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I.	ECONOMIC AND MARKET RISKS

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II.	REGULATORY RISKS

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III.	FINANCIAL RISKS

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IV.	OPERATIONAL RISKS

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V.	DEVELOPMENT AND SUSTAINABILITY RISKS

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•	maintaining required federal, state and local permits;

•	completing construction work, commissioning and integration of all of the systems comprising our HBI production plant;

•	negotiating sales contracts for our planned production; and

•	other factors, many of which are beyond our control.

VI.	HUMAN CAPITAL RISKS

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VII.	RISKS RELATED TO THE PROPOSED MERGER

•	the adoption of the Merger Agreement by AK Steel stockholders;

•	the approval by our shareholders of the Merger Agreement and the transactions contemplated by the Merger Agreement, including the issuance of our common shares in connection with the Merger;

•	the receipt of required regulatory approval in Mexico;

•	the absence of any governmental order or law prohibiting the consummation of the Merger;

•	the accuracy of our and AK Steel’s respective representations and warranties under the Merger Agreement (subject to the materiality standards set forth in the Merger Agreement);

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•	the performance by us and AK Steel of our respective obligations under the Merger Agreement in all material respects; and

•	the absence of a material adverse effect (as described in the Merger Agreement) on us or AK Steel.

•	we may experience negative reactions from the financial markets, including negative impacts on the market price of our common shares;

•	the manner in which customers, vendors, business partners and other third parties perceive us may be negatively impacted, which in turn could affect our ability to compete for new business or obtain renewals in the marketplace more broadly;

•	we may experience negative reactions from employees, which may adversely affect, among other things, productivity and occupational safety; and

•	we will have expended significant time and resources that could otherwise have been spent on our existing businesses and the pursuit of other opportunities that could have been beneficial to us, and our ongoing business and financial results may be adversely affected.

•	adverse changes in market conditions;

•	commodity prices for iron ore and steel;

•	production levels;

•	operating results;

•	competitive conditions;

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•	laws and regulations affecting the iron ore and steel businesses;

•	capital expenditure obligations;

•	higher than expected integration costs;

•	lower than expected synergies; and

•	general economic conditions.

•	increasing our vulnerability to changing economic, regulatory and industry conditions;

•	limiting our ability to compete and our flexibility in planning for, or reacting to, changes in our business and industry;

•	limiting our ability to pay dividends to our shareholders;

•	limiting our ability to borrow additional funds; and

•	requiring us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for working capital, capital expenditures, acquisitions, share repurchases, dividends and other purposes.

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•	A decrease in the average year-to-date realized product revenue rate of $6.14 per long ton, or 5.8%, during the year ended December 31, 2019, compared to 2018, which resulted in a decrease of $127.3 million, predominantly due to:

◦	A decrease in the hot-rolled coil steel price, which negatively affected the realized revenue rate by $16 per long ton or $311 million; and

◦	Lower pellet premiums which negatively affected the realized revenue rate by $2 per long ton or $40 million.

◦	These decreases were offset partially by higher full-year Platts 62% price, which positively affected the realized revenue rate by $13 per long ton, or $260 million.

•	Lower third-party sales volume of 2.0 million long tons, due to decreased customer demand, which was offset partially by increased intercompany demand of 0.8 million long tons, for a net decrease of 1.2 million long tons or decreased revenues of $117.7 million.

•	A decrease in sales volume of 1.2 million long tons, which resulted in decreased costs of $75 million period-over-period.

•	This decrease was offset partially by an unfavorable change in the full-year cost predominantly due to:

◦	Increased stripping and lower ore recovery, which together increased costs by $35 million, or $2 per long ton, increased depreciation of $15 million, or $1 per long ton, increased commodity supply usage of $12 million, or $1 per long ton, and increased maintenance of $9 million, or $1 per long ton.

◦	This unfavorable change was offset partially by decreased royalties of $14 million, or $1 per long ton, lower energy rates resulting in lower costs of $12 million, or $1 per long ton, and decreased labor costs of $11 million, or $1 per long ton.

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•	uncertainty and weaknesses in global economic conditions, including downward pressure on prices caused by oversupply of imported products, reduced market demand and risks related to U.S. government actions with respect to Section 232 of the Trade Expansion Act (as amended by the Trade Act of 1974), the United States-Mexico-Canada Agreement and/or other trade agreements, treaties or policies;

•	continued volatility of iron ore and steel prices and other trends, which may impact the price-adjustment calculations under our sales contracts;

•	our ability to successfully diversify our product mix and add new customers beyond our traditional blast furnace clientele;

•	our ability to cost-effectively achieve planned production rates or levels, including at our HBI plant;

•	our ability to successfully identify and consummate any strategic investments or development projects, including our HBI plant;

•	the impact of our blast furnace customers reducing their steel production due to increased market share of steel produced using other methods or lighter-weight steel alternatives;

•	our actual economic iron ore reserves or reductions in current mineral estimates, including whether any mineralized material qualifies as a reserve;

•	the outcome of any contractual disputes with our customers, joint venture partners or significant energy, material or service providers or any other litigation or arbitration;

•	problems or uncertainties with sales volume or mix, productivity, tons mined, transportation, mine-closure obligations, environmental liabilities, employee-benefit costs and other risks of the mining industry;

•	impacts of existing and increasing governmental regulation and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other authorization of, or from, any governmental or regulatory entity and costs related to implementing improvements to ensure compliance with regulatory changes;

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•	our ability to maintain adequate liquidity, our level of indebtedness and the availability of capital could limit cash flow available to fund working capital, planned capital expenditures, acquisitions and other general corporate purposes or ongoing needs of our business;

•	our ability to continue to pay cash dividends, and the amount and timing of any cash dividends;

•	our ability to maintain appropriate relations with unions and employees;

•	the ability of our customers, joint venture partners and third party service providers to meet their obligations to us on a timely basis or at all;

•	events or circumstances that could impair or adversely impact the viability of a mine or production plant and the carrying value of associated assets, as well as any resulting impairment charges;

•	uncertainties associated with natural disasters, weather conditions, unanticipated geological conditions, supply or price of energy, equipment failures and other unexpected events;

•	adverse changes in interest rates and tax laws;

•	the potential existence of significant deficiencies or material weakness in our internal control over financial reporting;

•	the possibility that the Merger Agreement may be terminated and the proposed Merger may not be completed, whether due to the inability to obtain regulatory approvals, as a result of litigation instituted against AK Steel and/or us, the inability to obtain shareholder approval, or the inability to satisfy any other condition to the completion of the Merger;

•	our ability to realize the anticipated benefits of the proposed Merger and to successfully integrate the businesses of AK Steel into our existing businesses, including uncertainties associated with maintaining relationships with customers, vendors and employees, as well as realizing the estimated future synergies;

•	the possibility that the Merger may be less accretive than expected, and may be dilutive, to our earnings per share, whether as a result of adverse changes in market conditions, volatility in the commodity prices for iron ore and/or steel, adverse regulatory developments or otherwise; and

•	additional debt we assume, or other proposed financing transactions we may enter into, in connection with the proposed Merger may negatively impact our credit profile and limit our financial flexibility.

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NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Existing Business

Founded in 1847, Cleveland-Cliffs Inc. is the largest and oldest independent iron ore mining company in the United States. We are a major supplier of iron ore pellets to the North American steel industry from our mines and pellet plants located in Michigan and Minnesota. In 2020, we expect to be the sole producer of HBI in the Great Lakes region with the startup of our first production plant in Toledo, Ohio.

Our Company’s continuing operations are organized and managed in two operating segments according to our differentiated products. Our Mining and Pelletizing segment is a major supplier of iron ore pellets to the North American steel industry from our mines and pellet plants located in Michigan and Minnesota. Our Metallics segment includes our HBI production plant in Toledo, Ohio, which is currently under construction and expected to be completed during the first half of 2020. During the second quarter of 2019, Northshore mine began supplying DR-grade pellets to our Metallics segment, which will be used as feedstock for the HBI production plant when we begin production in 2020.

Unless otherwise noted, discussion of our business and results of operations in this Annual Report on Form 10-K refers to our continuing operations on a stand-alone basis without giving effect to the Merger.

Proposed Merger with AK Steel

On December 2, 2019, we entered into the Merger Agreement with AK Steel and Merger Sub, pursuant to which, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into AK Steel, with AK Steel surviving the Merger as a wholly owned subsidiary of Cliffs.

Pursuant to the Merger Agreement, at the effective time of the Merger, each share of AK Steel common stock issued and outstanding prior to the effective time of the Merger will be converted into, and become exchangeable for, 0.400 of a share of our common stock, par value $0.125 per share.

We expect to complete the Merger in the first quarter of 2020. Completion of the Merger is subject to various conditions, such as satisfaction or waiver of certain specified closing conditions, and it is possible that factors outside of our control could result in the Merger being completed at a later time or not at all. The Merger Agreement also contains certain termination rights that may be exercised by either us or AK Steel. We plan to complete the Merger as soon as reasonably practicable following the satisfaction of all applicable conditions.

Significant Accounting Policies

We consider the following policies to be beneficial in understanding the judgments involved in the preparation of our consolidated financial statements and the uncertainties that could impact our financial condition, results of operations and cash flows. Certain prior period amounts have been reclassified to conform with the current year presentation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of management estimates and assumptions relate to mineral reserves; future realizable cash flow; environmental, reclamation and closure obligations; valuation of long-lived assets, inventory, tax assets and post-employment, post-retirement and other employee benefit liabilities; reserves for contingencies and litigation; and the fair value of derivative instruments. Actual results could differ from estimates. Management reviews its estimates on an ongoing basis. Changes in facts and circumstances may alter such estimates and affect the results of operations and financial position in future periods.

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Basis of Consolidation

The consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries, including the following iron ore operations at December 31, 2019:

Name		Location		Business Segment		Status of Operations
Northshore		Minnesota		Mining and Pelletizing		Active
United Taconite		Minnesota		Mining and Pelletizing		Active
Tilden		Michigan		Mining and Pelletizing		Active
Empire		Michigan		Mining and Pelletizing		Indefinitely Idled
Toledo HBI		Ohio		Metallics		Construction Stage

Intercompany transactions and balances are eliminated upon consolidation.

Equity Method Investment

We have an investment in an unconsolidated joint venture that we have the ability to exercise significant influence over, but not control, and is accounted for under the equity method.

Our 23% ownership interest in Hibbing is recorded as an equity method investment. As of December 31, 2019 and 2018, our investment in Hibbing was $18.0 million and $15.4 million, respectively, classified in Other non-current liabilities in the Statements of Consolidated Financial Position.

Our share of equity income is eliminated against consolidated product inventory upon production, and against Cost of goods sold and operating expenses when sold. This effectively reduces the cost of our share of the mining venture's production, reflecting the cost-based nature of our participation in the unconsolidated joint venture.

Noncontrolling Interests

During 2017, our ownership interest in Empire increased to 100% as we reached an agreement to distribute the noncontrolling interest net assets of $132.7 million to ArcelorMittal USA, in exchange for its interest in Empire. The parties agreed that the net assets were to be distributed in three installments of $44.2 million each, the balance of which was recorded in Other current liabilities in the Statements of Consolidated Financial Position. The final installment was paid in August 2019. Upon payment of the first installment, we assumed ArcelorMittal USA's 21% interest and reflected the ownership percentage change in our consolidated financial statements. During the year ended December 31, 2017, we accounted for the increase in ownership as an equity transaction, which resulted in a net $12.1 million decrease in equity attributable to Cliffs' shareholders and a $116.7 million decrease in Noncontrolling interest. The net loss attributable to the noncontrolling interest of the Empire mining venture was $3.9 million for the year ended December 31, 2017.

During 2017, we also acquired the remaining 15% equity interest in Tilden owned by U.S. Steel for $105.0 million. With the closing of this transaction, we have 100% ownership of the mine. During the year ended December 31, 2017, we accounted for the increase in ownership as an equity transaction, which resulted in an $89.1 million decrease in equity attributable to Cliffs' shareholders and a $15.9 million decrease in Noncontrolling interest.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and on deposit as well as all short-term securities held for the primary purpose of general liquidity. We consider investments in highly liquid debt instruments with an original maturity of three months or less from the date of acquisition and longer maturities when funds can be withdrawn in three months or less without a significant penalty to be cash equivalents. We routinely monitor and evaluate counterparty credit risk related to the financial institutions in which our short-term investment securities are held.

Trade Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable are recorded at the point control transfers and represents the amount of consideration we expect to receive in exchange for transferred goods and do not bear interest. The allowance for doubtful accounts is our best estimate of the expected credit losses over the life of our existing accounts receivable. We establish provisions for expected lifetime losses on accounts receivable at the time a receivable is recorded based on historical experience, customer credit quality and forecasted economic conditions. We regularly review our accounts receivable balances and establish or adjust the allowance as necessary using the specific identification method.

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Inventories

Product Inventories

The Mining and Pelletizing segment cost of product inventories is determined using the LIFO method and is stated at the lower of cost or market. The Metallics segment cost of product inventories is determined using the weighted-average method and is stated at the lower of cost or net realizable value.

Supplies and Other Inventories

Supply inventories include replacement parts, fuel, chemicals and other general supplies, which are expected to be used or consumed in normal operations. Supply inventories also include critical spares. Critical spares are replacement parts for equipment that is critical for the continued operation of the mine or processing facilities.

Supply inventories are stated at the lower of cost or net realizable value using average cost, less an allowance for obsolete and surplus items.

Refer to NOTE 4 - INVENTORIES for further information.

Derivative Financial Instruments and Hedging Activities

We are exposed to certain risks related to the ongoing operations of our business, including those caused by changes in commodity prices and energy rates. We have established policies and procedures, including the use of certain derivative instruments, to manage such risks, if deemed necessary.

Derivative financial instruments are recognized as either assets or liabilities in the Statements of Consolidated Financial Position and measured at fair value. On the date a qualifying hedging instrument is executed, we designate the hedging instrument as a hedge of the variability of cash flows to be received or paid related to a forecasted transaction (cash flow hedge). We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as cash flow hedges to specific firm commitments or forecasted transactions. We also formally assess, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of the related hedged items. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, we discontinue hedge accounting prospectively and record all future changes in fair value in the period of the instrument's earnings or losses.

For derivative instruments that have been designated as cash flow hedges, the changes in fair value are recorded in Accumulated other comprehensive loss. Amounts recorded in Accumulated other comprehensive loss are reclassified to earnings or losses in the period the underlying hedged transaction affects earnings or when the underlying hedged transaction is no longer reasonably possible of occurring.

For derivative instruments that have not been designated as cash flow hedges, such as provisional pricing arrangements and supplemental revenue or refunds contained within a customer supply agreement, changes in fair value are recorded in the period of the instrument's earnings or losses.

Refer to Revenue Recognition below for discussion of derivatives recorded as a result of pricing terms in our sales contracts. Additionally, refer to NOTE 12 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES for further information.

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Property, Plant and Equipment

Our properties are stated at the lower of cost less accumulated depreciation or fair value. Depreciation of plant and equipment is computed principally by the straight-line method based on estimated useful lives, not to exceed the mine lives. Depreciation continues to be recognized when operations are idled temporarily. Depreciation and depletion is recorded over the following estimated useful lives:

Asset Class		Basis		Life
Land rights and mineral rights		Units of production		Life of mine
Office and information technology		Straight line		3 to 15 years
Buildings		Straight line		45 years
Mining equipment		Straight line/Double declining balance		3 to 20 years
Processing equipment		Straight line		10 to 45 years
Electric power facilities		Straight line		10 to 45 years
Land improvements		Straight line		20 to 45 years
Asset retirement obligation		Straight line		Life of mine

Refer to NOTE 5 - PROPERTY, PLANT AND EQUIPMENT for further information.

Other Intangible Assets

Our mine permits are subject to periodic amortization on a straight line basis over their estimated useful life, which corresponds with the life of mine.

Asset Impairment

We monitor conditions that may affect the carrying value of our long-lived tangible and intangible assets when events and circumstances indicate that the carrying value of the asset groups may not be recoverable. In order to determine if assets have been impaired, assets are grouped and tested at the lowest level for which identifiable, independent cash flows are available ("asset group"). An impairment loss exists when projected net undiscounted cash flows are less than the carrying value of the asset group. The measurement of the impairment loss to be recognized is based on the difference between the fair value and the carrying value of the asset group. Fair value can be determined using a market approach, income approach or cost approach.

For the years ended December 31, 2019, 2018 and 2017, no impairment factors were present that would indicate the carrying value of any of our asset groups may not be recoverable; as a result, no impairment assessments were required.

Fair Value Measurements

ASC Topic 820, Fair Value Measurements and Disclosures, establishes a three-level valuation hierarchy for classification of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our own views about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized below:

•	Level 1 — Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

•	Level 2 — Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•	Level 3 — Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

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The classification of assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement in its entirety.

Refer to NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS and NOTE 8 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further information.

Pensions and Other Postretirement Benefits

We offer defined benefit pension plans, defined contribution pension plans and OPEB plans, primarily consisting of retiree healthcare benefits, to most employees as part of a total compensation and benefits program.

We recognize the funded or unfunded status of our pension and OPEB obligations on our December 31, 2019 and 2018 Statements of Consolidated Financial Position based on the difference between the market value of plan assets and the actuarial present value of our retirement obligations on that date, on a plan-by-plan basis. If the plan assets exceed the pension and OPEB obligations, the amount of the surplus is recorded as an asset; if the pension and OPEB obligations exceed the plan assets, the amount of the underfunded obligations is recorded as a liability. Year-end balance sheet adjustments to pension and OPEB assets and obligations are recorded as Accumulated other comprehensive loss in the Statements of Consolidated Financial Position.

The actuarial estimates of the PBO and APBO incorporate various assumptions including the discount rates, the rates of increases in compensation, healthcare cost trend rates, mortality, retirement timing and employee turnover. The discount rate is determined based on the prevailing year-end rates for high-grade corporate bonds with a duration matching the expected cash flow timing of the benefit payments from the various plans. The remaining assumptions are based on our estimates of future events by incorporating historical trends and future expectations. The amount of net periodic cost that is recorded in the Statements of Consolidated Operations consists of several components including service cost, interest cost, expected return on plan assets, and amortization of previously unrecognized amounts. Service cost represents the value of the benefits earned in the current year by the participants. Interest cost represents the cost associated with the passage of time. Certain items, such as plan amendments, gains and/or losses resulting from differences between actual and assumed results for demographic and economic factors affecting the obligations and assets of the plans, and changes in other assumptions are subject to deferred recognition for income and expense purposes. The expected return on plan assets is determined utilizing the weighted average of expected returns for plan asset investments in various asset categories based on historical performance, adjusted for current trends. Service costs are classified within Cost of goods sold and operating expenses, Selling, general and administrative expenses and Miscellaneous - net while the interest cost, expected return on assets, amortization of prior service costs/credits, net actuarial gain/loss, and other costs are classified within Other non-operating income.

Refer to NOTE 8 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further information.

Asset Retirement Obligations

Asset retirement obligations are recognized when incurred and recorded as liabilities at fair value. The fair value of the liability is determined as the discounted value of the expected future cash flows. The asset retirement obligation is accreted over time through periodic charges to earnings. In addition, the asset retirement cost is capitalized and amortized over the life of the related asset. Reclamation costs are adjusted periodically to reflect changes in the estimated present value resulting from the passage of time and revisions to the estimates of either the timing or amount of the reclamation costs. We review, on an annual basis, unless otherwise deemed necessary, the asset retirement obligation at each mine site in accordance with the provisions of ASC Topic 410, Asset Retirement and Environmental Obligations. We perform an in-depth evaluation of the liability every three years in addition to our routine annual assessments.

Future reclamation costs for inactive mines are accrued based on management’s best estimate at the end of each period of the costs expected to be incurred at a site. Such cost estimates include, where applicable, ongoing maintenance and monitoring costs. Changes in estimates at inactive mines are reflected in earnings in the period an estimate is revised.

Refer to NOTE 11 - ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS for further information.

