No one person, or more than one person acting as a group (subject to certain exceptions), owns 30 percent or more of the combined voting power of the entity resulting from the business transaction; and

•

At least a majority of the members of the board of directors of the entity resulting from the business transaction were members of the incumbent Board of Cliffs when the business transaction agreement was signed or approved by Cliffs’ Board. For purposes of this exception, the incumbent board of directors of Cliffs generally means those directors who were serving as of August 11, 2008 (or a prior date in the case of certain pre-2007 equity awards) or whose appointment or election was endorsed by a majority of the incumbent members prior to the date of such appointment or election.

Except as it pertains to the definition of business combination or similar transactions, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with Cliffs. Additionally, for certain equity awards made prior to the 2007 Incentive Equity Plan, issuances of Cliffs stock approved by the incumbent board of directors of Cliffs, acquisitions by Cliffs of its own stock and acquisitions of Cliffs stock by Cliffs’ employee benefit plans or related trusts also will not constitute a change in control.

Our 2007 Incentive Equity Plan also clarifies that the following two plan provisions do not apply to the definition of “Business Combination”: (a) persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with Cliffs; and (b) if a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

Additional Payments Upon Termination Without Cause after Change in Control

Each of the named executive officers, with the exception of Messrs. Price and Mehan, has a written Change in Control severance agreement that applies only in the event of termination during the two years after a change in control. The terms of Mr. Price’s employment agreement is described on page 43 and Mr. Mehan’s former employment agreement is described on page 43. If one of the named executive officers is involuntarily terminated during the two years after a change in control, for a reason other than cause, he or she will be entitled to the following additional benefits:

(1)

A lump sum payment in an amount equal to three times the sum of (A) base salary (at the highest rate in effect for any period prior to the termination date), plus (B) annual incentive pay at the target level for the current year or prior year, whichever is greater.

(2)

Coverage for a period of 36 months following the termination date, for health, life insurance and disability benefits.

(3)

A lump sum payment in an amount equal to the sum of the additional future pension benefits that the executive would have been entitled to receive three years following the termination date under the SERP.

(4)

Pro rata incentive pay at target levels for the year in which the termination date occurs.

(5)

Outplacement services in an amount up to 15 percent of the executive’s base salary.

(6)

Post-retirement medical, hospital, surgical and prescription drug coverage for the lifetime of the executive, his or her spouse and any eligible dependents at the normal participant cost based on the executive’s age at retirement.

(7)

A gross-up payment for any taxes imposed on the executive under Section 4999 of the Code relating to excess parachute payments; however, such provision for payments was eliminated for all named executive officers effective January 1, 2012.

(8)

He or she will become vested in certain matching contributions under the VNQDC Plan provided that the amounts are not withdrawn until the end of the five-year vesting period.

(9)

He or she will be provided perquisites for a period of 36 months comparable to the perquisites he or she was receiving before the termination of his employment or the change in control, whichever was greater.

Similar benefits are paid if the executive voluntarily terminates his or her employment during the two years following a change in control by reason of any one of the following occurring:

(a)

Failure to maintain the executive in the office or position, or a substantially equivalent office or position, which the executive held immediately prior to a change in control;

(b)

(i) A significant adverse change in the nature or scope of the executive’s authorities, powers, functions, responsibilities or duties; (ii) a reduction in the executive’s base salary; (iii) a reduction in the executive’s opportunity to receive incentive pay; or (iv) the termination or denial of the executive’s rights to employee benefits or a reduction in the scope or value thereof;

(c)

A change in circumstances that substantially has hindered the executive’s performance of his or her job;

(d)

Certain corporate transactions;

(e)

Cliffs relocates its principal executive offices in excess of 25 miles from the prior location; or

(f)

Breach of the severance agreement.

For purposes of the severance agreements, “cause” generally means termination of an executive for the following acts: (A) conviction of a criminal violation involving fraud, embezzlement or theft in connection with his or her duties or in the course of his or her employment with Cliffs or any subsidiary of Cliffs; (B) intentional wrongful damage to property of Cliffs or any subsidiary of Cliffs; (C) intentional wrongful disclosure of secret processes or confidential information of Cliffs or any subsidiary of Cliffs; or (D) intentional wrongful engagement in any competitive activity.