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Environmental Remediation Costs

We have a formal policy for environmental protection and restoration. Our mining and exploration activities are subject to various laws and regulations governing protection of the environment. We conduct our operations to protect the public health and environment and believe our operations are in compliance with applicable laws and regulations in all material respects. Our environmental liabilities, including obligations for known environmental remediation exposures at active and closed mining operations and other sites, have been recognized based on the estimated cost of investigation and remediation at each site. If the cost can only be estimated as a range of possible amounts with no point in the range being more likely, the minimum of the range is accrued. Future expenditures are not discounted unless the amount and timing of the cash disbursements reasonably can be estimated. It is possible that additional environmental obligations could be incurred, the extent of which cannot be assessed. Potential insurance recoveries have not been reflected in the determination of the liabilities.

Refer to NOTE 11 - ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS for further information.

Revenue Recognition - Pre-Adoption of Topic 606 (2017)

Prior to the adoption of Topic 606, revenue was recognized from a sale when persuasive evidence of an arrangement existed, the price was fixed or determinable, the product was delivered in accordance with shipping terms, title and risk of loss were transferred to the customer in accordance with the specified provisions of each supply agreement and collection of the sales price reasonably was assured. Our supply agreements provide that title and risk of loss transfer to the customer either upon loading of the vessel, shipment or when payment is received. Under certain supply agreements, we ship the product to ports on the lower Great Lakes or to the customers’ facilities prior to the transfer of title. Our rationale for shipping iron ore products to certain customers and retaining title until payment is received for these products is to minimize credit risk exposure.

Sales were recorded at a sales price specified in the relevant supply agreements resulting in revenue and a receivable at the time of sale. The majority of our contracts have pricing mechanisms that require price estimation at the time of delivery with price finalization at a future period. Upon revenue recognition for provisionally priced sales, a derivative was created for the difference between the sales price used and expected future settlement price. The derivative was adjusted to fair value through Revenues from product sales and services as a revenue adjustment each reporting period based upon current market data and forward-looking estimates determined by management until the final sales price was determined. The principal risks associated with recognition of sales on a provisional basis include Platts 62% price, Atlantic Basin pellet premium and index freight fluctuations between the date initially recorded and the date of final settlement. For revenue recognition, we estimated the future settlement rate; however, if significant changes in inputs occurred between the provisional pricing date and the final settlement date, we were required to either return a portion of the sales proceeds received or bill for the additional sales proceeds due based on the provisional sales price.    

Revenue Recognition - Post-Adoption of Topic 606 (2018 and 2019)

We sell a single product, iron ore pellets, in the North American market. With the adoption of Topic 606 as of January 1, 2018, revenue is recognized generally when iron ore is delivered to our customers. Revenue is measured at the point that control transfers and represents the amount of consideration we expect to receive in exchange for transferring goods. We offer standard payment terms to our customers, generally requiring settlement within 30 days.

We enter into supply contracts of varying lengths to provide customers iron ore pellets to use in their blast furnaces. Blast furnaces run continuously with a constant feed of iron ore and once shut down, cannot easily be restarted. As a result, we ship iron ore in large quantities for storage and use by customers at a later date. Customers do not simultaneously receive and consume the benefits of the iron ore. Based on our assessment of the factors that indicate the pattern of satisfaction, we transfer control of the iron ore at a point in time upon shipment or delivery of the product. The customer is able to direct the use of, and obtain substantially all of the benefits from, the product at the time the product is delivered.

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Most of our customer supply agreements specify a provisional price, which is used for initial billing and cash collection. Revenue recorded in accordance with Topic 606 is calculated using the expected revenue rate at the point when control transfers. The final settlement includes market inputs for a specified period of time, which may vary by customer, but typically include one or more of the following: Platts 62% price, Atlantic Basin pellet premium, Platts international indexed freight rates and changes in specified PPI, including industrial commodities, energy and steel. Changes in the expected revenue rate from the date control transfers through final settlement of contract terms is recorded in accordance with Topic 815. Refer to NOTE 12 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES for further information on how our estimated and final revenue rates are determined.

A supply agreement with a customer provides for supplemental revenue or refunds based on the hot-rolled coil steel price in the year the iron ore is consumed in the customer’s blast furnaces. As control transfers prior to consumption, the supplemental revenue is recorded in accordance with Topic 815. Refer to NOTE 12 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES for further information on supplemental revenue or refunds.

Included within Revenues from product sales and services is derivative revenue related to Topic 815 of $7.5 million, $422.6 million and $120.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.

As of December 31, 2019 and 2018, under Topic 606, we had finished goods of 1.0 million long tons and 0.8 million long tons, respectively, in transit or stored at ports and customer facilities on the lower Great Lakes to service customers, for which revenue had yet to be recognized. Under the previous accounting standard, we did not recognize revenue and related cost of goods sold until title transferred to the customer, usually when payment was received. As of December 31, 2017, under the previous accounting standard, we had finished goods of 1.5 million long tons stored at ports and customer facilities on the lower Great Lakes to service customers, for which revenue had yet to be recognized.

Practical expedients and exemptions

We have elected to treat all shipping and handling costs as fulfillment costs because a significant portion of these costs are incurred prior to control transfer.

We have various long-term sales contracts with minimum purchase and supply requirement provisions that extend beyond the current reporting period. The portion of our transaction price for these contracts that is allocated entirely to wholly unsatisfied performance obligations is based on market prices that have not yet been determined and therefore is variable in nature. As such, we have not disclosed the value of unsatisfied performance obligations pursuant to the practical expedient.

Cost of Goods Sold

Cost of goods sold and operating expenses represents all direct and indirect costs and expenses applicable to the sales from our mining operations.

In some circumstances, as requested by the customer, we will coordinate and ship our product via vessel directly to the port nearest to the customer's blast furnace. In this type of contract, the customer will pay one amount inclusive of both product and freight. We recognize revenue for both product revenue and the amount reimbursed for the vessel freight to the final port. We separate these revenue types in NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION. Accordingly, the revenue we record for freight is offset by an equal amount included in Cost of goods sold and operating expenses for costs we incur for that freight, resulting in no impact on sales margin.

Operating expenses represented the portion of the Tilden mining venture costs prior to our 100% ownership; that is, the costs attributable to the share of the mine’s production owned by the other joint venture partner in the Tilden mine until we acquired the remaining 15% noncontrolling interest during 2017. The mining venture functioned as a captive cost company, supplying product only to its owners effectively for the cost of production. Accordingly, the noncontrolling interests’ revenue amounts were stated at cost of production and were offset by an equal amount included in Cost of goods sold and operating expenses resulting in no sales margin reflected for the noncontrolling partner participant. As we were responsible for product fulfillment under the venture, we acted as a principal in the transaction and, accordingly, recorded revenue under these arrangements on a gross basis.

We received management fees or royalties, which were earned as pellets were produced for our joint ownership mines, until we ceased our mine manager duties at Hibbing and until we purchased the remaining interest in Tilden.

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Repairs and Maintenance

Repairs, maintenance and replacement of components are expensed as incurred. The cost of major equipment overhauls is capitalized and depreciated over the estimated useful life, which is the period until the next scheduled overhaul, generally five years. All other planned and unplanned repairs and maintenance costs are expensed when incurred.

Share-Based Compensation

The fair value of each performance share grant is estimated on the date of grant using a Monte Carlo simulation to forecast relative TSR performance. A correlation matrix of historic and projected stock prices was developed for both the Company and its predetermined peer group of mining and metals companies. The fair value assumes that objective will be achieved. The expected term of the grant represents the time from the grant date to the end of the service period. We estimate the volatility of our common shares and that of the peer group of mining and metals companies using daily price intervals for all companies. The risk-free interest rate is the rate at the grant date on zero-coupon government bonds, with a term commensurate with the remaining performance period.

The fair value of the restricted stock units is determined based on the closing price of our common shares on the grant date.

Upon vesting of share-based compensation awards, we issue shares from treasury shares before issuing new shares. Forfeitures are recognized when they occur.

The fair value of stock options is estimated on the date of grant using a Black-Scholes model using the grant date price of our common shares and option exercise price, and assumptions regarding the option’s expected term, the volatility of our common shares, the risk-free interest rate, and the dividend yield over the option’s expected term.

Refer to NOTE 9 - STOCK COMPENSATION PLANS for additional information.

Income Taxes

Income taxes are based on income for financial reporting purposes, calculated using tax rates by jurisdiction, and reflect a current tax liability or asset for the estimated taxes payable or recoverable on the current year tax return and expected annual changes in deferred taxes. Any interest or penalties on income tax are recognized as a component of Income tax benefit (expense).

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized within Net income in the period that includes the enactment date.

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial results of operations.

Accounting for uncertainty in income taxes recognized in the financial statements requires that a tax benefit from an uncertain tax position be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on technical merits.

See NOTE 10 - INCOME TAXES for further information.

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Discontinued Operations

Asia Pacific Iron Ore Operations

During 2018, we committed to a course of action leading to the permanent closure of the Asia Pacific Iron Ore mining operations and sold all of the assets of our Asia Pacific Iron Ore business through a series of sales to third parties. As a result of our exit, management determined that our Asia Pacific Iron Ore operating segment met the criteria to be classified as held for sale and a discontinued operation under ASC Topic 205, Presentation of Financial Statements. As such, all current and historical Asia Pacific Iron Ore operating segment results are classified within discontinued operations.

Canadian Operations

During 2015, we announced that the Bloom Lake Group and the Wabush Group commenced restructuring proceedings in Montreal, Quebec under the CCAA to address the immediate liquidity issues and to preserve and protect their assets for the benefit of all stakeholders while restructuring and/or sale options were explored. Our Canadian exit represented a strategic shift in our business. For this reason, all Eastern Canadian Iron Ore costs to exit are classified as discontinued operations.

Refer to NOTE 13 - DISCONTINUED OPERATIONS for further discussion of the Asia Pacific Iron Ore segment and Eastern Canadian Iron Ore discontinued operations.

Foreign Currency

Our financial statements are prepared with the U.S. dollar as the reporting currency and the functional currency of all subsidiaries is the U.S. dollar. In August 2018, management determined that there were significant changes in economic factors related to our Australian subsidiaries. The change in economic factors was a result of the sale and conveyance of substantially all assets and liabilities of our Australian subsidiaries to third parties, representing a significant change in operations. As such, the functional currency for the Australian subsidiaries changed from the Australian dollar to the U.S. dollar and all remaining Australian denominated monetary balances will be remeasured prospectively through the Statements of Consolidated Operations.

As a result of the liquidation of the Australian subsidiaries' assets, the historical impact of foreign currency translation recorded in Accumulated other comprehensive loss in the Statements of Consolidated Financial Position of $228.1 million was reclassified and recognized as a gain in Income (loss) from discontinued operations, net of tax in the Statements of Consolidated Operations for the year ended December 31, 2018.

Refer to NOTE 13 - DISCONTINUED OPERATIONS for further information regarding our Australian subsidiaries.

Earnings Per Share

We present both basic and diluted earnings per share amounts for continuing operations and discontinued operations. Total basic earnings per share amounts are calculated by dividing Net income attributable to Cliffs shareholders by the weighted average number of common shares outstanding during the period presented. Total diluted earnings per share amounts are calculated by dividing Net income attributable to Cliffs shareholders by the weighted average number of common shares, common share equivalents under stock plans using the treasury-stock method and the calculated common share equivalents in excess of the conversion rate related to our 2025 Convertible Senior Notes using the treasury-stock method. Common share equivalents are excluded from EPS computations in the periods in which they have an anti-dilutive effect.

See NOTE 6 - DEBT AND CREDIT FACILITIES and NOTE 17 - EARNINGS PER SHARE for further information.

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Recent Accounting Pronouncements

Issued and Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard requires lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases except for short-term leases. For lessees, leases are classified as either operating or finance leases. We adopted this standard on its effective date of January 1, 2019 using the optional alternative approach, which requires application of the new guidance at the beginning of the standard's effective date. Adoption of the updated standard did not have a material effect on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which introduces a new accounting model, Current Expected Credit Losses ("CECL"). CECL requires earlier recognition of credit losses, while also providing additional transparency about credit risk. CECL utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. We elected to early adopt this standard on December 31, 2019. Adoption of the updated standard did not have a material effect on our consolidated financial statements.

On January 1, 2018, we adopted Topic 606 and applied it to all contracts that were not completed using the modified retrospective method. We recognized the cumulative effect of initially applying Topic 606 as an adjustment of $34.0 million to the opening balance of Retained deficit. The comparative period information for the year ended December 31, 2017, has not been retrospectively revised and continues to be reported under the accounting standards in effect for that period. The adoption of Topic 606 increased 2018 Revenues from product sales and services and Net income by $68.1 million and $46.2 million, respectively.

Under Topic 606, revenue is generally recognized upon delivery to our customers, which is earlier than under the previous guidance. As an example, for certain iron ore shipments where revenue was previously recognized upon title transfer when payment was received, we now recognize revenue when control transfers, which is generally upon delivery. While we continue to retain title until we receive payment in many cases, we determined upon review of our customer contracts that the preponderance of control indicators pass to our customers' favor when we deliver our products; thus, we generally concluded that control transfers at that point. As a result of the adoption of Topic 606 and vessel deliveries not occurring during the winter months because of the closure of the Soo Locks at Sault Ste. Marie and the Welland Canal, our revenues and net income will be relatively lower than historical levels during the first quarter of each year and relatively higher than historical levels during the remaining three quarters of each year. However, the total amount of revenue recognized during the year should remain substantially the same as under previous accounting standards, assuming revenue rates and volumes are consistent between years. The adoption of Topic 606 did not have an impact on net cash flows in our Statements of Consolidated Cash Flows.

NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION

Revenues from Product Sales and Services

The following table represents our Revenues from product sales and services contributed by each category of products and services:

	(In Millions)
	Year Ended December 31,
	2019				2018				2017
Revenue category:
Product	$	1,848.1			$	2,172.3			$	1,644.6
Freight	141.8				160.1				166.7
Venture partner's cost reimbursements	—				—				54.7
Total revenues from product sales and services	$	1,989.9			$	2,332.4			$	1,866.0

Freight and venture partner's cost reimbursements are included in both Revenues from product sales and services and Cost of goods sold and operating expenses and are offset within Sales margin.

There was no allowance for doubtful accounts at December 31, 2019 and 2018 and no bad debt expense for the years ended December 31, 2019, 2018 and 2017.

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Deferred Revenue

The table below summarizes our deferred revenue balances:

	(In Millions)
	Deferred Revenue (Current)								Deferred Revenue (Long-Term)
	Year Ended December 31,								Year Ended December 31,
	2019				2018				2019				2018
Opening balance as of January 1	$	21.0			$	23.8			$	38.5			$	51.4
Closing balance as of December 31	22.1				21.0				25.7				38.5
Increase (Decrease)	$	1.1			$	(2.8	)		$	(12.8	)		$	(12.9	)

The terms of one of our pellet supply agreements required supplemental payments to be paid by the customer during the period 2009 through 2012. Installment amounts received under this arrangement in excess of sales were classified as Other current liabilities and Other non-current liabilities in the Statements of Consolidated Financial Position upon receipt of payment. Revenue is recognized over the life of the supply agreement, which extends until 2022, in equal annual installments. As of December 31, 2019 and December 31, 2018, installment amounts received in excess of sales totaled $38.5 million and $51.3 million, respectively, related to this agreement. As of December 31, 2019, and December 31, 2018, deferred revenue of $12.8 million was recorded in Other current liabilities and $25.7 million and $38.5 million, respectively, was recorded as long-term in Other non-current liabilities in the Statements of Consolidated Financial Position, related to this agreement.

Due to the payment terms and the timing of cash receipts near a period end, cash receipts can exceed deliveries for certain customers. Revenue associated with these transactions totaling $9.3 million and $8.2 million was deferred and included in Other current liabilities in the Statements of Consolidated Financial Position as of December 31, 2019 and December 31, 2018, respectively.

Accrued Liabilities

The following table presents the detail of our Accrued liabilities in the Statements of Consolidated Financial Position:

	(In Millions)
	December 31,
	2019				2018
Accrued employment costs	$	61.7			$	74.0
Accrued interest	29.0				38.4
Accrued dividends	17.8				15.0
Accrued royalties	8.4				17.3
Other	9.4				14.2
Accrued liabilities	$	126.3			$	158.9

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Cash Flow Information

A reconciliation of capital additions to cash paid for capital expenditures is as follows:

	(In Millions)
	Year Ended December 31,
	2019				2018				2017
Capital additions1	$	689.8			$	394.8			$	156.0
Less:
Non-cash accruals	15.3				93.6				(2.2		)
Right-of-use assets - finance leases	29.3				7.6				6.5
Grants	(10.8		)		(2.5		)		—
Cash paid for capital expenditures including deposits	$	656.0			$	296.1			$	151.7
1 Includes capital additions related to discontinued operations of $0.1 million and $2.8 million for the years ended December 31, 2018 and 2017, respectively.

Cash payments (receipts) for interest and income taxes are as follows:

	(In Millions)
	2019				2018				2017
Taxes paid on income	$	0.2			$	2.9			$	1.7
Income tax refunds	(117.9		)		(11.3		)		(7.8		)
Interest paid on debt obligations net of capitalized interest1	97.6				105.7				139.0
1 Capitalized interest was $24.8 million and $6.5 million for the years ended December 31, 2019 and 2018, respectively.

Non-Cash Financing Activities - Declared Dividends

NOTE 3 - SEGMENT REPORTING

Our Company’s continuing operations are organized and managed in two operating segments according to our differentiated products. Our Mining and Pelletizing segment is a major supplier of iron ore pellets to the North American steel industry from our mines and pellet plants located in Michigan and Minnesota. Our Metallics segment includes our HBI production plant in Toledo, Ohio, which is currently under construction and expected to be completed during the first half of 2020. During the second quarter of 2019, Northshore mine began supplying DR-grade pellets to our Metallics segment, which will be used as feedstock for the HBI production plant. All intersegment sales were eliminated in consolidation.

We evaluate performance based on sales margin, defined as revenues less cost of goods sold identifiable to each segment. Additionally, we evaluate performance on a segment basis, as well as a consolidated basis, based on EBITDA and Adjusted EBITDA. These measures are used by management, investors, lenders and other external users of our financial statements to assess our operating performance and to compare operating performance to other companies in the iron ore industry. In addition, management believes EBITDA and Adjusted EBITDA are useful measures to assess the earnings power of the business without the impact of capital structure and can be used to assess our ability to service debt and fund future capital expenditures in the business.

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The following tables present a summary of our reportable segments including a reconciliation of segment revenues to total Revenues from product sales and services, segment sales margin to total Sales margin and a reconciliation of Net income to EBITDA and Adjusted EBITDA:    

	(In Millions)
	Year Ended December 31, 2019
	Mining and Pelletizing				Metallics				Total
Operating segment revenues from product sales and services	$	2,069.2			$	—			$	2,069.2
Elimination of intersegment revenues	(79.3		)		—				(79.3		)
Total revenues from product sales and services	$	1,989.9			$	—			$	1,989.9
Operating segment sales margin	$	600.0			$	—			$	600.0
Elimination of intersegment sales margin	(24.3		)		—				(24.3		)
Total sales margin	$	575.7			$	—			$	575.7

Revenues from product sales and services of $2,332.4 million and $1,866.0 million, respectively, and sales margin of $809.6 million and $467.6 million, respectively, related to our Mining and Pelletizing segment accounted for all of our consolidated revenues and sales margin for years ended December 31, 2018 and December 31, 2017.

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	(In Millions)
	2019				2018				2017
Net income	$	292.8			$	1,128.1			$	363.1
Less:
Interest expense, net	(101.6		)		(121.3		)		(132.0		)
Income tax benefit (expense)	(17.6		)		460.3				252.4
Depreciation, depletion and amortization	(85.1		)		(89.0		)		(87.7		)
Total EBITDA	$	497.1			$	878.1			$	330.4
Less:
Impact of discontinued operations	$	(1.3	)		$	120.6			$	22.0
Loss on extinguishment of debt	(18.2		)		(6.8		)		(165.4		)
Severance costs	(1.7		)		—				—
Acquisition costs	(6.5		)		—				—
Foreign exchange remeasurement	—				(0.9		)		13.9
Impairment of other long-lived assets	—				(1.1		)		—
Total Adjusted EBITDA	$	524.8			$	766.3			$	459.9
EBITDA:
Mining and Pelletizing	$	648.1			$	852.9			$	534.9
Metallics	(8.1		)		(3.3		)		(0.4		)
Corporate and Other (including discontinued operations)	(142.9		)		28.5				(204.1		)
Total EBITDA	$	497.1			$	878.1			$	330.4
Adjusted EBITDA:
Mining and Pelletizing	$	668.3			$	875.3			$	559.4
Metallics	(8.1		)		(3.3		)		(0.4		)
Corporate	(135.4		)		(105.7		)		(99.1		)
Total Adjusted EBITDA	$	524.8			$	766.3			$	459.9

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The following table summarizes our depreciation, depletion and amortization and capital additions:

	(In Millions)
	2019				2018				2017
Depreciation, depletion and amortization:
Mining and Pelletizing	$	79.0			$	68.2			$	66.6
Metallics	0.6				—				—
Corporate	5.5				5.6				6.8
Total depreciation, depletion and amortization	$	85.1			$	73.8			$	73.4
Capital additions1:
Mining and Pelletizing	$	128.1			$	145.0			$	136.8
Metallics	558.4				248.1				13.7
Corporate and Other	3.3				1.6				2.7
Total capital additions	$	689.8			$	394.7			$	153.2
1 Refer to NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION for additional information.

A summary of assets by segment is as follows:

	(In Millions)
	December 31,
	2019				2018				2017
Assets:
Mining and Pelletizing	$	1,643.1			$	1,694.1			$	1,500.6
Metallics	913.6				265.9				13.4
Total reportable segment assets	2,556.7				1,960.0				1,514.0
Corporate and Other	940.1				1,557.2				1,300.6
Assets of discontinued operations	7.0				12.4				138.8
Total assets	$	3,503.8			$	3,529.6			$	2,953.4

Included in the consolidated financial statements are the following amounts relating to geographic location:

	(In Millions)
	2019				2018				2017
Revenues from product sales and services:
United States	$	1,505.2			$	1,847.3			$	1,504.5
Canada	448.1				395.1				206.2
Other countries	36.6				90.0				155.3
Total revenues from product sales and services	$	1,989.9			$	2,332.4			$	1,866.0
Property, plant and equipment, net:
United States	$	1,929.0			$	1,286.0			$	1,033.8

Concentrations in Revenue

In 2019, 2018 and 2017, three customers individually accounted for more than 10% of our consolidated product revenue. Total product revenue from those customers represents $1.8 billion, $2.1 billion and $1.5 billion of our total consolidated product revenue in 2019, 2018 and 2017, respectively.

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NOTE 4 - INVENTORIES

The following table presents the detail of our Inventories in the Statements of Consolidated Financial Position:

		(In Millions)
		December 31,
		2019				2018
Product inventories
Finished goods		$	114.1			$	77.8
Work-in-process		68.7				10.1
Total product inventories		182.8				87.9
Supplies and other inventories		134.6				93.2
Inventories		$	317.4			$	181.1

The excess of current cost over LIFO cost of iron ore inventories was $101.3 million and $95.6 million at December 31, 2019 and 2018, respectively. As of December 31, 2019, the product inventory balance for the Mining and Pelletizing segment increased, resulting in a LIFO increment in 2019. The effect of the inventory build was an increase in Inventories of $34.2 million in the Statements of Consolidated Financial Position for the year ended December 31, 2019. As of December 31, 2018, the product inventory balance for the Mining and Pelletizing segment declined, resulting in the liquidation of a LIFO layer in 2018. The effect of the inventory reduction was a decrease in Cost of goods sold and operating expenses of $0.2 million in the Statements of Consolidated Operations for the year ended December 31, 2018.

The allowance for obsolete and surplus items in supplies and other inventories was $12.7 million and $12.6 million at December 31, 2019 and 2018, respectively.

NOTE 5 - PROPERTY, PLANT AND EQUIPMENT

The following table indicates the carrying value of each of the major classes of our consolidated property, plant and equipment:

	(In Millions)
	December 31,
	2019				2018
Land rights and mineral rights	$	549.7			$	549.6
Office and information technology	71.9				70.0
Buildings	157.8				87.2
Mining equipment	581.9				548.5
Processing equipment	791.8				645.8
Electric power facilities	81.9				58.7
Land improvements	32.5				23.8
Asset retirement obligation	1.7				14.8
Other	27.9				25.2
Construction-in-progress	730.3				284.8
	3,027.4				2,308.4
Allowance for depreciation and depletion	(1,098.4		)		(1,022.4		)
	$	1,929.0			$	1,286.0

At December 31, 2019 and 2018, we had deposits for property, plant and equipment of $34.0 million and $83.0 million, respectively, included in Other non-current assets.

We recorded depreciation expense of $76.6 million, $65.6 million and $65.8 million in the Statements of Consolidated Operations for the years ended December 31, 2019, 2018 and 2017, respectively.

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We recorded capitalized interest into property, plant and equipment of $24.8 million and $6.5 million during the years ended December 31, 2019 and 2018, respectively.

The net book value of the land rights and mineral rights is as follows:

	(In Millions)
	December 31,
	2019				2018
Land rights	$	12.4			$	12.4
Mineral rights:
Cost	$	537.3			$	537.2
Depletion	(134.1		)		(126.5		)
Net mineral rights	$	403.2			$	410.7

NOTE 6 - DEBT AND CREDIT FACILITIES

The following represents a summary of our long-term debt:

(In Millions)
December 31, 2019
Debt Instrument		Annual Effective Interest Rate		Total Principal Amount				Debt Issuance Costs				Unamortized Discounts				Total Debt
Senior Secured Notes:
$400 Million 4.875% 2024 Senior Notes		5.00%		$	400.0			$	(4.6	)		$	(1.8	)		$	393.6
Senior Unsecured Notes:
$316.25 Million 1.50% 2025 Convertible Senior Notes		6.26%		316.3				(4.6		)		(65.0		)		246.7
$1.075 Billion 5.75% 2025 Senior Notes		6.01%		473.3				(3.6		)		(5.5		)		464.2
$750 Million 5.875% 2027 Senior Notes		6.49%		750.0				(6.3		)		(27.3		)		716.4
$800 Million 6.25% 2040 Senior Notes		6.34%		298.4				(2.2		)		(3.3		)		292.9
ABL Facility		N/A		450.0				N/A				N/A				—
Long-term debt																$	2,113.8

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(In Millions)
December 31, 2018
Debt Instrument		Annual Effective Interest Rate		Total Principal Amount				Debt Issuance Costs				Unamortized Discounts				Total Debt
Senior Secured Notes:
$400 Million 4.875% 2024 Senior Notes		5.00%		$	400.0			$	(5.7	)		$	(2.2	)		$	392.1
Unsecured Senior Notes:
$700 Million 4.875% 2021 Senior Notes		4.89%		124.0				(0.2		)		—				123.8
$316.25 Million 1.50% 2025 Convertible Senior Notes		6.26%		316.3				(5.5		)		(75.6		)		235.2
$1.075 Billion 5.75% 2025 Senior Notes		6.01%		1,073.3				(9.9		)		(14.6		)		1,048.8
$800 Million 6.25% 2040 Senior Notes		6.34%		298.4				(2.3		)		(3.3		)		292.8
ABL Facility		N/A		450.0				N/A				N/A				—
Fair Value Adjustment to Interest Rate Hedge																0.2
Long-term debt																$	2,092.9

Outstanding Senior Secured Notes

Our Senior Secured Notes bear interest at a rate of 4.875% per annum, which is payable semi-annually in arrears on January 15 and July 15 of each year. The Senior Secured Notes mature on January 15, 2024 and are secured senior obligations of the Company.

Our Senior Secured Notes are jointly and severally and fully and unconditionally guaranteed on a senior secured basis by substantially all of our material domestic subsidiaries and are secured (subject in each case to certain exceptions and permitted liens) by (i) a first-priority lien on substantially all of our assets and the assets of the guarantors, and (ii) a second-priority lien on the ABL Collateral (as defined below), which is junior to a first-priority lien for the benefit of the lenders under our ABL Facility.

The terms of the Senior Secured Notes contain certain covenants; however, there are no financial covenants. Upon the occurrence of a change of control triggering event, as defined in the indenture, we will be required to offer to purchase the notes of the applicable series at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of purchase.

The following is a summary of redemption prices for our Senior Secured Notes:

Redemption Period		Redemption Price1			Restricted Amount
Prior to January 15, 2021 - using proceeds of equity issuance2		104.875	%		Up to 35% of original aggregate principal
Prior to January 15, 20212		100.000
Prior to January 15, 2021		103.000			Up to 10% of original aggregate principal
Beginning on January 15, 2021		102.438
Beginning on January 15, 2022		101.219
Beginning on January 15, 2023		100.000
1 Plus accrued and unpaid interest, if any, up to but excluding the redemption date.
2 Plus a "make-whole" premium.

Outstanding Senior Unsecured Notes

$750 Million 5.875% 2027 Senior Notes - 2019 Offering

On May 13, 2019, we entered into an indenture among the Company, the guarantors party thereto and U.S. Bank National Association, as trustee, relating to the issuance of $750 million aggregate principal amount of 5.875%

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2027 Senior Notes. The 5.875% 2027 Senior Notes were issued at 96.125% of face value. The 5.875% 2027 Senior Notes were issued in a private transaction exempt from the registration requirements of the Securities Act of 1933. Pursuant to the registration rights agreement executed as part of the offering, we agreed to file a registration statement with the SEC with respect to a registered offer to exchange the 5.875% 2027 Senior Notes for publicly registered notes within 365 days of the closing date, with all significant terms and conditions remaining the same.

The 5.875% 2027 Senior Notes bear interest at a rate of 5.875% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2019. The 5.875% 2027 Senior Notes mature on June 1, 2027.

The 5.875% 2027 Senior Notes are unsecured obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated indebtedness. The 5.875% 2027 Senior Notes are guaranteed on a senior unsecured basis by our material direct and indirect wholly-owned domestic subsidiaries and, therefore, are structurally senior to any of our existing and future indebtedness that is not guaranteed by such guarantors and are structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries that do not guarantee the 5.875% 2027 Senior Notes.

The 5.875% 2027 Senior Notes may be redeemed, in whole or in part, at any time at our option not less than 30 days nor more than 60 days after prior notice is sent to the holders of the 5.875% 2027 Senior Notes. The following is a summary of redemption prices for our 5.875% 2027 Senior Notes:

Redemption Period		Redemption Price1			Restricted Amount
Prior to June 1, 2022 - using proceeds of equity issuance		105.875	%		Up to 35% of original aggregate principal
Prior to June 1, 20222		100.000
Beginning on June 1, 2022		102.938
Beginning on June 1, 2023		101.958
Beginning on June 1, 2024		100.979
Beginning on June 1, 2025 and thereafter		100.000
1  Plus accrued and unpaid interest, if any, up to but excluding the redemption date.
2  Plus a "make-whole" premium.

In addition, if a change of control triggering event, as defined in the indenture, occurs with respect to the 5.875% 2027 Senior Notes, we will be required to offer to purchase the notes at a purchase price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of purchase.

The terms of the 5.875% 2027 Senior Notes contain certain customary covenants; however, there are no financial covenants.

Debt issuance costs of $6.8 million were incurred related to the offering of the 5.875% 2027 Senior Notes and are included in Long-term debt in the Statements of Consolidated Financial Position.

$316.25 Million 1.50% 2025 Convertible Senior Notes

The 2025 Convertible Notes bear interest at a rate of 1.50% per year, payable semiannually in arrears on January 15 and July 15 of each year. The 2025 Convertible Notes mature on January 15, 2025. The 2025 Convertible Notes are senior unsecured obligations and rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 2025 Convertible Notes; equal in right of payment to any of our unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries. The terms of the 2025 Convertible Notes contain certain customary covenants; however, there are no financial covenants.

Holders may convert their 2025 Convertible Notes at their option at any time prior to the close of business on the business day immediately preceding July 15, 2024, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2018, if the last reported sale price of our common shares, par value $0.125 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than

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or equal to 130% of the conversion price on each applicable trading day; (2) during the five-business day period after any five-consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2025 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common shares and the conversion rate on each such trading day; (3) if we call the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after July 15, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2025 Convertible Notes at any time, regardless of the foregoing circumstances. Upon conversion, we will pay or deliver, as the case may be, cash, common shares or a combination of cash and common shares, at our election.

Upon the issuance of the 2025 Convertible Notes the initial conversion rate was 122.4365 common shares per $1,000 principal, with a conversion price of $8.17 per common share. The conversion rate is subject to adjustment in some circumstances, including the payment of dividends on common shares, but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 2025 Convertible Notes in connection with such a corporate event or notice of redemption, as the case may be. As of December 31, 2019, the conversion rate was 126.3479 common shares per $1,000 principal amount of 2025 Convertible Notes.

We may not redeem the 2025 Convertible Notes prior to January 15, 2022. We may redeem all or any portion of the 2025 Convertible Notes, for cash at our option on or after January 15, 2022 if the last reported sale price of our common shares has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30-consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the 2025 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

It is our current intent to settle conversions through combination settlement.  Our ability to settle conversions through combination settlement and cash settlement will be subject to restrictions in the agreement governing our ABL Facility and may be subject to restrictions in agreements governing our future debt.

If we undergo a fundamental change as defined in the indenture, holders may require us to repurchase for cash all or any portion of their 2025 Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2025 Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

In accounting for the issuance of the notes, we separated the 2025 Convertible Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of similar liabilities that did not have associated convertible features. The carrying amount of the equity component of $85.9 million representing the conversion option was determined by deducting the fair value of the liability component from the par value of the notes. The difference represents the debt discount that is amortized to interest expense over the term of the notes. The equity component is not remeasured as long as it continues to qualify for equity classification.

Other Outstanding Unsecured Senior Notes

The following represents a summary of our other unsecured senior notes' maturity and interest payable due dates:

Debt Instrument		Maturity		Interest Payable (until maturity)
$1.075 Billion 5.75% 2025 Senior Notes		March 1, 2025		March 1 and September 1
$800 Million 6.25% 2040 Senior Notes		October 1, 2040		April 1 and October 1

The senior notes are unsecured obligations and rank equally in right of payment with all our other existing and future unsecured and unsubordinated indebtedness. There are no subsidiary guarantees of the interest and principal amounts for the 2040 Senior Notes. The 2025 Senior Notes are guaranteed on a senior unsecured basis by our material direct and indirect wholly-owned domestic subsidiaries and, therefore, are structurally senior to any of our existing and future indebtedness that is not guaranteed by such guarantors and are structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries that do not guarantee the 2025 Senior Notes.

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The 2040 Senior Notes may be redeemed any time at our option not less than 30 days nor more than 60 days after prior notice is sent to the holders. The 2040 Senior Notes are redeemable at a redemption price equal to the greater of (1) 100% of the principal amount of the notes to be redeemed or (2) the sum of the present values of the remaining scheduled payments of principal and interest on the notes to be redeemed, discounted to the redemption date on a semi-annual basis at the treasury rate plus 40 basis points, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

We may redeem the 2025 Senior Notes, in whole or in part, on or after March 1, 2020, at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption, and prior to March 1, 2020, at a redemption price equal to 100% of the principal amount thereof plus a “make-whole” premium set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. We may also redeem up to 35% of the aggregate principal amount of the 2025 Senior Notes on or prior to March 1, 2020 at a redemption price equal to 105.75% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of redemption with the net cash proceeds of one or more equity offerings.

In addition, if a change of control triggering event, as defined in the applicable indenture, occurs with respect to the unsecured notes, we will be required to offer to purchase the notes of the applicable series at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of purchase.

The terms of the unsecured notes contain certain customary covenants; however, there are no financial covenants.

Debt Extinguishment - 2019

During the year ended December 31, 2019, we used the net proceeds from the issuance of $750 million aggregate principal amount of 5.875% 2027 Senior Notes, along with cash on hand, to redeem in full all of our outstanding 4.875% 2021 Senior Notes and to fund the repurchase of $600 million aggregate principal amount of our outstanding 5.75% 2025 Senior Notes in a tender offer.

The following is a summary of the debt extinguished and the respective loss on extinguishment:

		(In Millions)
		Year Ended December 31, 2019
		Debt Extinguished				(Loss) on Extinguishment1
Unsecured Notes:
$700 Million 4.875% 2021 Senior Notes		$	124.0			$	(5.3	)
$1.075 Billion 5.75% 2025 Senior Notes		600.0				(12.9		)
		$	724.0			$	(18.2	)
1 This includes premiums paid related to the redemption of our notes of $5.3 million.

Debt Extinguishment - 2018

During the year ended December 31, 2018, we redeemed in full all of our outstanding 5.90% 2020 Senior Notes and 4.80% 2020 Senior Notes with cash on hand. Additionally, we purchased certain of our 4.875% 2021 Senior Notes and 5.75% 2025 Senior Notes.

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The following is a summary of the debt extinguished and the respective gain (loss) on extinguishment:

		(In Millions)
		Year Ended December 31, 2018
		Debt Extinguished				Gain (Loss) on Extinguishment1
Unsecured Notes:
$400 Million 5.90% 2020 Senior Notes		$	88.9			$	(3.3	)
$500 Million 4.80% 2020 Senior Notes		122.4				(3.7		)
$700 Million 4.875% 2021 Senior Notes		14.4				0.1
$1.075 Billion 5.75% 2025 Senior Notes		1.7				0.1
		$	227.4			$	(6.8	)
1 This includes premiums paid related to the redemption of our notes of $7.1 million.

Debt Extinguishment - 2017

During the year ended December 31, 2017, we issued 63.3 million common shares in an underwritten public offering. We received net proceeds of $661.3 million at a public offering price of $10.75 per common share. The net proceeds from the issuance of our common shares and the net proceeds from the issuance of $1.075 Billion 5.75% 2025 Senior Notes were used to redeem in full all of our outstanding 8.25% 2020 First Lien Notes, 8.00% 2020 1.5 Lien Notes and 7.75% 2020 Second Lien Notes. Additionally, through tender offers, we purchased certain of our 5.90% 2020 Senior Notes, our 4.80% 2020 Senior Notes and our 4.875% 2021 Senior Notes.

The following is a summary of the debt extinguished and the respective gain (loss) on extinguishment:

		(In Millions)
		Year Ended December 31, 2017
		Debt Extinguished				Gain (Loss) on Extinguishment1
Secured Notes:
$540 Million 8.25% 2020 First Lien Notes		$	540.0			$	(93.5	)
$218.5 Million 8.00% 2020 1.5 Lien Notes		218.5				45.1
$544.2 Million 7.75% 2020 Second Lien Notes		430.1				(104.5		)
Unsecured Notes:
$400 Million 5.90% 2020 Senior Notes		136.7				(7.8		)
$500 Million 4.80% 2020 Senior Notes		114.4				(1.9		)
$700 Million 4.875% 2021 Senior Notes		171.0				(2.8		)
		$	1,610.7			$	(165.4	)
1 This includes premiums paid related to the redemption of our notes of $110.0 million.

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Debt Maturities

The following represents a summary of our debt instrument maturities based on the principal amounts outstanding at December 31, 2019:

	(In Millions)
	Maturities of Debt
2020	$	—
2021	—
2022	—
2023	—
2024	400.0
2025 and thereafter	1,838.0
Total maturities of debt	$	2,238.0

ABL Facility

On February 28, 2018, we amended and restated our senior secured asset-based revolving credit facility with various financial institutions. The ABL Facility will mature upon the earlier of February 28, 2023 or 60 days prior to the maturity of certain other material debt and provides for up to $450.0 million in borrowings, including a $248.8 million sublimit for the issuance of letters of credit and a $100.0 million sublimit for swingline loans. Availability under the ABL Facility is limited to an eligible borrowing base, as applicable, determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.