In order to receive benefits under the severance agreements, the named executive officers may not disclose Cliffs’ confidential and proprietary information, may not go into competition with Cliffs, and may not solicit Cliffs’ employees to leave Cliffs’ employment.

Additional Payments Upon Death or Disability

In the event of any named executive officer’s death or disability, the following amounts will be paid and benefits will be provided, in addition to the amounts payable to all terminated salaried employees:

•

Full vesting, subject to the Compensation Committee’s discretion, from time to time, of his or her performance shares, retention units and restricted share units.

POTENTIAL TERMINATION PAYMENTS TO NAMED EXECUTIVE OFFICERS

The following tables show the benefits payable to the named executive officers other than Messrs. Calfee and Mehan upon various types of terminations of employment and change in control assuming an effective date of December 30, 2011.

Joseph A. Carrabba


*Benefit*	*Voluntary* *Termination or* *For Cause* *Termination* *($)*		*Retirement* *($)*		*Involuntary* *Termination* *($)*		*Change in* *Control* *Without* *Termination* *($)*		*Termination* *Without* *Cause after* *Change in* *Control* *($)*		*Death* *($)*		*Disability* *($)*
Cash Severance		—		—		—		—		7,200,000		—		—
Non-Equity Incentive Plan Compensation		—		1,784,860		—		—		1,400,000		—		—
Equity
Performance Shares		—		4,028,743		4,028,743		7,822,619		7,822,619		4,028,743		4,028,743
Restricted Share Units		—		749,606		749,606		1,419,087		1,419,087		749,606		749,606
Subtotal		—		4,778,349		4,778,349		9,241,706		9,241,706		4,778,349		4,778,349
Retirement Benefits
Pension		2,819,517		2,819,517		2,819,517		—		4,038,925		2,758,494		2,758,494
Retiree Welfare		—		—		—		—		262,477		—		—
401(k) Performance Contribution		—		95,550		—		—		—		—		—
Subtotal		2,819,517		2,915,067		2,819,517		—		4,301,402		2,758,494		2,758,494
Non-Qualified Deferred Compensation		1,458,330		1,458,330		1,458,330		1,458,330		1,458,330		1,458,330		1,458,330
Other Benefits
Health & Welfare		—		—		—		—		35,828		—		—
Outplacement		—		—		—		—		150,000		—		—
Perquisites		—		—		—		—		36,455		—		—
Tax Gross-Ups(1)		—		—		—		—		7,013,309		—		—
Subtotal		—		—		—		—		7,235,591		—		—
Total		4,277,847		10,936,606		9,056,196		10,700,036		30,837,029		8,995,173		8,995,173

Laurie Brlas


*Benefit*	*Voluntary* *Termination or* *For Cause* *Termination* *($)*		*Retirement* *($)*		*Involuntary* *Termination* *($)*		*Change in* *Control* *Without* *Termination* *($)*		*Termination* *Without* *Cause after* *Change in* *Control* *($)*		*Death* *($)*		*Disability* *($)*
Cash Severance		—		—		—		—		2,851,200		—		—
Non-Equity Incentive Plan Compensation		—		—		—		—		422,400		—		—
Equity
Performance Shares		—		—		747,537		1,409,111		1,409,111		747,537		747,537
Restricted Share Units		—		—		248,765		468,873		468,873		248,765		248,765
Subtotal		—		—		996,302		1,877,984		1,877,984		996,302		996,302
Retirement Benefits
Pension		435,117		435,117		435,117		—		813,100		409,497		409,497
Retiree Welfare		—		—		—		—		128,184		—		—
401(k) Performance Contribution		—		—		—		—		—		—		—
Subtotal		435,117		435,117		435,117		—		941,284		409,497		409,497
Non-Qualified Deferred Compensation		1,316,806		—		1,316,806		1,316,806		1,316,806		1,316,806		1,316,806
Other Benefits
Health & Welfare		—		—		—		—		35,828		—		—
Outplacement		—		—		—		—		79,200		—		—
Perquisites		—		—		—		—		39,351		—		—
Tax Gross-Ups(1)		—		—		—		—		2,008,019		—		—
Subtotal		—		—		—		—		2,162,398		—		—
Total		1,751,923		435,117		2,748,225		3,194,790		9,572,072		2,722,605		2,722,605