The ABL Facility and certain bank products and hedge obligations are guaranteed by us and certain of our existing wholly-owned U.S. subsidiaries and are required to be guaranteed by certain of our future U.S. subsidiaries. Amounts outstanding under the ABL Facility are secured by (i) a first-priority security interest in the accounts receivable and other rights to payment, inventory, as-extracted collateral, certain investment property, deposit accounts, securities accounts, certain general intangibles and commercial tort claims, certain mobile equipment, commodities accounts and other related assets of ours, the other borrowers and the guarantors, and proceeds and products of each of the foregoing (collectively, the “ABL Collateral”) and (ii) a second-priority security interest in substantially all of our assets and the assets of the other borrowers and the guarantors other than the ABL Collateral.

Borrowings under the ABL Facility bear interest, at our option, at a base rate or, if certain conditions are met, a LIBOR rate, in each case plus an applicable margin. The base rate is equal to the greater of the federal funds rate plus 0.5%, the LIBOR rate based on a one-month interest period plus 1% and the floating rate announced by Bank of America Merrill Lynch as its “prime rate" and 1%. The LIBOR rate is a per annum fixed rate equal to LIBOR with respect to the applicable interest period and amount of LIBOR rate loan requested.

The ABL Facility contains customary representations and warranties and affirmative and negative covenants including, among others, covenants regarding the maintenance of certain financial ratios if certain conditions are triggered, covenants relating to financial reporting, covenants relating to the payment of dividends on, or purchase or redemption of, our capital stock, covenants relating to the incurrence or prepayment of certain debt, covenants relating to the incurrence of liens or encumbrances, covenants relating to compliance with laws, covenants relating to transactions with affiliates, covenants relating to mergers and sales of all or substantially all of our assets and limitations on changes in the nature of our business.

The ABL Facility provides for customary events of default, including, among other things, the event of nonpayment of principal, interest, fees, or other amounts, a representation or warranty proving to have been materially incorrect when made, failure to perform or observe certain covenants within a specified period of time, a cross-default to certain material indebtedness, the bankruptcy or insolvency of the Company and certain of its subsidiaries, monetary judgment defaults of a specified amount, invalidity of any loan documentation, a change of control of the Company, and ERISA defaults resulting in liability of a specified amount. If an event of default exists (beyond any applicable grace or cure period, if any), the administrative agent may and, at the direction of the requisite number of lenders, shall declare all amounts owing under the ABL Facility immediately due and payable, terminate such lenders’ commitments to make loans under the ABL Facility and/or exercise any and all remedies and other rights under the ABL Facility. For certain events of default related to insolvency and receivership, the commitments of the lenders will be automatically terminated and all outstanding loans and other amounts will become immediately due and payable.

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As of December 31, 2019 and 2018, we were in compliance with the ABL Facility liquidity requirements and, therefore, the springing financial covenant requiring a minimum fixed charge coverage ratio of 1.0 to 1.0 was not applicable.

The following represents a summary of our borrowing capacity under the ABL Facility:

	(In Millions)
	December 31, 2019				December 31, 2018
Available borrowing base on ABL Facility1	$	395.7			$	323.7
Letter of credit obligations and other commitments2	(37.9		)		(55.0		)
Borrowing capacity available3	$	357.8			$	268.7
1 The ABL Facility has a maximum borrowing base of $450 million, determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.
2 We issued standby letters of credit with certain financial institutions in order to support business obligations including, but not limited to, workers compensation and environmental obligations.
3 As of December 31, 2019 and 2018 we had no loans drawn under the ABL Facility.

NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following represents the assets and liabilities measured at fair value:

	(In Millions)
	December 31, 2019
	Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Assets:
Cash equivalents	$	—			$	187.6			$	—			$	187.6
Derivative assets	—				—				45.8				45.8
Total	$	—			$	187.6			$	45.8			$	233.4
Liabilities:
Derivative liabilities	$	—			$	3.2			$	1.1			$	4.3
Total	$	—			$	3.2			$	1.1			$	4.3

	(In Millions)
	December 31, 2018
	Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Assets:
Cash equivalents	$	0.8			$	542.6			$	—			$	543.4
Derivative assets	—				0.1				91.4				91.5
Total	$	0.8			$	542.7			$	91.4			$	634.9
Liabilities:
Derivative liabilities	$	—			$	3.7			$	—			$	3.7
Total	$	—			$	3.7			$	—			$	3.7

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Financial assets classified in Level 1 included money market funds. The valuation of these instruments is based upon unadjusted quoted prices for identical assets in active markets.

The valuation of financial assets and liabilities classified in Level 2 is determined using a market approach based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable. Level 2 assets included commercial paper at December 31, 2019 and commercial paper, certificates of deposit and commodity hedge contracts at December 31, 2018. Level 2 liabilities included commodity hedge contracts at December 31, 2019 and 2018.

The Level 3 assets and liabilities consist of a freestanding derivative instrument related to a certain supply agreement and derivative assets and liabilities related to certain provisional pricing arrangements with our customers.

The supply agreement included in our Level 3 assets contains provisions for supplemental revenue or refunds based on the hot-rolled coil steel price in the year the iron ore product is consumed in the customer’s blast furnaces. We account for these provisions as derivative instruments at the time of sale and adjust the derivative instruments to fair value through Revenues from product sales and services each reporting period until the product is consumed and the amounts are settled. We had assets of $44.5 million and $89.3 million at December 31, 2019 and 2018, respectively, related to this supply agreement.

The provisional pricing arrangements included in our Level 3 assets/liabilities specify provisional price calculations, where the pricing mechanisms generally are based on market pricing, with the final revenue rate to be based on market inputs at a specified point in time in the future, per the terms of the supply agreements. The difference between the estimated final revenue rate at the date of sale and the estimated final revenue rate at the measurement date is characterized as a derivative and is required to be accounted for separately once the revenue has been recognized. The derivative instruments are adjusted to fair value through Revenues from product sales and services each reporting period based upon current market data and forward-looking estimates provided by management until the final revenue rates are determined. At December 31, 2019, we had assets of $1.3 million and liabilities of $1.1 million related to provisional pricing arrangements. At December 31, 2018, we had assets of $2.1 million related to provisional pricing arrangements.

The following table illustrates information about quantitative inputs and assumptions for the derivative assets and derivative liabilities categorized in Level 3 of the fair value hierarchy:

	Qualitative/Quantitative Information About Level 3 Fair Value Measurements
			Fair Value at December 31, 2019 (In Millions)		Balance Sheet Location		Valuation Technique		Unobservable Input		Point Estimate
	Customer supply agreement		$44.5		Derivative assets		Market Approach		Management's estimate of hot-rolled coil steel price per net ton		$650
	Provisional pricing arrangements		$1.3		Derivative assets		Market Approach		Management's estimate of Platts 62% price per dry metric ton		$76
	Provisional pricing arrangements		$1.1		Other current liabilities		Market Approach		PPI estimates		197

The significant unobservable input used in the fair value measurement of our customer supply agreement is a forward-looking estimate of the hot-rolled coil steel price determined by management.

At December 31, 2019, the significant unobservable inputs used in the fair value measurement of our provisional pricing arrangements were management's estimate of Platts 62% price based upon current market data and index pricing and estimates for PPI data, including those for industrial commodities, fuel and steel. During the year, significant unobservable inputs used in the fair value measurement of our provisional pricing arrangements also included the Atlantic Basin pellet premium based upon current market data and index pricing, of which includes forward-looking estimates determined by management. Refer to NOTE 12 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES for further information.

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The following tables represent a reconciliation of the changes in fair value of financial instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	(In Millions)
	Derivative Assets (Level 3)								Derivative Liabilities (Level 3)
	Year Ended December 31,								Year Ended December 31,
	2019				2018				2019				2018
Beginning balance - January 1	$	91.4			$	49.5			$	—			$	(1.7	)
Total gains (losses) included in earnings	78.6				428.7				(71.1		)		(6.1		)
Settlements	(124.2		)		(386.8		)		70.0				7.8
Ending balance - December 31	$	45.8			$	91.4			$	(1.1	)		$	—
Total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) on assets still held at the reporting date	$	45.8			$	91.4			$	(1.1	)		$	—

The carrying values of certain financial instruments (e.g. Accounts receivable, net, Accounts payable and Other current liabilities) approximate fair value and, therefore, have been excluded from the table below. A summary of the carrying value and fair value of other financial instruments were as follows:

			(In Millions)
			December 31, 2019								December 31, 2018
	Classification		Carrying Value				Fair Value				Carrying Value				Fair Value
Long-term debt:
Secured Notes:
$400 Million 4.875% 2024 Senior Notes	Level 1		$	393.6			$	410.0			$	392.1			$	370.2
Unsecured Notes:
$700 Million 4.875% 2021 Senior Notes	Level 1		—				—				123.8				122.3
$316.25 Million 1.50% 2025 Convertible Senior Notes	Level 1		246.7				385.0				235.2				352.4
$1.075 Billion 5.75% 2025 Senior Notes	Level 1		464.2				473.3				1,048.8				962.0
$750 Million 5.875% 2027 Senior Notes	Level 1		716.4				718.5				—				—
$800 Million 6.25% 2040 Senior Notes	Level 1		292.9				250.2				292.8				232.8
ABL Facility	Level 2		—				—				—				—
Fair Value Adjustment to Interest Rate Hedge	Level 2		—				—				0.2				0.2
Total long-term debt			$	2,113.8			$	2,237.0			$	2,092.9			$	2,039.9

NOTE 8 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS

We offer defined benefit pension plans, defined contribution pension plans and OPEB plans, primarily consisting of retiree healthcare benefits, to most employees as part of a total compensation and benefits program. The defined benefit pension plans are noncontributory and benefits generally are based on a minimum formula or employees’ years of service and average earnings for a defined period prior to retirement.

We offer retiree medical coverage to hourly retirees of our USW-represented mines. Currently, we have a four-year agreement with the USW which began October 1, 2018 and is effective through September 30, 2022. The 2018 USW agreement established the set fixed monthly medical premiums for participants who retired prior to January 1, 2015. These fixed premiums will expire on December 31, 2020 and revert to increasing premiums based on a cost-sharing formula thereafter. The agreement also provides for an OPEB cap that limits the amount of our contributions toward retiree medical insurance coverage per calendar year for each retiree and spouse of a retiree who retired on or

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after January 1, 2015. The amount of the annual OPEB cap is based upon the gross plan costs we incurred in 2014. The OPEB cap does not apply to surviving spouses. In lieu of retiree medical coverage, USW-represented employees hired after September 1, 2016 receive a 401(k) contribution of $0.60 per hour worked to a restricted Retiree Health Care Account.

In addition, we currently provide various levels of OPEB to some full-time employees who meet certain length of service and age requirements (a portion of which is pursuant to collective bargaining agreements). Most plans require retiree contributions and have deductibles, co-pay requirements and benefit limits. Most bargaining unit plans require retiree contributions and co-pays for medical and prescription drug coverage. There is a cap on our cost for medical coverage under the salaried plans. The annual limit applies to each covered participant and equals $7,000 for coverage prior to age 65, with the retiree’s participation adjusted based on the age at which the retiree’s benefits commence. We do not provide OPEB for most salaried employees hired after January 1, 1993. Retiree healthcare coverage is provided through programs administered by insurance companies whose charges are based on benefits paid.

On August 12, 2019, Cliffs Mining Company, our subsidiary, ceased performing manager duties for the Hibbing mine and transitioned those duties to ArcelorMittal USA.  In connection with this transition, Cliffs Mining Company and ArcelorMittal USA entered into a transition agreement, pursuant to which the Ore Mining Companies Pension Plan previously sponsored by Cliffs Mining Company is now sponsored by ArcelorMittal Hibbing Management LLC. In connection with the transfer of manager duties for the Hibbing mine, Hibbing employees previously employed by Cliffs Mining Company became employed by an ArcelorMittal USA controlled group entity. All non-Hibbing active and retired participants were transferred to our Salaried Pension Plan. This transition did not have a material impact on our consolidated financial statements in the year ended December 31, 2019.

The following table summarizes the annual expense (income) recognized related to the retirement plans:

	(In Millions)
	2019				2018				2017
Defined benefit pension plans	$	22.4			$	12.7			$	18.0
Defined contribution pension plans	3.4				3.1				2.9
OPEB plans	(2.5		)		(5.9		)		(6.1		)
Total	$	23.3			$	9.9			$	14.8

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Obligations and Funded Status

The following tables and information provide additional disclosures:

	(In Millions)
	Pension Benefits								Other Benefits
Change in benefit obligations:	2019				2018				2019				2018
Benefit obligations — beginning of year	$	905.7			$	973.1			$	241.9			$	265.9
Service cost (excluding expenses)	17.3				18.7				1.7				2.2
Interest cost	34.9				30.3				9.5				8.3
Plan amendments	—				2.2				—				12.8
Actuarial (gain) loss	111.8				(57.0		)		18.9				(29.4		)
Benefits paid	(62.2		)		(60.7		)		(25.6		)		(24.4		)
Participant contributions	—				—				5.8				5.6
Other	13.6				(0.9		)		2.3				0.9
Benefit obligations — end of year	$	1,021.1			$	905.7			$	254.5			$	241.9
Change in plan assets:
Fair value of plan assets — beginning of year	$	687.2			$	749.8			$	240.2			$	262.5
Actual return on plan assets	98.1				(29.6		)		35.1				(8.2		)
Participant contributions	—				—				0.5				0.5
Employer contributions	16.4				27.6				2.5				3.0
Benefits paid	(62.2		)		(60.7		)		(18.6		)		(17.6		)
Other	9.4				0.1				—				—
Fair value of plan assets — end of year	$	748.9			$	687.2			$	259.7			$	240.2
Funded status	$	(272.2	)		$	(218.5	)		$	5.2			$	(1.7	)
Amounts recognized in Statements of Financial Position:
Non-current assets	$	—			$	—			$	48.5			$	32.1
Current liabilities	(0.5		)		(0.1		)		(3.5		)		(3.5		)
Non-current liabilities	(271.7		)		(218.4		)		(39.8		)		(30.3		)
Total amount recognized	$	(272.2	)		$	(218.5	)		$	5.2			$	(1.7	)
Amounts recognized in accumulated other comprehensive loss:
Net actuarial loss	$	382.1			$	330.1			$	72.6			$	82.1
Prior service cost (credit)	7.3				8.5				(7.9		)		(9.9		)
Net amount recognized	$	389.4			$	338.6			$	64.7			$	72.2

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	(In Millions)
	2019
	Pension Plans																Other Benefits
	Salaried				Hourly				SERP				Total				Salaried				Hourly				Total
Fair value of plan assets	$	293.7			$	455.2			$	—			$	748.9			$	—			$	259.7			$	259.7
Benefit obligation	(407.2		)		(607.3		)		(6.6		)		(1,021.1		)		(37.7		)		(216.8		)		(254.5		)
Funded status	$	(113.5	)		$	(152.1	)		$	(6.6	)		$	(272.2	)		$	(37.7	)		$	42.9			$	5.2

	(In Millions)
	2018
	Pension Plans																				Other Benefits
	Salaried				Hourly				Mining				SERP				Total				Salaried				Hourly				Total
Fair value of plan assets	$	249.8			$	429.4			$	8.0			$	—			$	687.2			$	—			$	240.2			$	240.2
Benefit obligation	(340.8		)		(548.9		)		(10.7		)		(5.3		)		(905.7		)		(32.9		)		(209.0		)		(241.9		)
Funded status	$	(91.0	)		$	(119.5	)		$	(2.7	)		$	(5.3	)		$	(218.5	)		$	(32.9	)		$	31.2			$	(1.7	)

The accumulated benefit obligation for all defined benefit pension plans was $1,010.0 million and $896.8 million at December 31, 2019 and 2018, respectively.

Components of Net Periodic Benefit Cost

	(In Millions)
	Pension Benefits												Other Benefits
	2019				2018				2017				2019				2018				2017
Service cost	$	17.3			$	18.7			$	17.1			$	1.7			$	2.2			$	1.8
Interest cost	34.9				30.3				30.5				9.5				8.3				8.3
Expected return on plan assets	(54.6		)		(60.0		)		(54.5		)		(16.8		)		(18.4		)		(17.7		)
Amortization:
Prior service costs (credits)	1.2				2.2				2.6				(2.0		)		(3.0		)		(3.0		)
Net actuarial loss	23.5				21.2				22.3				5.1				5.0				4.5
Curtailments	0.1				0.3				—				—				—				—
Net periodic benefit cost (credit)	$	22.4			$	12.7			$	18.0			$	(2.5	)		$	(5.9	)		$	(6.1	)

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Components of Accumulated Other Comprehensive Loss (Income)

The following includes details on the significant actuarial losses (gains) impacting the benefit obligation:

	(In Millions)
	Pension Benefits								Other Benefits
	2019				2018				2019				2018
Discount rates	$	105.8			$	(75.7	)		$	25.5			$	(19.0	)
Demographic losses	12.3				21.7				3.6				2.3
Mortality	(6.3		)		(3.0		)		(3.9		)		(0.8		)
Per capita claims	—				—				(9.4		)		(11.9		)
Other	—				—				3.1				—
Actuarial (gain) loss on benefit obligation	111.8				(57.0		)		18.9				(29.4		)
Actual returns on assets (over) under estimate	(43.5		)		89.6				(18.3		)		26.6
Amortization of net actuarial loss	(23.5		)		(21.2		)		(5.1		)		(5.0		)
Amortization of prior service credits (costs)	(1.2		)		(2.2		)		2.0				3.0
Current year prior service costs	—				2.2				—				12.8
Other	7.2				(0.3		)		(5.0		)		1.5
Total recognized in accumulated other comprehensive loss (income)	$	50.8			$	11.1			$	(7.5	)		$	9.5

Assumptions

The discount rate for determining PBO is determined individually for each plan as noted in the assumption chart below. The discount rates are determined by matching the projected cash flows used to determine the PBO and APBO to a projected yield curve of 936 Aa graded bonds in the 40^th to 90^th percentiles. These bonds are either noncallable or callable with make-whole provisions.

On December 31, 2019, the assumed mortality improvement projection was changed from generational scale MP-2018 to generational scale MP-2019. The healthy mortality assumption was updated to the Pri-2012 mortality tables with blue collar adjustments for the Iron Hourly Pension and Hourly OPEB plans, with white collar adjustments for the Salaried OPEB Plan, and without adjustments for the Salaried Pension Plan.

On December 31, 2018, the assumed mortality improvement projection was changed from generational scale MP-2017 to generational scale MP-2018. The healthy mortality assumption was the RP-2014 mortality tables with blue collar adjustments for the Iron Hourly Pension and Hourly OPEB plans, with white collar adjustments for the Salaried OPEB Plan, and without adjustments for the Salaried Pension Plan.

The following represents weighted-average assumptions used to determine benefit obligations:

	Pension Benefits						Other Benefits
	December 31,						December 31,
	2019			2018			2019			2018
Discount rate:
Iron Hourly Pension Plan	3.34	%		4.31	%		N/A	%		N/A	%
Salaried Pension Plan	3.18			4.21			N/A			N/A
Ore Mining Pension Plan	N/A			4.33			N/A			N/A
Supplemental Executive Retirement Plan	3.05			4.22			N/A			N/A
Hourly OPEB Plan	N/A			N/A			3.28			4.29
Salaried OPEB Plan	N/A			N/A			3.29			4.27
Interest crediting rate	6.00			6.00			N/A			N/A
Salaried rate of compensation increase	3.00			3.00			3.00			3.00
Hourly rate of compensation increase	2.00			2.00			N/A			N/A

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The following represents weighted-average assumptions used to determine net benefit cost:

	Pension Benefits									Other Benefits
	December 31,									December 31,
	2019			2018			2017			2019			2018			2017
Obligation Discount Rate:
Iron Hourly Pension Plan	4.31	%		3.61	%		4.02	%		N/A	%		N/A	%		N/A	%
Salaried Pension Plan	4.22			3.52			3.91			N/A			N/A			N/A
Ore Mining Pension Plan	N/A			3.61			4.04			N/A			N/A			N/A
Supplemental Executive Retirement Plan	4.21			3.54			3.90			N/A			N/A			N/A
Hourly OPEB Plan	N/A			N/A			N/A			4.29			3.60			4.03
Salaried OPEB Plan	N/A			N/A			N/A			4.28			3.57			3.98
Service Cost Discount Rate:
Iron Hourly Pension Plan	4.49			3.76			4.30			N/A			N/A			N/A
Salaried Pension Plan	4.23			3.53			3.93			N/A			N/A			N/A
Ore Mining Pension Plan	N/A			3.75			4.27			N/A			N/A			N/A
Supplemental Executive Retirement Plan	4.11			3.43			3.69			N/A			N/A			N/A
Hourly OPEB Plan	N/A			N/A			N/A			4.48			3.73			4.23
Salaried OPEB Plan	N/A			N/A			N/A			4.54			3.76			4.30
Interest Cost Discount Rate:
Iron Hourly Pension Plan	3.96			3.21			3.38			N/A			N/A			N/A
Salaried Pension Plan	3.85			3.08			3.21			N/A			N/A			N/A
Ore Mining Pension Plan	N/A			3.22			3.41			N/A			N/A			N/A
Supplemental Executive Retirement Plan	3.89			3.16			3.36			N/A			N/A			N/A
Hourly OPEB Plan	N/A			N/A			N/A			3.95			3.10			3.24
Salaried OPEB Plan	N/A			N/A			N/A			3.91			3.15			3.28
Interest crediting rate	6.00			6.00			6.00			N/A			N/A			N/A
Expected return on plan assets	8.25			8.25			8.25			7.00			7.00			7.00
Salaried rate of compensation increase	3.00			3.00			3.00			3.00			3.00			3.00
Hourly rate of compensation increase	2.00			2.00			2.00			N/A			N/A			N/A

The following represents assumed health care cost trend rates:

	December 31,
	2019			2018
Health care cost trend rate assumed for next year	6.50	%		6.75	%
Ultimate health care cost trend rate	5.00			5.00
Year that the ultimate rate is reached	2026			2026

Plan Assets

Our financial objectives with respect to our pension and VEBA plan assets are to fully fund the actuarial accrued liability for each of the plans, to maximize investment returns within reasonable and prudent levels of risk, and to maintain sufficient liquidity to meet benefit obligations on a timely basis.

Our investment objective is to outperform the expected return on assets assumption used in the plans’ actuarial reports over the life of the plans. The expected return on assets takes into account historical returns and estimated future long-term returns based on capital market assumptions applied to the asset allocation strategy. The expected return is net of investment expenses paid by the plans. In addition, investment performance is monitored on a quarterly basis by benchmarking to various indices and metrics for the one-, three- and five-year periods.

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The asset allocation strategy is determined through a detailed analysis of assets and liabilities by plan, which defines the overall risk that is acceptable with regard to the expected level and variability of portfolio returns, surplus (assets compared to liabilities), contributions and pension expense.

The asset allocation review process involves simulating capital market behaviors including global asset class performance, inflation and interest rates in order to evaluate various asset allocation scenarios and determine the asset mix with the highest likelihood of meeting financial objectives. The process includes factoring in the current funded status and likely future funded status levels of the plans by taking into account expected growth or decline in the contributions over time.

The asset allocation strategy varies by plan. The following table reflects the actual asset allocations for pension and VEBA plan assets as of December 31, 2019 and 2018, as well as the 2020 weighted average target asset allocations. Equity investments include securities in large-cap, mid-cap and small-cap companies located in the U.S. and worldwide. Fixed income investments primarily include corporate bonds and government debt securities.

		Pension Assets									VEBA Assets
Asset Category		2020 Target Allocation			Percentage of Plan Assets at December 31,						2020 Target Allocation			Percentage of Plan Assets at December 31,
					2019			2018						2019			2018
Equity securities		45.0	%		44.0	%		38.9	%		8.0	%		7.2	%		8.1	%
Fixed income		28.0	%		26.1	%		26.0	%		80.0	%		79.8	%		77.0	%
Hedge funds		5.0	%		5.4	%		5.4	%		4.0	%		4.8	%		4.7	%
Private equity		7.0	%		6.6	%		6.2	%		3.0	%		0.7	%		1.2	%
Structured credit		7.5	%		7.0	%		11.4	%		2.0	%		2.1	%		3.5	%
Real estate		7.5	%		9.4	%		10.3	%		3.0	%		5.4	%		5.4	%
Cash		—	%		1.5	%		1.8	%		—	%		—	%		0.1	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Following is a description of the inputs and valuation methodologies used to measure the fair value of our plan assets.

Equity Securities

Equity securities classified as Level 1 investments include U.S. large-, small- and mid-cap investments and international equities. These investments are comprised of securities listed on an exchange, market or automated quotation system for which quotations are readily available. The valuation of these securities is determined using a market approach and is based upon unadjusted quoted prices for identical assets in active markets.

Fixed Income

Fixed income securities classified as Level 1 investments include bonds and government debt securities. These investments are comprised of securities listed on an exchange, market or automated quotation system for which quotations are readily available. The valuation of these securities is determined using a market approach and is based upon unadjusted quoted prices for identical assets in active markets. Also included in fixed income is a portfolio of U.S. Treasury STRIPS, which are zero-coupon bearing fixed income securities backed by the full faith and credit of the U.S. government. The securities sell at a discount to par because there are no incremental coupon payments. STRIPS are not issued directly by the Treasury but rather are created by a financial institution, government securities broker or government securities dealer. Liquidity on the issue varies depending on various market conditions; however, in general the STRIPS market is slightly less liquid than that of the U.S. Treasury Bond market. The STRIPS are priced daily through a bond pricing vendor and are classified as Level 2.

Hedge Funds

Hedge funds are alternative investments comprised of direct or indirect investment in offshore hedge funds with an investment objective to achieve equity-like returns with one half the volatility of equities and moderate correlation. The valuation techniques used to measure fair value attempt to maximize the use of observable inputs and minimize the use of unobservable inputs. Considerable judgment is required to interpret the factors used to develop estimates of fair value. Valuations of the underlying investment funds are obtained and reviewed. The securities that are valued by the funds are interests in the investment funds and not the underlying holdings of such investment funds. Thus, the inputs

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used to value the investments in each of the underlying funds may differ from the inputs used to value the underlying holdings of such funds. Hedge funds are valued monthly and recorded on a one-month lag.

Private Equity Funds

Private equity funds are alternative investments that represent direct or indirect investments in partnerships, venture funds or a diversified pool of private investment vehicles (fund of funds).

Investment commitments are made in private equity funds based on an asset allocation strategy, and capital calls are made over the life of the funds to fund the commitments. As of December 31, 2019, remaining commitments total $37.1 million for our pension and OPEB plans. Committed amounts are funded from plan assets when capital calls are made. Investment commitments are not pre-funded in reserve accounts.

Private equity investments are valued quarterly and recorded on a one-quarter lag. For alternative investment values reported on a lag, current market information is reviewed for any material changes in values at the reporting date. Capital distributions for the funds do not occur on a regular frequency. Liquidation of these investments would require sale of the partnership interest.

Structured Credit

Structured credit investments are alternative investments comprised of collateralized debt obligations and other structured credit investments that are priced based on valuations provided by independent, third-party pricing agents, if available. Such values generally reflect the last reported sales price if the security is actively traded. The third-party pricing agents may also value structured credit investments at an evaluated bid price by employing methodologies that utilize actual market transactions, broker-supplied valuations or other methodologies designed to identify the market value of such securities.

Structured credit investments are valued monthly and recorded on a one-month lag. For alternative investment values reported on a lag, current market information is reviewed for any material changes in values at the reporting date. Historically, redemption requests have been considered quarterly, subject to notice of 90 days, although the advisor is currently only requiring notice of 65 days.

Real Estate

The real estate portfolio for the pension plans is an alternative investment comprised of one fund with strategic categories of real estate investments. All real estate holdings are appraised externally at least annually, and appraisals are conducted by reputable, independent appraisal firms that are members of the Appraisal Institute. All external appraisals are performed in accordance with the Uniform Standards of Professional Appraisal Practices. The property valuations and assumptions about each property are reviewed quarterly by the investment advisor and values are adjusted if there has been a significant change in circumstances relating to the property since the last external appraisal. The fair value of the fund is updated monthly so there is no lag in reported value. Redemption requests are considered on a quarterly basis, subject to notice of 45 days.

The real estate fund of funds investment for the Empire-Tilden, Hibbing and United Taconite VEBA plans invests in pooled investment vehicles that in turn invest in commercial real estate properties. Valuations are performed quarterly and financial statements are prepared on a semi-annual basis, with annual audited statements. Asset values for this fund are reported with a one-quarter lag, and current market information is reviewed for any material changes in values at the reporting date. Withdrawals are permitted on the last business day of each quarter subject to a 95-day prior written notice.

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Pension

The fair value of our pension plan assets by asset category is as follows:

		(In Millions)
		December 31, 2019
Asset Category		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Equity securities:
U.S. large-cap		$	139.1			$	—			$	—			$	139.1
U.S. small/mid-cap		29.3				—				—				29.3
International		161.4				—				—				161.4
Fixed income		173.0				22.3				—				195.3
Hedge funds		—				—				40.2				40.2
Private equity		—				—				49.5				49.5
Structured credit		—				—				52.3				52.3
Real estate		—				—				70.4				70.4
Cash		11.4				—				—				11.4
Total		$	514.2			$	22.3			$	212.4			$	748.9

		(In Millions)
		December 31, 2018
Asset Category		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Equity securities:
U.S. large-cap		$	112.6			$	—			$	—			$	112.6
U.S. small/mid-cap		22.5				—				—				22.5
International		132.0				—				—				132.0
Fixed income		151.1				27.4				—				178.5
Hedge funds		—				—				37.2				37.2
Private equity		—				—				42.6				42.6
Structured credit		—				—				78.8				78.8
Real estate		—				—				70.5				70.5
Cash		12.5				—				—				12.5
Total		$	430.7			$	27.4			$	229.1			$	687.2

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The following represents the fair value measurements of changes in plan assets using significant unobservable inputs (Level 3):

	(In Millions)
	Year Ended December 31, 2019
	Hedge  Funds				Private Equity Funds				Structured Credit Fund				Real Estate				Total
Beginning balance — January 1, 2019	$	37.2			$	42.6			$	78.8			$	70.5			$	229.1
Actual return on plan assets:
Relating to assets still held at     the reporting date	3.4				(1.0		)		0.5				(4.2		)		(1.3		)
Relating to assets sold during     the period	—				1.2				0.8				28.6				30.6
Purchases	—				16.5				—				—				16.5
Sales	—				(9.3		)		(26.8		)		(23.8		)		(59.9		)
Other	(0.4		)		(0.5		)		(1.0		)		(0.7		)		(2.6		)
Ending balance — December 31, 2019	$	40.2			$	49.5			$	52.3			$	70.4			$	212.4

	(In Millions)
	Year Ended December 31, 2018
	Hedge  Funds				Private Equity Funds				Structured Credit Fund				Real Estate				Total
Beginning balance — January 1, 2018	$	37.4			$	39.8			$	72.9			$	65.5			$	215.6
Actual return on plan assets:
Relating to assets still held at     the reporting date	(0.2		)		1.4				5.9				5.4				12.5
Relating to assets sold during the period	—				4.0				—				—				4.0
Purchases	—				5.2				—				—				5.2
Sales	—				(7.8		)		—				(0.4		)		(8.2		)
Ending balance — December 31, 2018	$	37.2			$	42.6			$	78.8			$	70.5			$	229.1

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VEBA

Assets for OPEB plans include VEBA trusts pursuant to bargaining agreements that are available to fund retired employees’ life insurance obligations and medical benefits. The fair value of our other benefit plan assets by asset category is as follows:

		(In Millions)
		December 31, 2019
Asset Category		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Equity securities:
U.S. large-cap		$	9.3			$	—			$	—			$	9.3
U.S. small/mid-cap		2.3				—				—				2.3
International		7.0				—				—				7.0
Fixed income		166.4				40.9				—				207.3
Hedge funds		—				—				12.4				12.4
Private equity		—				—				1.7				1.7
Structured credit		—				—				5.5				5.5
Real estate		—				—				14.0				14.0
Cash		0.2				—				—				0.2
Total		$	185.2			$	40.9			$	33.6			$	259.7

		(In Millions)
		December 31, 2018
Asset Category		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Equity securities:
U.S. large-cap		$	9.7			$	—			$	—			$	9.7
U.S. small/mid-cap		2.4				—				—				2.4
International		7.3				—				—				7.3
Fixed income		146.8				37.8				—				184.6
Hedge funds		—				—				11.4				11.4
Private equity		—				—				3.0				3.0
Structured credit		—				—				8.5				8.5
Real estate		—				—				13.1				13.1
Cash		0.2				—				—				0.2
Total		$	166.4			$	37.8			$	36.0			$	240.2

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The following represents the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets:

	(In Millions)
	Year Ended December 31, 2019
	Hedge  Funds				Private Equity Funds				Structured Credit Fund				Real Estate				Total
Beginning balance — January 1, 2019	$	11.4			$	3.0			$	8.5			$	13.1			$	36.0
Actual return on plan assets:
Relating to assets still held at the reporting date	1.0				(0.6		)		0.1				0.9				1.4
Relating to assets sold during the period	—				—				0.1				—				0.1
Purchases	—				—				—				—				—
Sales	—				(0.7		)		(3.2		)		—				(3.9		)
Ending balance — December 31, 2019	$	12.4			$	1.7			$	5.5			$	14.0			$	33.6

	(In Millions)
	Year Ended December 31, 2018
	Hedge  Funds				Private Equity Funds				Structured Credit Fund				Real Estate				Total
Beginning balance — January 1, 2018	$	11.4			$	3.9			$	7.9			$	12.0			$	35.2
Actual return on plan assets:
Relating to assets still held at the reporting date	—				(0.1		)		0.6				1.1				1.6
Relating to assets sold during the period	—				0.3				—				—				0.3
Purchases	—				—				—				—				—
Sales	—				(1.1		)		—				—				(1.1		)
Ending balance — December 31, 2018	$	11.4			$	3.0			$	8.5			$	13.1			$	36.0

Contributions

Annual contributions to the pension plans are made within income tax deductibility restrictions in accordance with statutory regulations. In the event of plan termination, the plan sponsors could be required to fund additional shut down and early retirement obligations that are not included in the pension obligations. Costs for early termination for pensions and OPEB are estimated to be $14.9 million and $3.0 million, respectively. We currently have no intention to shut down, terminate or withdraw from any of our employee benefit plans.

		(In Millions)
		Pension Benefits				Other Benefits
Company Contributions						VEBA				Direct Payments				Total
2018		$	27.6			$	—			$	3.8			$	3.8
2019		16.4				—				3.7				3.7
2020 (Expected)1		20.2				—				3.5				3.5
1 Pursuant to the bargaining agreement, benefits can be paid from VEBA trusts that are at least 70% funded (all VEBA trusts are over 70% funded at December 31, 2019). Funding obligations have been suspended as UTAC's, Tilden's and Empire's share of the value of their respective trust assets have reached 90% of their obligation.

VEBA plans are not subject to minimum regulatory funding requirements. Amounts contributed are pursuant to bargaining agreements.

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Contributions by participants to the OPEB plans were $5.8 million for the year ended December 31, 2019 and $5.6 million for the year ended December 31, 2018.

Estimated Cost for 2020

For 2020, we estimate net periodic benefit cost (credit) as follows:

	(In Millions)
Defined benefit pension plans	$	16.7
OPEB plans	(8.7		)
Total	$	8.0

Estimated Future Benefit Payments

	(In Millions)
	Pension Benefits				Other Benefits
					Gross Company Benefits				Less Medicare Subsidy				Net Benefit Payments
2020	$	73.6			$	17.2			$	(0.7	)		$	16.5
2021	71.1				16.6				(0.8		)		15.8
2022	70.4				16.3				(0.8		)		15.5
2023	71.2				16.3				(0.8		)		15.5
2024	66.9				16.1				(0.9		)		15.2
2025-2029	318.2				77.3				(4.6		)		72.7

NOTE 9 - STOCK COMPENSATION PLANS

At December 31, 2019, we had outstanding awards under various share-based compensation plans, which are described below. The following table summarizes the share-based compensation expense that we recorded in continuing operations:

	(In Millions, except per share amounts)
	2019				2018				2017
Cost of goods sold and operating expenses	$	2.0			$	1.7			$	1.9
Selling, general and administrative expenses	15.6				13.4				16.3
Reduction of operating income from continuing operations before     income taxes	17.6				15.1				18.2
Income tax benefit1	(3.7		)		—				—
Reduction of net income from continuing operations attributable to Cliffs shareholders	$	13.9			$	15.1			$	18.2
Reduction of continuing operations earnings per common share attributable to Cliffs shareholders:
Basic	$	0.05			$	0.05			$	0.06
Diluted	$	0.05			$	0.05			$	0.06
1 No income tax benefit in 2018 and 2017 due to the full valuation allowance.

Employees’ Plans

The A&R 2015 Equity Plan was approved by our Board of Directors on February 21, 2017 and by our shareholders on April 25, 2017. The A&R 2015 Equity Plan increased the maximum number of shares that may be issued by 15.0 million common shares.

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Following is a summary of approved grants by the Compensation Committee:

Grant Year		Vesting Date		Plan Issued Under		Restricted Stock Units Granted			Performance Shares Granted
2019		12/31/2021		A&R 2015 Equity Plan		572,104			572,104
2018		12/31/2020		A&R 2015 Equity Plan		685,599			675,599
2017		12/31/2019		A&R 2015 Equity Plan		532,358			249,106
2017		12/31/2019		Amended 2015 Equity Plan		553,725			553,725

Performance Shares

The outstanding performance shares vest over a period of three years and are intended to be paid out in common shares. Performance is measured on the basis of relative TSR for the period and measured against the constituents of the S&P Metals and Mining ETF Index at the beginning of the relevant performance period. The final payout for the outstanding performance period grants will vary from 0% to 200% of the original grant depending on whether and to what extent the Company achieves certain objectives and performance goals as established by the Compensation Committee.

Following is a summary of our performance share award agreements outstanding as of December 31, 2019:

Performance Share Plan Year		Performance Shares Granted			Forfeitures to Date			Expected to Vest			Grant Date		Grant Date Fair Value				Performance Period
2019		572,104			15,879			556,225			2/19/2019		$	18.31			1/1/2019 - 12/31/2021
2018		675,599			35,320			640,279			2/21/2018		$	11.93			1/1/2018 - 12/31/2020
2017		249,106			—			249,106			6/26/2017		$	10.74			5/31/2017 - 12/31/2019
2017		553,725			63,457			490,268			2/21/2017		$	19.69			1/1/2017 - 12/31/2019

The performance shares granted on February 21, 2017 were paid at 161.2% of the original grant based on the final performance evaluation versus the performance goals that were established in the grants. The performance shares granted on June 26, 2017 were paid at 200.0%.

Restricted Stock Units

All of the outstanding restricted stock units are subject to continued employment, are retention based, and are payable in common shares or cash in certain circumstances at a time determined by the Compensation Committee at its discretion. The restricted stock units that were granted in 2017 vested on December 31, 2019. The restricted stock units that were granted in 2019 and 2018 cliff vest in three years on December 31, 2021 and December 31, 2020, respectively.

Stock Options

The 412,710 stock options that were granted during the first quarter of 2015 vested on December 31, 2017, are exercisable at a strike price of $7.70 and expire on January 12, 2025. The 250,000 stock options that were granted in the fourth quarter of 2014 vested in equal thirds on each of December 31, 2015, 2016 and 2017 and are exercisable at a strike price of $13.83 and expire on November 17, 2021. As of December 31, 2019, 563,230 stock options remain outstanding and are exercisable with a weighted average price of $10.42.