Donald J. Gallagher


*Benefit*	*Voluntary* *Termination or* *For Cause* *Termination* *($)*		*Retirement* *($)*		*Involuntary* *Termination* *($)*		*Change in* *Control* *Without* *Termination* *($)*		*Termination* *Without* *Cause after* *Change in* *Control* *($)*		*Death* *($)*		*Disability* *($)*
Cash Severance		—		—		—		—		2,635,200		—		—
Non-Equity Incentive Plan Compensation		—		507,721		—		—		390,400		—		—
Equity
Performance Shares		—		716,010		716,010		1,339,902		1,339,902		716,010		716,010
Restricted Share Units		—		238,600		238,600		446,426		446,426		238,600		238,600
Subtotal		—		954,610		954,610		1,786,328		1,786,328		954,610		954,610
Retirement Benefits
Pension		3,517,558		3,517,558		3,517,558		—		3,912,505		2,000,186		3,528,646
Retiree Welfare		142,779		142,779		142,779		—		153,347		271,166		142,779
401(k) Performance Contribution		—		48,617		—		—		—		—		—
Subtotal		3,660,337		3,708,954		3,660,337		—		4,065,852		2,271,352		3,671,425
Non-Qualified Deferred Compensation		6,457,303		6,457,303		6,457,303		6,457,303		6,457,303		6,457,303		6,457,303
Other Benefits
Health & Welfare		—		—		—		—		35,828		—		—
Outplacement		—		—		—		—		73,200		—		—
Perquisites		—		—		—		—		35,022		—		—
Tax Gross-Ups(1)		—		—		—		—		—		—		—
Subtotal		—		—		—		—		144,050		—		—
Total		10,117,640		11,628,588		11,072,250		8,243,631		15,479,133		9,683,265		11,083,338

Duncan P. Price (2)


*Benefit*	*Voluntary* *Termination or* *For Cause* *Termination* *($)*		*Retirement* *($)*		*Involuntary* *Termination* *($)*		*Change in* *Control* *Without* *Termination* *($)*		*Termination* *Without* *Cause after* *Change in* *Control* *($)*		*Death* *($)*		*Disability* *($)*
Cash Severance		—		—		2,243,837		—		3,214,903		—		—
Non-Equity Incentive Plan Compensation		—		—		—		—		439,645		—		—
Equity
Performance Shares		—		—		392,867		842,349		842,349		392,867		392,867
Restricted Share Units		—		—		130,887		280,576		280,576		130,887		130,887
Subtotal		—		—		523,754		1,112,925		1,112,925		523,754		523,754
Retirement Benefits
Pension		—		—		—		—		—		—		—
Retiree Welfare		—		—		—		—		—		—		—
401(k) Performance Contribution		—		—		—		—		—		—		—
Subtotal		—		—		—		—		—		—		—
Non-Qualified Deferred Compensation		—		—		—		—		—		—		—
Other Benefits
Health & Welfare		—		—		—		—		35,828		—		—
Outplacement		—		—		—		—		94,798		—		—
Perquisites		—		—		—		—		—		—		—
Tax Gross-Ups(1)		—		—		—		—		1,649,514		—		—
Subtotal		—		—		—		—		1,780,139		—		—
Total		—		—		2,767,591		1,122,925		6,557,612		523,754		523,754

P. Kelly Tompkins


*Benefit*	*Voluntary* *Termination or* *For Cause* *Termination* *($)*		*Retirement* *($)*		*Involuntary* *Termination* *($)*		*Change in* *Control* *Without* *Termination* *($)*		*Termination* *Without* *Cause after* *Change in* *Control* *($)*		*Death* *($)*		*Disability* *($)*
Cash Severance		—		—		—		—		2,322,00		—		—
Non-Equity Incentive Plan Compensation		—		—		—		—		344,000		—		—
Equity
Performance Shares		—		—		646,936		1,190,885		1,190,885		646,936		646,936
Restricted Share Units		—		—		215,162		395,923		395,923		215,162		215,162
Subtotal		—		—		862,098		1,586,808		1,586,808		862,098