Employee Stock Purchase Plan

On March 26, 2015, upon recommendation by the Compensation Committee, our Board of Directors approved and adopted, subject to the approval of Cliffs' shareholders at the 2015 Annual Meeting, the Cliffs Natural Resources Inc. 2015 Employee Stock Purchase Plan. This plan was approved by our shareholders at the 2015 Annual Meeting held May 19, 2015. Ten million common shares have been reserved for issuance under this plan; however, as of December 31, 2019, this program has not been made active and no common shares have been purchased. We sought shareholder approval of this plan for the purpose of qualifying the reserved common shares for special tax treatment under Section 423 of the IRC of 1986, as amended.

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Nonemployee Directors

Our nonemployee directors are entitled to receive restricted share awards under the Directors’ Plan. For 2019, 2018 and 2017, nonemployee directors were granted a specified number of restricted shares, with a value equal to $100,000. The number of shares is based on the closing price of our common shares on the date of the Annual Meeting. The awards are subject to any deferral election and pursuant to the terms of the Directors’ Plan and an award agreement.

On April 23, 2018, our Governance and Nominating Committee of the Board of Directors approved the acceleration of vesting of the restricted share awards granted to the nonemployee directors prior to April 2018, which were generally subject to a vesting period of three years. Effective April 30, 2018 and under the terms of the Directors' Plan, the vesting of these outstanding awards was accelerated. The Governance and Nominating Committee also approved a change to the vesting period for all future awards under the Directors' Plan. The nonemployee director restricted share awards granted on April 25, 2018 and all future awards are subject to a vesting period of one year.

For the last three years, grants of restricted and/or deferred shares have been awarded to elected or re-elected nonemployee directors as follows:

Year of Grant		Restricted Shares			Deferred Shares
2019		86,477			23,659
2018		92,718			17,170
2017		93,359			17,289

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Other Information

Stock option, restricted awards and performance share activity under our long-term equity plans and Directors’ Plans are as follows:

	2019			2018			2017
	Shares			Shares			Shares
Stock options:
Outstanding at beginning of year	563,230			599,870			599,870
Exercised	—			(36,640	)		—
Forfeited/canceled	—			—			—
Outstanding at end of year	563,230			563,230			599,870
Restricted awards:
Outstanding and restricted at beginning of year	4,804,248			4,776,483			5,461,783
Granted during the year	682,240			795,487			1,196,731
Vested and issued	(3,168,195	)		(627,567	)		(1,813,315	)
Forfeited/canceled	(60,974	)		(140,155	)		(68,716	)
Outstanding and restricted at end of year	2,257,319			4,804,248			4,776,483
Performance shares:
Outstanding at beginning of year	1,424,723			1,848,312			1,368,469
Granted during the year	572,104			675,599			802,831
Vested and issued	—			(489,953	)		—
Forfeited/canceled	(60,949	)		(609,235	)		(322,988	)
Outstanding at end of year	1,935,878			1,424,723			1,848,312
Vested or expected to vest as of December 31, 20191	4,756,427
Directors’ retainer and voluntary shares:
Outstanding at beginning of year	—			—			—
Granted during the year	31,075			27,300			25,476
Vested and issued	(31,075	)		(27,300	)		(25,476	)
Outstanding at end of year	—			—			—
Reserved for future grants or awards at end of year:
Employee plans	9,931,740
Directors’ plans	389,692
Total	10,321,432
1 We assume all shares will vest until the date of vesting or forfeiture.

A summary of our outstanding share-based award activity for the year ended December 31, 2019 is as follows:

	Shares			Weighted Average Grant Date Fair Value
Outstanding, beginning of year	6,792,201			$	6.90
Granted	1,285,419			$	14.18
Vested and issued	(3,199,270	)		$	2.20
Forfeited/canceled	(121,923	)		$	12.21
Outstanding, end of year	4,756,427			$	11.90

The total compensation cost related to outstanding awards not yet recognized is $16.0 million at December 31, 2019. The weighted average remaining period for the awards outstanding at December 31, 2019 is approximately 1.2 years.

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NOTE 10 - INCOME TAXES

Income from continuing operations before income taxes includes the following components:

		(In Millions)
		2019				2018				2017
United States		$	311.9			$	565.0			$	90.7
Foreign		0.2				(0.3		)		17.5
		$	312.1			$	564.7			$	108.2

The components of the income tax provision (benefit) on continuing operations consist of the following:

		(In Millions)
		2019				2018				2017
Current provision (benefit):
United States federal		$	(0.7	)		$	(0.5	)		$	(252.6	)
United States state & local		0.1				—				(0.1		)
Foreign		0.2				0.7				0.3
		(0.4		)		0.2				(252.4		)
Deferred provision (benefit):
United States federal		18.0				(475.4		)		—
Total income tax provision (benefit) from continuing operations		$	17.6			$	(475.2	)		$	(252.4	)

Reconciliation of our income tax attributable to continuing operations computed at the U.S. federal statutory rate is as follows:

		(In Millions)
		2019							2018							2017
Tax at U.S. statutory rate		$	65.5			21.0	%		$	118.6			21.0	%		$	37.9			35.0	%
Increase (decrease) due to:
Percentage depletion in excess of cost depletion		(49.3		)		(15.8	)		(54.6		)		(9.7	)		(61.6		)		(56.9	)
Impact of tax law change - remeasurement of deferred taxes		—				—			—				—			407.5				376.6
Luxembourg legal entity reduction		846.0				271.1			161.7				28.6			—				—
Valuation allowance release:
Tax law change - remeasurement of deferred taxes		—				—			—				—			(407.5		)		(376.6	)
Current year activity		—				—			(79.6		)		(14.1	)		(469.8		)		(434.2	)
Release of U.S. valuation allowance		—				—			(460.5		)		(81.5	)		—				—
Repeal of AMT		—				—			—				—			(235.3		)		(217.5	)
Luxembourg legal entity reduction		(846.0		)		(271.1	)		(161.7		)		(28.6	)		—				—
Impact of foreign operations		0.2				0.1			0.1				—			477.9				441.7
Other items, net		1.2				0.4			0.8				0.2			(1.5		)		(1.4	)
Provision for income tax expense (benefit) and effective income tax rate including discrete items		$	17.6			5.7	%		$	(475.2	)		(84.1	)%		$	(252.4	)		(233.3	)%

The increase in income tax expense from 2018 to 2019 is primarily due to release of the valuation allowance in the U.S. of $460.5 million in 2018. The Luxembourg legal entity reduction relates to initiatives resulting in the dissolution of certain entities and settlement of related financial instruments in the years ended December 31, 2019 and 2018.

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These 2019 and 2018 net operating loss deferred tax asset reductions resulted in tax expense of $846.0 million and $161.7 million, respectively, which were fully offset by decreases in the respective valuation allowance.

In December 2017, a benefit of $235.3 million was recorded as a result of the repeal of AMT in the 2017 U.S. Tax Cuts and Jobs Act. Additionally, the impact of tax law change - remeasurement of deferred taxes for the year ended December 31, 2017 primarily relates to the statutory rate reduction in the U.S. that decreased the deferred tax assets by $334.1 million, which was fully offset by a decrease in the valuation allowance. Also on December 31, 2017, there was a Luxembourg rate reduction that decreased the deferred tax assets by $73.4 million, which was fully offset by a decrease in valuation allowance. The impact of foreign operations relates to income and losses in foreign jurisdictions where the statutory rates, ranging from 0% to 24.94%, differ from the U.S. statutory rate of 21% for the years ended December 31, 2019 and 2018 and 35.0% for the year ended December 31, 2017.

The components of income taxes for other than continuing operations consisted of the following:

		(In Millions)
		2019				2018				2017
Other comprehensive income:
Postretirement benefit liability		$	11.4			$	3.6			$	—
Unrealized net loss on derivative financial instruments		0.1				0.7				—
Total		$	11.5			$	4.3			$	—

Significant components of our deferred tax assets and liabilities are as follows:

		(In Millions)
		2019				2018
Deferred tax assets:
Operating loss & other carryforwards		$	794.9			$	2,118.8
Pension and OPEB liabilities		113.7				102.8
Deferred income		25.2				23.3
Property, plant and equipment and mineral rights		1.4				13.3
State and local		71.0				68.2
Other liabilities		45.1				48.4
Total deferred tax assets before valuation allowance		1,051.3				2,374.8
Deferred tax asset valuation allowance		(441.3		)		(1,287.3		)
Net deferred tax assets		610.0				1,087.5
Deferred tax liabilities:
Investment in partnerships		(136.8		)		(141.2		)
Intercompany notes		—				(465.7		)
Other assets		(13.7		)		(15.8		)
Total deferred tax liabilities		(150.5		)		(622.7		)
Net deferred tax assets		$	459.5			$	464.8

We had gross domestic (including states) and foreign net operating loss carryforwards of $3.5 billion and $1.6 billion, respectively, at December 31, 2019. We had gross domestic and foreign net operating loss carryforwards of $3.6 billion and $6.6 billion, respectively, at December 31, 2018. The U.S. federal net operating losses will begin to expire in 2034 and state net operating losses will begin to expire in 2020. The foreign net operating losses can be carried forward indefinitely. We had foreign tax credit carryforwards of $5.8 million at December 31, 2019 and 2018. The foreign tax credit carryforwards will begin to expire in 2020. We had gross interest expense limitation carryforwards of $55.3 million for the year ended December 31, 2019. This interest expense can be carried forward indefinitely.

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The changes in the valuation allowance are presented below:

		(In Millions)
		2019				2018				2017
Balance at beginning of year		$	1,287.3			$	1,983.1			$	3,095.1
Change in valuation allowance:
Included in income tax expense (benefit)		(846.0		)		(691.3		)		(1,120.0		)
Change in deferred assets in other comprehensive income		—				(4.5		)		(9.8		)
Acquisition of noncontrolling interest		—				—				17.8
Balance at end of year		$	441.3			$	1,287.3			$	1,983.1

During 2019, a legal entity reduction initiative was completed in Luxembourg resulting in the dissolution of certain entities and settlement of related financial instruments, triggering the utilization of $1.3 billion of net operating loss deferred tax asset and reversal of the intercompany notes deferred tax liability of $446.5 million.  In addition, prior year adjustments in Luxembourg and a statutory rate reduction from 26.01% to 24.94% resulted in a net increase to the operating loss carryforward deferred tax asset of $46.2 million. The total net deferred tax reduction resulted in an expense of $846.0 million which was fully offset by a decrease in the valuation allowance. During 2018, a similar legal entity reduction initiative was completed resulting in the dissolution of certain Luxembourg entities which resulted in a decrease in the net operating loss deferred tax asset of $161.7 million which was fully offset by a decrease in valuation allowance. We continue to maintain a full valuation allowance against the remaining Luxembourg net deferred tax assets of $397.1 million at December 31, 2019. Our losses in Luxembourg in recent periods represent sufficient negative evidence to require a full valuation allowance against the deferred tax assets in that jurisdiction. We intend to maintain a valuation allowance against the deferred tax assets related to these operating losses, until sufficient positive evidence exists to support the realization of such assets.

We recorded a $695.8 million net decrease in the valuation allowance in the year ended December 31, 2018. As of December 31, 2018, our U.S. operations emerged from a three-year cumulative loss position. As the significant negative evidence of cumulative losses has been eliminated, we undertook an evaluation of the continuing need for a valuation allowance on the U.S. deferred tax assets, the majority of which relate to the U.S. tax net operating losses.

In completing our evaluation of whether a valuation allowance was still needed, we considered all available positive and negative evidence. Positive evidence considered included the emergence from the three-year cumulative loss position, our long-term customer contracts with minimum tonnage requirements, the global scarcity of iron ore pellets, near term forecasts of strong profitability and the recently revised IRC Section 163(j) interest deduction limitation. Negative evidence included the overall size of the deferred tax asset with limited carryforward and no carryback opportunity, the finite nature of the iron ore resources we mine, the uncertainty of steel tariffs that positively impacted our revenue rates in 2018 and the various market signs that the U.S. economy may be nearing the end of the current expansion.

We also considered that future realization of the deferred tax assets depends on the existence of sufficient taxable income of the appropriate character during the carryforward period. In considering sources of taxable income, we identified that a portion of the deferred tax assets would be utilized by existing taxable temporary differences reversing in the same periods as existing deductible temporary differences. In addition, we determined that carryback opportunities and tax planning strategies do not exist as potential sources of future taxable income. Lastly, forecasting future taxable income was considered, but is challenging in a cyclical industry such as ours as it relies heavily on the accuracy of key assumptions, particularly about key pricing benchmarks.

Because historical information is verifiable and more objective than forecast information and due to the cyclicality of the industry, we developed an estimate of future income based on our historical earnings through the most recent industry cycle. We adjusted historical earnings for certain non-recurring items as well as to reflect the current corporate structure by eliminating the impact of discontinued operations and extinguished debt (“core earnings”). Additionally, we adjusted core earnings to reflect the impact of the recently revised IRC Section 163(j) interest expense deduction limitation as well as permanent tax adjustments. The IRC Section 163(j) limitation will limit our interest expense deduction, particularly in down years in the industry cycle, resulting in higher taxable income.

Based on the core earnings analysis, the Company’s average annual book taxable income through the business cycle is in excess of the estimated $109.0 million taxable income that would be required annually to fully utilize the

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deferred tax assets within the 19 year carryforward period. We ascribed significant weight in our assessment to the core earnings analysis and the resulting projection of taxable income through the industry cycle. Based on the weight of this positive evidence, and after considering the other available positive and negative evidence, we determined that it was appropriate to release all of the valuation allowance related to U.S. federal deferred tax assets at December 31, 2018 as it is more likely than not that the entire amount of the U.S. deferred tax asset will be realized before the end of the carryforward period. The income tax benefit recorded for the reversal of the valuation allowance against the U.S. deferred tax assets was $460.5 million.

We also have a valuation allowance recorded against certain state net operating losses and foreign tax credits, which are expected to expire before utilization. At December 31, 2019 and 2018, we had a valuation allowance recorded against certain state net operating losses of $38.4 million and $38.3 million, respectively. At December 31, 2019 and 2018, we had a valuation allowance recorded against certain foreign tax credits of approximately $5.8 million.

At December 31, 2019 and 2018, we had no cumulative undistributed earnings of foreign subsidiaries included in consolidated retained earnings. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of earnings.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

		(In Millions)
		2019				2018				2017
Unrecognized tax benefits balance as of January 1		$	29.0			$	33.5			$	30.7
Increase (decrease) for tax positions in prior years		0.2				0.1				(2.8		)
Increase for tax positions in current year		—				3.6				4.5
Settlements		—				—				1.0
Lapses in statutes of limitations		—				(8.2		)		—
Other		—				—				0.1
Unrecognized tax benefits balance as of December 31		$	29.2			$	29.0			$	33.5

At December 31, 2019 and 2018, we had $29.2 million and $29.0 million, respectively, of unrecognized tax benefits recorded. Of this amount, $4.4 million and $4.2 million, were recorded in Other non-current liabilities for the years ended December 31, 2019 and 2018, respectively, and $24.8 million was recorded in Other non-current assets for both years in the Statements of Consolidated Financial Position. If the unrecognized tax benefits were recognized, the entire $29.2 million would impact the effective tax rate. We do not expect that the amount of unrecognized benefits will change significantly within the next 12 months. At December 31, 2019 and 2018, we had $3.7 million and $2.7 million, respectively, of accrued interest and penalties related to the unrecognized tax benefits recorded in Other non-current liabilities in the Statements of Consolidated Financial Position.

Tax years 2016 and forward remain subject to examination for the U.S. and tax years 2008 and forward remain subject to examination for Canada.

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NOTE 11 - ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS

The following is a summary of our environmental and mine closure obligations:

	(In Millions)
	December 31,
	2019				2018
Environmental	$	2.0			$	2.5
Mine closure1	165.3				172.4
Total environmental and mine closure obligations	167.3				174.9
Less current portion	2.4				2.9
Long-term environmental and mine closure obligations	$	164.9			$	172.0
1 Includes $22.0 million and $35.0 million related to our active operations as of December 31, 2019 and 2018, respectively, with the remaining balance attributable to inactive operations, including our indefinitely idled Empire mine and a closed mine formerly operating as LTV Steel Mining Company.

Environmental

Our mining and exploration activities are subject to various laws and regulations governing the protection of the environment. We conduct our operations to protect the public health and environment and believe our operations are in compliance with applicable laws and regulations in all material respects. Our environmental liabilities include obligations for known environmental remediation exposures at various active and closed mining operations and other sites, and have been recognized based on the estimated cost of investigation and remediation at each site. If the cost can only be estimated as a range of possible amounts with no specific amount being more likely, the minimum of the range is accrued. Future expenditures are not discounted unless the amount and timing of the cash disbursements are readily known. Potential insurance recoveries have not been reflected. Additional environmental obligations could be incurred, the extent of which cannot be assessed.

Mine Closure

The accrued closure obligation for our mining operations provides for contractual and legal obligations associated with the eventual closure of the mining operations. We performed a detailed assessment of our asset retirement obligations related to our active mining locations in accordance with our accounting policy, under which we perform an in-depth evaluation of the liability every three years in addition to routine annual assessments. In 2017, we employed a third-party specialist to assist in the triennial in-depth evaluation.

For the assessments performed, we determined the obligations based on detailed estimates adjusted for factors that a market participant would consider (e.g., inflation, overhead and profit) and then discounted the obligation using the current credit-adjusted risk-free interest rate based on the corresponding life of mine. The estimate also incorporates incremental increases in the closure cost estimates and changes in estimates of mine lives. The closure date for each of our active operating mine sites was determined based on the exhaustion date of the remaining iron ore reserves. The closure date and expected timing of the capital requirements to meet our obligations for our indefinitely idled or closed mines, is determined based on the unique circumstances of each property. For indefinitely idled or closed mines, the accretion of the liability is recognized over the anticipated timing of remediation. The amortization of the related asset and accretion of the liability is recognized over the estimated mine lives for our active operations.

The following represents a roll forward of our asset retirement obligation liability:

	(In Millions)
	December 31,
	2019				2018
Asset retirement obligation at beginning of year	$	172.4			$	168.4
Accretion expense	10.1				9.5
Remediation payments	(0.8		)		(1.0		)
Revision in estimated cash flows	(16.4		)		(4.5		)
Asset retirement obligation at end of year	$	165.3			$	172.4

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The revision in estimated cash flows during the year ended December 31, 2019 for $16.4 million primarily relates to an extension of the life-of-mine plan for Tilden mine based on the economic reserve analysis performed during 2019.

NOTE 12 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The following table presents the fair value of our derivative instruments and the classification of each in the Statements of Consolidated Financial Position:

	(In Millions)
	Derivative Assets												Derivative Liabilities
	December 31, 2019						December 31, 2018						December 31, 2019						December 31, 2018
Derivative Instrument	Balance Sheet Location		Fair Value				Balance Sheet Location		Fair Value				Balance Sheet Location		Fair Value				Balance Sheet Location		Fair Value
Derivatives designated as hedging instruments under ASC 815:
Commodity contracts			$	—			Derivative assets		$	0.1			Other current liabilities		$	3.2			Other current liabilities		$	3.7
Derivatives not designated as hedging instruments under ASC 815:
Customer supply agreement	Derivative assets		44.5				Derivative assets		89.3						—						—
Provisional pricing arrangements	Derivative assets		1.3				Derivative assets		2.1				Other current liabilities		1.1						—
Total derivatives not designated as hedging instruments under ASC 815:			$	45.8					$	91.4					$	1.1					$	—
Total derivatives			$	45.8					$	91.5					$	4.3					$	3.7

Derivatives Designated as Hedging Instruments - Cash Flow Hedges

Commodity Contracts

The following table presents our outstanding hedge contracts:

(Quantities in Millions)

December 31, 2019

December 31, 2018

Notional Amount

Unit of Measure

Varying Maturity Dates

Notional Amount

Unit of Measure

Varying Maturity Dates

Natural gas

20.1

MMBtu

January 2020 - December 2021

1.8

MMBtu

January 2019 - August 2019

Diesel

0.8

Gallons

January 2020

11.0

Gallons

January 2019 - December 2019

Derivatives Not Designated as Hedging Instruments

Customer Supply Agreement

A supply agreement with one customer provides for supplemental revenue or refunds to the customer based on the hot-rolled coil steel price at the time the iron ore product is consumed in the customer’s blast furnace. The supplemental pricing is characterized as a freestanding derivative and is required to be accounted for separately once control transfers to the customer. The derivative instrument, which is finalized based on a future price, is adjusted to fair value through Revenues from product sales and services each reporting period based upon current market data and forward-looking estimates provided by management until the pellets are consumed and the amounts are settled.

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Provisional Pricing Arrangements

Certain of our supply agreements specify provisional price calculations, where the pricing mechanisms generally are based on market pricing, with the final revenue rate based on certain market inputs at a specified period in time in the future, per the terms of the supply agreements. Market inputs are tied to indexed price adjustment factors that are integral to the iron ore supply contracts and vary based on the agreement. The pricing mechanisms typically include adjustments based upon changes in the Platts 62% price, Atlantic Basin pellet premium, Platts international indexed freight rates and changes in specified PPI, including those for industrial commodities, fuel and steel. The pricing adjustments generally operate in the same manner, with each factor typically comprising a portion of the price adjustment, although the weighting of each factor varies based upon the specific terms of each agreement. The price adjustment factors have been evaluated to determine if they qualify as embedded derivatives. The price adjustment factors share the same economic characteristics and risks as the host sales contract and are integral to the host sales contract as inflation adjustments; accordingly, they have not been separately valued as derivative instruments.    

Revenue is recognized generally upon delivery to our customers. Revenue is measured at the point that control transfers and represents the amount of consideration we expect to receive in exchange for transferring goods. Changes in the expected revenue rate from the date that control transfers through final settlement of contract terms is recorded in accordance with Topic 815 and is characterized as a derivative instrument and accounted for separately.  Subsequently, the derivative instruments are adjusted to fair value through Revenues from product sales and services each reporting period based upon current market data and forward-looking estimates provided by management until the final revenue rate is determined.

The 2019 and 2018 amounts represent the difference between the amount we expected to receive when revenue was initially measured at the point control transfers and our subsequent estimate of the final revenue rate based on the price calculation established in the supply agreements. The 2017 amounts represent the difference between the provisional price agreed upon with our customers based on the supply agreement terms and our estimate of the final revenue rate based on the price calculations established in the supply agreements.

The following summarizes the effect of our derivatives that are not designated as hedging instruments in the Statements of Consolidated Operations:

				(In Millions)
Derivatives Not Designated as Hedging Instruments		Location of Gain (Loss) Recognized in Income on Derivative		Year Ended December 31,
				2019				2018				2017
Customer supply agreements		Revenues from product sales and services		$	78.1			$	425.8			$	163.3
Provisional pricing arrangements		Revenues from product sales and services		(70.6		)		(3.2		)		(42.7		)
Commodity contracts		Cost of goods sold and operating expenses		—				—				(1.3		)
Total				$	7.5			$	422.6			$	119.3

Refer to NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS for additional information.

NOTE 13 - DISCONTINUED OPERATIONS

The information below sets forth selected financial information related to operating results of our businesses classified as discontinued operations, which include our former Asia Pacific Iron Ore, North American Coal and Canadian operations. While the reclassification of revenues and expenses related to discontinued operations from prior periods have no impact upon previously reported Net income, the Statements of Consolidated Operations present the revenues and expenses that were reclassified from the specified line items to Income (loss) from discontinued operations, net of tax. The charts below provide an asset group breakout for each financial statement line impacted by discontinued operations.

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		(In Millions)
		Year Ended December 31,
		2019				2018				2017
Income (loss) from discontinued operations, net of tax
Asia Pacific Iron Ore		$	(1.5	)		118.3				21.2
Canadian Operations		0.3				(26.5		)		(21.3		)
Other		(0.5		)		(3.6		)		2.6
		$	(1.7	)		$	88.2			$	2.5

		(In Millions)
		Year Ended December 31,
		2019				2018				2017
Net cash provided (used) by operating activities
Asia Pacific Iron Ore		$	(2.1	)		$	(81.3	)		$	79.6
Canadian Operations		—				(14.6		)		—
		$	(2.1	)		$	(95.9	)		$	79.6
Net cash provided (used) by investing activities
Asia Pacific Iron Ore		$	0.1			$	19.8			$	(2.8	)
Canadian Operations		0.3				—				(7.7		)
Other		—				—				2.1
		$	0.4			$	19.8			$	(8.4	)

Asia Pacific Iron Ore Operations

Background

    During 2018, we committed to a course of action leading to the permanent closure of the Asia Pacific Iron Ore mining operations and sold all of the assets of our Asia Pacific Iron Ore business through a series of sales to third parties. As a result of our exit, management determined that our Asia Pacific Iron Ore operating segment met the criteria to be classified as held for sale and a discontinued operation under ASC Topic 205, Presentation of Financial Statements. As such, all current and historical Asia Pacific Iron Ore operating segment results are classified within discontinued operations.

Income (Loss) from Discontinued Operations

For the reasons described above, our previously related Asia Pacific Iron Ore operating segment results for all periods presented, as well as exit costs, are classified as discontinued operations.

		(In Millions)
		Year Ended December 31,
Income (Loss) from Discontinued Operations		2019				2018				2017
Revenues from product sales and services		$	—			$	129.1			$	464.2
Cost of goods sold and operating expenses		—				(230.7		)		(427.9		)
Sales margin		—				(101.6		)		36.3
Other operating expense		(1.1		)		(3.3		)		(9.9		)
Other expense		(0.4		)		(2.3		)		(5.2		)
Gain on foreign currency translation		—				228.1				—
Impairment of long-lived assets		—				(2.6		)		—
Income (loss) from discontinued operations, net of tax		$	(1.5	)		$	118.3			$	21.2

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Gain on Foreign Currency Translation

As a result of the liquidation of the Australian subsidiaries' net assets, the historical changes in foreign currency translation recorded in Accumulated other comprehensive loss in the Statements of Consolidated Financial Position totaling $228.1 million was reclassified and recognized as a gain in Income (loss) from discontinued operations, net of tax in the Statements of Consolidated Operations for the year ended December 31, 2018.

Canadian Operations

Background

During 2015, we announced that the Bloom Lake Group and the Wabush Group commenced restructuring proceedings in Montreal, Quebec under the CCAA to address the immediate liquidity issues and to preserve and protect their assets for the benefit of all stakeholders while restructuring and/or sale options were explored.    

The Bloom Lake Group and the Wabush Group filed a joint plan of compromise and arrangement that was approved by the required majorities of each unsecured creditor class and was sanctioned by the Court in June 2018. During July 2018, amendments were made to the plan to address the manner in which certain distributions under the plan would be effected and the plan was implemented. Under the terms of the amended plan, all employee claims, all claims by the Bloom Lake Group, the Wabush Group and their respective creditors against us as well as all of our claims against the Bloom Lake Group and the Wabush Group were resolved.

Income (Loss) on Discontinued Operations

Our Canadian exit represented a strategic shift in our business. For this reason, all current and historical Eastern Canadian Iron Ore and Ferroalloys operating segment results are classified as discontinued operations.

Amounts Receivable from the Canadian Entities

Prior to the deconsolidations, certain of our wholly-owned subsidiaries made loans to the Canadian Entities for the purpose of funding their operations and had accounts receivable generated in the ordinary course of business. The loans, corresponding interest and the accounts receivable were considered intercompany transactions and eliminated in our consolidated financial statements. Since the deconsolidations, the loans, associated interest and accounts receivable are considered related party transactions and have been recognized in our consolidated financial statements at their estimated fair value. Following the approval of the amended plan, we reversed our outstanding asset of $51.6 million, with a corresponding charge to Income (loss) from discontinued operations, net of tax in the Statements of Consolidated Operations for the year ended December 31, 2018.

Income Tax Expense

We have recognized tax expense of $15.9 million for the year ended December 31, 2018, included in Income (loss) from discontinued operations, net of tax related to a gain on our Canadian investments. This expense is primarily the result of the receipt during 2018 of CCAA estate distributions which were immediately contributed back into the CCAA estate as required by the amended plan. There was no tax expense or benefit recognized for the years ended December 31, 2019 and 2017.

Guarantees and Contingent Liabilities

During 2018, under the terms of the amended plan, we and certain of our wholly-owned subsidiaries made a cash contribution of C$19.0 million to the Wabush Group pension plans and agreed to contribute into the CCAA estate any remaining distributions or payments we may be entitled to receive as creditors of the Bloom Lake Group and the Wabush Group for distribution to other creditors.  The C$19.0 million cash contribution was included in Income (loss) from discontinued operations, net of tax in the Statements of Consolidated Operations for the year ended December 31, 2018.

During 2017, we became aware that it was probable the Monitor would assert a preference claim against the Company and/or certain of its affiliates and we estimated a liability, which included the value of our related-party claims against the Bloom Lake Group and the Wabush Group. Following the approval of the amended plan, we reversed our outstanding liability of $55.6 million, with a corresponding credit to Income (loss) from discontinued operations, net of tax in the Statements of Consolidated Operations for the year ended December 31, 2018.

During 2017, the Wabush Scully Mine was sold as part of the ongoing CCAA proceedings for the Wabush Group. As part of this transaction, the environmental remediation obligations were transferred to the buyer and we were released

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NOTE 14 - SHAREHOLDERS' EQUITY

Share Repurchase Program

In November 2018, we announced that our Board of Directors authorized a program to repurchase outstanding common shares in the open market or in privately negotiated transactions, up to a maximum of $200 million, excluding commissions and fees. In April 2019, we announced that our Board of Directors increased the common share repurchase authorization by an additional $100 million, excluding commissions and fees. During 2019, we repurchased 24.4 million common shares at a cost of $252.9 million in the aggregate, including commissions and fees. During 2018, we repurchased 5.4 million common shares at a cost of approximately $47.5 million in aggregate, including commissions and fees. The share repurchase program was active until December 31, 2019.

Dividends

The below table summarizes our recent dividend activity:

Declaration Date		Record Date		Payment Date		Dividend Declared per Common Share1
12/2/2019		1/3/2020		1/15/2020		$	0.06
9/3/2019		10/4/2019		10/15/2019		$	0.10
5/31/2019		7/5/2019		7/15/2019		$	0.06
2/19/2019		4/5/2019		4/15/2019		$	0.05
10/18/2018		1/4/2019		1/15/2019		$	0.05
1 The dividend declared on September 3, 2019 included a special cash dividend of $0.04 per common share.

Common Share Public Offering

On February 9, 2017, we issued 63.3 million common shares in an underwritten public offering at a public offering price of $10.75 per common share. We received net proceeds of $661.3 million. The net proceeds from the issuance of our common shares were used to redeem various tranches of our outstanding long-term debt. Refer to NOTE 6 - DEBT AND CREDIT FACILITIES for further information.

Preferred Stock

We have 3,000,000 Class A preferred shares authorized and 4,000,000 Class B preferred shares authorized; no preferred shares are issued or outstanding.

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NOTE 15 - ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of Accumulated other comprehensive loss within Cliffs shareholders’ equity and related tax effects allocated to each are shown below:

	(In Millions)
	Pre-tax Amount				Tax Benefit				After-tax Amount
As of December 31, 2019:
Postretirement benefit liability	$	(454.1	)		$	138.4			$	(315.7	)
Unrealized net loss on derivative financial instruments	(3.9		)		0.8				(3.1		)
	$	(458.0	)		$	139.2			$	(318.8	)
As of December 31, 2018:
Postretirement benefit liability	$	(408.1	)		$	127.0			$	(281.1	)
Unrealized net loss on derivative financial instruments	(3.5		)		0.7				(2.8		)
	$	(411.6	)		$	127.7			$	(283.9	)
As of December 31, 2017:
Postretirement benefit liability	$	(387.3	)		$	123.4			$	(263.9	)
Foreign currency translation adjustments	225.4				—				225.4
Unrealized net loss on derivative financial instruments	(0.5		)		—				(0.5		)
	$	(162.4	)		$	123.4			$	(39.0	)

The following table reflects the changes in Accumulated other comprehensive loss related to Cliffs shareholders’ equity:

	(In Millions)
	Postretirement Benefit Liability, net of tax				Foreign Currency Translation				Derivative Financial Instruments, net of tax				Accumulated Other Comprehensive Loss
January 1, 2017	$	(260.6	)		$	239.3			$	—			$	(21.3	)
Other comprehensive loss before reclassifications	(29.8		)		(13.9		)		(0.5		)		(44.2		)
Net loss reclassified from accumulated other comprehensive loss	26.5				—				—				26.5
December 31, 2017	(263.9		)		225.4				(0.5		)		(39.0		)
Other comprehensive income (loss) before reclassifications	(42.9		)		2.7				(0.6		)		(40.8		)
Net loss (gain) reclassified from accumulated other comprehensive loss	25.7				(228.1		)		(1.7		)		(204.1		)
December 31, 2018	(281.1		)		—				(2.8		)		(283.9		)
Other comprehensive loss before reclassifications	(56.7		)		—				(2.3		)		(59.0		)
Net loss reclassified from accumulated other comprehensive loss	22.1				—				2.0				24.1
December 31, 2019	$	(315.7	)		$	—			$	(3.1	)		$	(318.8	)

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The following table reflects the details about Accumulated other comprehensive loss components reclassified from Cliffs shareholders’ equity:

		(In Millions)
Details about Accumulated Other Comprehensive Loss Components		Amount of (Gain)/Loss Reclassified into Income, Net of Tax												Affected Line Item in the Statement of Consolidated Operations
		Year Ended December 31, 2019				Year Ended December 31, 2018				Year Ended December 31, 2017
Amortization of pension and OPEB liability:
Prior service costs1		$	(0.7	)		$	(0.8	)		$	(0.4	)		Other non-operating income
Net actuarial loss1		28.6				26.2				26.9				Other non-operating income
Curtailments1		0.1				0.3				—				Other non-operating income
		28.0				25.7				26.5				Total before taxes
Income tax expense		(5.9		)		—				—				Income tax benefit (expense)
		$	22.1			$	25.7			$	26.5			Net of taxes
Changes in foreign currency translation:
Gain on foreign currency translation2		$	—			$	(228.1	)		$	—			Income (loss) from discontinued operations, net of tax
		$	—			$	(228.1	)		$	—
Changes in derivative financial instruments:
Commodity contracts		$	2.5			$	(1.7	)		$	—			Cost of goods sold and operating expenses
Income tax expense		(0.5		)		—				—				Income tax benefit (expense)
		$	2.0			$	(1.7	)		$	—			Net of taxes
Total reclassifications for the period		$	24.1			$	(204.1	)		$	26.5
1 These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost. See NOTE 8 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further information.
2 Represents Australian accumulated currency translation adjustments due to the liquidation of our Australian subsidiaries' net assets. See NOTE 13 - DISCONTINUED OPERATIONS for further information.

NOTE 16 - RELATED PARTIES

Hibbing is a co-owned joint venture with companies that are integrated steel producers or their subsidiaries. In 2018, we tendered our resignation as the mine manager of the Hibbing mine and we transitioned this role to the majority owner in August 2019. The following is a summary of the mine ownership of the co-owned iron ore mine at December 31, 2019:

Mine		Cleveland-Cliffs Inc.		ArcelorMittal USA		U.S. Steel
Hibbing		23.0%		62.3%		14.7%

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Product revenues from related parties were as follows:

	(In Millions)
	Year Ended December 31,
	2019				2018				2017
Product revenues from related parties	$	915.3			$	1,234.5			$	806.7
Total product revenues	1,848.1				2,172.3				1,644.6
Related party product revenue as a percent of total product revenue	49.5		%		56.8		%		49.1		%

The following table presents the classification of related party assets and liabilities in the Statements of Consolidated Financial Position:

		(In Millions)
		December 31,
Balance Sheet Location of Assets (Liabilities)		2019				2018
Accounts receivable, net		$	31.1			$	176.0
Derivative assets		44.5				89.3
Other current liabilities		(2.0		)		(45.3		)
		$	73.6			$	220.0

Derivative assets

A supply agreement with one customer provides for supplemental revenue or refunds to the customer based on the hot-rolled coil steel price at the time the product is consumed in the customer’s blast furnace. The supplemental pricing is characterized as a freestanding derivative. Refer to NOTE 12 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES for further information.

Other current liabilities

During 2017, our ownership interest in Empire increased to 100% as we reached an agreement to distribute the noncontrolling interest net assets of $132.7 million to ArcelorMittal USA, in exchange for its interest in Empire. The net assets were agreed to be distributed in three installments of $44.2 million each, the balance of which was recorded in Other current liabilities in the Statements of Consolidated Financial Position. The final installment was paid in August 2019.

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NOTE 17 - EARNINGS PER SHARE

The following table summarizes the computation of basic and diluted earnings per share:

	(In Millions, Except Per Share Amounts)
	Year Ended December 31,
	2019				2018				2017
Income from continuing operations	$	294.5			$	1,039.9			$	360.6
Loss from continuing operations attributable to noncontrolling interest	—				—				3.9
Net income from continuing operations attributable to Cliffs shareholders	294.5				1,039.9				364.5
Income (loss) from discontinued operations, net of tax	(1.7		)		88.2				2.5
Net income attributable to Cliffs shareholders	$	292.8			$	1,128.1			$	367.0
Weighted average number of shares:
Basic	276.8				297.2				288.4
Convertible senior notes	4.4				3.4				—
Employee stock plans	3.3				3.5				4.6
Diluted	284.5				304.1				293.0
Earnings (loss) per common share attributable to Cliffs common shareholders - basic:
Continuing operations	$	1.07			$	3.50			$	1.27
Discontinued operations	(0.01		)		0.30				0.01
	$	1.06			$	3.80			$	1.28
Earnings (loss) per common share attributable to Cliffs common shareholders - diluted:
Continuing operations	$	1.04			$	3.42			$	1.25
Discontinued operations	(0.01		)		0.29				0.01
	$	1.03			$	3.71			$	1.26

NOTE 18 - COMMITMENTS AND CONTINGENCIES

Purchase Commitments

In 2017, we began to incur capital commitments related to the construction of our HBI production plant in Toledo, Ohio. We now expect to reach commercial production ahead of schedule, in the first half of 2020. In total, we expect to spend approximately $830 million plus a contingency of up to 20% on the HBI production plant, excluding capitalized interest, through 2020, of which approximately $700 million was paid as of December 31, 2019. As of December 31, 2019, we have contracts and purchase orders in place for approximately $260 million for the HBI production plant. We expect cash capital expenditures for the HBI production plant of approximately $290 million during 2020.

Contingencies

We are currently the subject of, or party to, various claims and legal proceedings incidental to our current and historical operations. These claims and legal proceedings are subject to inherent uncertainties and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, additional funding requirements or an injunction. If an unfavorable ruling were to occur, there exists the possibility of a material adverse effect on the financial position and results of operations for the period in which the ruling occurs or future periods. However, based on currently available information we do not believe that any pending claims or legal proceedings will result in a material adverse effect in relation to our consolidated financial statements.

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Environmental Matters

We had environmental liabilities of $2.0 million and $2.5 million at December 31, 2019 and 2018, respectively, including obligations for known environmental remediation exposures at active and closed mining operations and other sites. These amounts have been recognized based on the estimated cost of investigation and remediation at each site, and include site studies, design and implementation of remediation plans, legal and consulting fees, and post-remediation monitoring and related activities. Future expenditures are not discounted unless the amount and timing of the cash disbursements are readily known. Potential insurance recoveries have not been reflected. Additional environmental obligations could be incurred, the extent of which cannot be assessed. The amount of our ultimate liability with respect to these matters may be affected by several uncertainties, primarily the ultimate cost of required remediation and the extent to which other responsible parties contribute. Refer to NOTE 11 - ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS for further information.

Tax Matters

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We also recognize tax benefits to the extent that it is more likely than not that our positions will be sustained when challenged by the taxing authorities. To the extent we prevail in matters for which liabilities have been established, or are required to pay amounts in excess of our liabilities, our effective tax rate in a given period could be materially affected. An unfavorable tax settlement would require use of our cash and result in an increase in our effective tax rate in the year of resolution. A favorable tax settlement would be recognized as a reduction in our effective tax rate in the year of resolution. Refer to NOTE 10 - INCOME TAXES for further information.

NOTE 19 - SUBSEQUENT EVENTS

On February 18, 2020, our Board of Directors declared a quarterly cash dividend on our common shares of $0.06 per share. The cash dividend will be payable on April 15, 2020, to shareholders of record as of the close of business on April 3, 2020.

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NOTE 20 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The sum of quarterly EPS may not equal EPS for the year due to discrete quarterly calculations.

	(In Millions, Except Per Share Amounts)
	2019
	Quarters
	First				Second				Third				Fourth				Year
Revenues from product sales and services	$	157.0			$	743.2			$	555.6			$	534.1			$	1,989.9
Sales margin	30.9				263.0				154.9				126.9				575.7
Net income (loss) from continuing operations attributable to Cliffs shareholders	$	(22.1	)		$	161.4			$	91.8			$	63.4			$	294.5
Loss from discontinued operations, net of tax	—				(0.6		)		(0.9		)		(0.2		)		(1.7		)
Net income (loss) attributable to Cliffs common shareholders	$	(22.1	)		$	160.8			$	90.9			$	63.2			$	292.8
Earnings (loss) per common share attributable to Cliffs common shareholders - basic:
Continuing operations	$	(0.08	)		$	0.59			$	0.34			$	0.23			$	1.07
Discontinued operations	—				—				—				—				(0.01		)
	$	(0.08	)		$	0.59			$	0.34			$	0.23			$	1.06
Earnings (loss) per common share attributable to Cliffs common shareholders - diluted:
Continuing operations	$	(0.08	)		$	0.57			$	0.33			$	0.23			$	1.04
Discontinued operations	—				—				—				—				(0.01		)
	$	(0.08	)		$	0.57			$	0.33			$	0.23			$	1.03

The diluted earnings per share calculation for the first quarter of 2019 excludes equity plan awards of 4.2 million and convertible senior notes awards of 7.3 million that were anti-dilutive.

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	(In Millions, Except Per Share Amounts)
	2018
	Quarters
	First				Second				Third				Fourth				Year
Revenues from product sales and services	$	180.0			$	714.3			$	741.8			$	696.3			$	2,332.4
Sales margin	61.5				284.5				261.6				202.0				809.6
Net income (loss) from continuing operations attributable to Cliffs shareholders	$	(13.4	)		$	229.4			$	199.8			$	624.1			$	1,039.9
Income (loss) from discontinued operations, net of tax	(70.9		)		(64.3		)		238.0				(14.6		)		88.2
Net income (loss) attributable to Cliffs common shareholders	$	(84.3	)		$	165.1			$	437.8			$	609.5			$	1,128.1
Earnings (loss) per common share attributable to Cliffs common shareholders - basic:
Continuing operations	$	(0.05	)		$	0.77			$	0.67			$	2.11			$	3.50
Discontinued operations	(0.24		)		(0.22		)		0.80				(0.05		)		0.30
	$	(0.29	)		$	0.55			$	1.47			$	2.06			$	3.80
Earnings (loss) per common share attributable to Cliffs common shareholders - diluted:
Continuing operations	$	(0.05	)		$	0.76			$	0.64			$	2.03			$	3.42
Discontinued operations	(0.24		)		(0.21		)		0.77				(0.05		)		0.29
	$	(0.29	)		$	0.55			$	1.41			$	1.98			$	3.71

Net income (loss) from continuing operations attributable to Cliffs shareholders increased during the three months ended December 31, 2018, relative to the preceding three quarters, due primarily to the release of the deferred tax valuation allowance in the U.S. of $460.5 million.

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NOTE 21 - SUPPLEMENTARY GUARANTOR INFORMATION

The accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.” Certain of our subsidiaries (the "Guarantors") have guaranteed the obligations under the 5.75% 2025 Senior Notes and the 5.875% 2027 Senior Notes issued by Cleveland-Cliffs Inc. See NOTE 6 - DEBT AND CREDIT FACILITIES for further information.

The following presents the condensed consolidating financial information for: (i) the Parent Company and the Issuer of the guaranteed obligations (Cleveland-Cliffs Inc.); (ii) the Guarantor subsidiaries, on a combined basis; (iii) the non-guarantor subsidiaries, on a combined basis; (iv) consolidating eliminations; and (v) Cleveland-Cliffs Inc. and subsidiaries on a consolidated basis. Each Guarantor subsidiary is 100% owned by the Parent Company as of December 31, 2019. The condensed consolidating financial information is presented as if the Guarantor structure at December 31, 2019 existed for all years presented. As a result, the Guarantor subsidiaries within the condensed consolidating financial information as of December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017 include results of subsidiaries that were previously less than wholly-owned and were historically non-guarantors until 100% ownership was obtained.

Each of the Guarantor subsidiaries fully and unconditionally guarantees, on a joint and several basis, the obligations of Cleveland-Cliffs Inc. under the 5.75% 2025 Senior Notes and the 5.875% 2027 Senior Notes. The guarantee of a Guarantor subsidiary will be automatically and unconditionally released and discharged, and such Guarantor subsidiary’s obligations under the guarantee and the related indenture governing the 5.75% 2025 Senior Notes and the 5.875% 2027 Senior Notes (the “Indentures”) will be automatically and unconditionally released and discharged, upon:

(a) any sale, exchange, transfer or disposition of such Guarantor subsidiary (by merger, consolidation, or the sale of) or the capital stock of such Guarantor subsidiary after which the applicable Guarantor subsidiary is no longer a subsidiary of the Company or the sale of all or substantially all of such Guarantor subsidiary’s assets (other than by lease);

(b) designation of any Guarantor subsidiary as an “excluded subsidiary” (as defined in the Indenture); and

(c) defeasance or satisfaction and discharge of the Indenture.

Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements. The accompanying condensed consolidating financial information has been presented on the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for the subsidiaries’ cumulative results of operations, capital contributions and distributions, and other changes in equity. Elimination entries include consolidating and eliminating entries for investments in subsidiaries, and intra-entity activity and balances.

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Condensed Consolidating Statement of Financial Position
As of December 31, 2019
(In Millions)
	Cleveland-Cliffs Inc.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	349.7			$	0.1			$	2.8			$	—			$	352.6
Accounts receivable, net	4.9				93.0				0.3				(4.2		)		94.0
Inventories	—				317.4				—				—				317.4
Derivative assets	—				45.8				—				—				45.8
Income tax receivable, current	58.6				—				—				—				58.6
Other current assets	9.1				13.0				7.4				—				29.5
Total current assets	422.3				469.3				10.5				(4.2		)		897.9
Non-current assets:
Property, plant and equipment, net	11.2				1,867.1				50.7				—				1,929.0
Income tax receivable, non-current	58.6				4.1				—				—				62.7
Deferred income taxes	458.3				—				1.2				—				459.5
Investment in subsidiaries	1,821.1				47.2				—				(1,868.3		)		—
Long-term intercompany notes	—				—				121.3				(121.3		)		—
Other non-current assets	15.1				121.4				18.2				—				154.7
TOTAL ASSETS	$	2,786.6			$	2,509.1			$	201.9			$	(1,993.8	)		$	3,503.8
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	5.7			$	187.5			$	4.2			$	(4.2	)		$	193.2
Accrued liabilities	80.7				45.5				0.1				—				126.3
State and local taxes payable	—				37.9				—				—				37.9
Other current liabilities	6.0				38.6				7.4				—				52.0
Total current liabilities	92.4				309.5				11.7				(4.2		)		409.4
Non-current liabilities:
Long-term debt	2,113.8				—				—				—				2,113.8
Pension and OPEB liabilities	80.5				496.9				(265.9		)		—				311.5
Environmental and mine closure obligations	—				145.6				19.3				—				164.9
Long-term intercompany notes	121.3				—				—				(121.3		)		—
Other non-current liabilities	20.7				120.3				5.3				—				146.3
TOTAL LIABILITIES	2,428.7				1,072.3				(229.6		)		(125.5		)		3,145.9
Commitments and contingencies
TOTAL EQUITY	357.9				1,436.8				431.5				(1,868.3		)		357.9
TOTAL LIABILITIES AND EQUITY	$	2,786.6			$	2,509.1			$	201.9			$	(1,993.8	)		$	3,503.8

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Condensed Consolidating Statement of Financial Position
As of December 31, 2018
(In Millions)
	Cleveland-Cliffs Inc.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	819.8			$	0.7			$	2.7			$	—			$	823.2
Accounts receivable, net	9.2				221.3				0.3				(4.1		)		226.7
Inventories	—				181.1				—				—				181.1
Derivative assets	0.1				91.4				—				—				91.5
Income tax receivable, current	117.3				—				—				—				117.3
Other current assets	10.0				16.9				12.9				—				39.8
Total current assets	956.4				511.4				15.9				(4.1		)		1,479.6
Non-current assets:
Property, plant and equipment, net	13.3				1,221.9				50.8				—				1,286.0
Income tax receivable, non-current	117.2				4.1				—				—				121.3
Deferred income taxes	463.6				—				1.2				—				464.8
Investment in subsidiaries	1,262.3				50.8				—				(1,313.1		)		—
Long-term intercompany notes	—				—				121.3				(121.3		)		—
Other non-current assets	8.0				153.8				16.1				—				177.9
TOTAL ASSETS	$	2,820.8			$	1,942.0			$	205.3			$	(1,438.5	)		$	3,529.6
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	5.3			$	181.4			$	4.2			$	(4.1	)		$	186.8
Accrued liabilities	92.7				66.1				0.1				—				158.9
State and local taxes payable	—				35.4				0.1				—				35.5
Other current liabilities	4.8				74.1				8.1				—				87.0
Total current liabilities	102.8				357.0				12.5				(4.1		)		468.2
Non-current liabilities:
Long-term debt	2,092.9				—				—				—				2,092.9
Pension and OPEB liabilities	64.3				414.4				(230.0		)		—				248.7
Environmental and mine closure obligations	—				152.1				19.9				—				172.0
Long-term intercompany notes	121.3				—				—				(121.3		)		—
Other non-current liabilities	15.3				99.5				8.8				—				123.6
TOTAL LIABILITIES	2,396.6				1,023.0				(188.8		)		(125.4		)		3,105.4
Commitments and contingencies
TOTAL EQUITY	424.2				919.0				394.1				(1,313.1		)		424.2
TOTAL LIABILITIES AND EQUITY	$	2,820.8			$	1,942.0			$	205.3			$	(1,438.5	)		$	3,529.6

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Condensed Consolidating Statement of Operations and Comprehensive Income
For the Year Ended December 31, 2019
(In Millions)
	Cleveland-Cliffs Inc.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Revenues from product sales and services	$	—			$	1,989.9			$	—			$	—			$	1,989.9
Cost of goods sold and operating expenses	—				(1,414.2		)		—				—				(1,414.2		)
Sales margin	—				575.7				—				—				575.7
Other operating income (expense):
Selling, general and administrative expenses	(100.7		)		(18.3		)		(0.4		)		—				(119.4		)
Miscellaneous - net	0.1				(26.0		)		(1.1		)		—				(27.0		)
Total other operating expense	(100.6		)		(44.3		)		(1.5		)		—				(146.4		)
Operating income (loss)	(100.6		)		531.4				(1.5		)		—				429.3
Other income (expense):
Interest income (expense), net	(99.4		)		(2.3		)		0.5				—				(101.2		)
Loss on extinguishment of debt	(18.2		)		—				—				—				(18.2		)
Other non-operating income (expense)	(4.0		)		(12.9		)		19.1				—				2.2
Total other income (expense)	(121.6		)		(15.2		)		19.6				—				(117.2		)
Income (loss) from continuing operations before income taxes	(222.2		)		516.2				18.1				—				312.1
Income tax expense	(17.0		)		(0.4		)		(0.2		)		—				(17.6		)
Equity in income of subsidiaries	531.6				18.3				—				(549.9		)		—
Income from continuing operations	292.4				534.1				17.9				(549.9		)		294.5
Income (loss) from discontinued operations, net of tax	0.4				(0.3		)		(1.8		)		—				(1.7		)
Net income attributable to Cliffs shareholders	$	292.8			$	533.8			$	16.1			$	(549.9	)		$	292.8
Other comprehensive income (loss)	(34.9		)		(35.8		)		16.9				18.9				(34.9		)
Total comprehensive income attributable to Cliffs shareholders	$	257.9			$	498.0			$	33.0			$	(531.0	)		$	257.9

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Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For the Year Ended December 31, 2018
(In Millions)
	Cleveland-Cliffs Inc.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Revenues from product sales and services	$	—			$	2,332.4			$	—			$	—			$	2,332.4
Cost of goods sold and operating expenses	—				(1,522.8		)		—				—				(1,522.8		)
Sales margin	—				809.6				—				—				809.6
Other operating income (expense):
Selling, general and administrative expenses	(86.1		)		(27.1		)		(0.3		)		—				(113.5		)
Miscellaneous - net	(0.3		)		(26.9		)		4.3				—				(22.9		)
Total other operating income (expense)	(86.4		)		(54.0		)		4.0				—				(136.4		)
Operating income (loss)	(86.4		)		755.6				4.0				—				673.2
Other income (expense):
Interest income (expense), net	(117.6		)		(2.1		)		0.8				—				(118.9		)
Loss on extinguishment of debt	(6.8		)		—				—				—				(6.8		)
Other non-operating income (expense)	(3.5		)		0.9				19.8				—				17.2
Total other income (expense)	(127.9		)		(1.2		)		20.6				—				(108.5		)
Income (loss) from continuing operations before income taxes	(214.3		)		754.4				24.6				—				564.7
Income tax benefit	474.7				—				0.5				—				475.2
Equity in income of subsidiaries	858.2				25.5				—				(883.7		)		—
Income from continuing operations	1,118.6				779.9				25.1				(883.7		)		1,039.9
Income from discontinued operations, net of tax	9.5				12.3				66.4				—				88.2
Net income attributable to Cliffs shareholders	$	1,128.1			$	792.2			$	91.5			$	(883.7	)		$	1,128.1
Other comprehensive loss	(244.9		)		(24.1		)		(256.7		)		280.8				(244.9		)
Total comprehensive income (loss) attributable to Cliffs shareholders	$	883.2			$	768.1			$	(165.2	)		$	(602.9	)		$	883.2

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Condensed Consolidating Statement of Operations and Comprehensive Income
For the Year Ended December 31, 2017
(In Millions)
	Cleveland-Cliffs Inc.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Revenues from product sales and services	$	—			$	1,866.0			$	—			$	—			$	1,866.0
Cost of goods sold and operating expenses	—				(1,398.4		)		—				—				(1,398.4		)
Sales margin	—				467.6				—				—				467.6
Other operating income (expense):
Selling, general and administrative expenses	(77.2		)		(19.9		)		(5.8		)		—				(102.9		)
Miscellaneous - net	(2.3		)		11.0				16.8				—				25.5
Total other operating income (expense)	(79.5		)		(8.9		)		11.0				—				(77.4		)
Operating income (loss)	(79.5		)		458.7				11.0				—				390.2
Other income (expense):
Interest income (expense), net	(126.8		)		(1.0		)		1.0				—				(126.8		)
Loss on extinguishment of debt	(165.4		)		—				—				—				(165.4		)
Other non-operating income (expense)	(4.0		)		(3.0		)		17.2				—				10.2
Total other income (expense)	(296.2		)		(4.0		)		18.2				—				(282.0		)
Income (loss) from continuing operations before income taxes	(375.7		)		454.7				29.2				—				108.2
Income tax benefit (expense)	251.4				1.3				(0.3		)		—				252.4
Equity in income of subsidiaries	512.6				11.8				—				(524.4		)		—
Income from continuing operations	388.3				467.8				28.9				(524.4		)		360.6
Income (loss) from discontinued operations, net of tax	(21.3		)		1.7				22.1				—				2.5
Net income	367.0				469.5				51.0				(524.4		)		363.1
Loss attributable to noncontrolling interest	—				3.9				—				—				3.9
Net income attributable to Cliffs shareholders	$	367.0			$	473.4			$	51.0			$	(524.4	)		$	367.0
Other comprehensive income (loss)	(4.0		)		12.9				(4.8		)		(8.1		)		(4.0		)
Total comprehensive income attributable to Cliffs shareholders	$	363.0			$	486.3			$	46.2			$	(532.5	)		$	363.0

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Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2019
(In Millions)
	Cleveland-Cliffs Inc.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Net cash provided (used) by operating activities	$	(50.0	)		$	616.3			$	(3.8	)		$	—			$	562.5
INVESTING ACTIVITIES
Purchase of property, plant and equipment	(1.2		)		(637.8		)		—				—				(639.0		)
Deposits for property, plant and equipment	—				(14.0		)		(3.0		)		—				(17.0		)
Intercompany investing	(63.9		)		(3.7		)		(0.1		)		67.7				—
Other investing activities	—				10.8				0.8				—				11.6
Net cash used by investing activities	(65.1		)		(644.7		)		(2.3		)		67.7				(644.4		)
FINANCING ACTIVITIES
Repurchase of common shares	(252.9		)		—				—				—				(252.9		)
Dividends paid	(72.1		)		—				—				—				(72.1		)
Proceeds from issuance of debt	720.9				—				—				—				720.9
Debt issuance costs	(6.8		)		—				—				—				(6.8		)
Repurchase of debt	(729.3		)		—				—				—				(729.3		)
Distributions of partnership equity	—				(44.2		)		—				—				(44.2		)
Intercompany financing	0.1				63.4				4.2				(67.7		)		—
Other financing activities	(14.9		)		8.6				(3.4		)		—				(9.7		)
Net cash provided (used) by financing activities	(355.0		)		27.8				0.8				(67.7		)		(394.1		)
Effect of exchange rate changes on cash	—				—				—				—				—
Decrease in cash and cash equivalents, including cash classified within other current assets related to discontinued operations	(470.1		)		(0.6		)		(5.3		)		—				(476.0		)
Less: decrease in cash and cash equivalents from discontinued operations, classified within other current assets	—				—				(5.4		)		—				(5.4		)
Net increase (decrease) in cash and cash equivalents	(470.1		)		(0.6		)		0.1				—				(470.6		)
Cash and cash equivalents at beginning of year	819.8				0.7				2.7				—				823.2
Cash and cash equivalents at end of year	$	349.7			$	0.1			$	2.8			$	—			$	352.6

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Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2018
(In Millions)
	Cleveland-Cliffs Inc.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Net cash provided (used) by operating activities	$	(120.7	)		$	741.0			$	(141.8	)		$	—			$	478.5
INVESTING ACTIVITIES
Purchase of property, plant and equipment	(1.2		)		(207.3		)		(0.1		)		—				(208.6		)
Deposits for property, plant and equipment	—				(82.3		)		(5.2		)		—				(87.5		)
Intercompany investing	399.1				(7.1		)		120.7				(512.7		)		—
Other investing activities	—				3.1				19.9				—				23.0
Net cash provided (used) by investing activities	397.9				(293.6		)		135.3				(512.7		)		(273.1		)
FINANCING ACTIVITIES
Repurchase of common shares	(47.5		)		—				—				—				(47.5		)
Debt issuance costs	(1.5		)		—				—				—				(1.5		)
Repurchase of debt	(234.5		)		—				—				—				(234.5		)
Distributions of partnership equity	—				(44.2		)		—				—				(44.2		)
Intercompany financing	(120.7		)		(402.4		)		10.4				512.7				—
Other financing activities	(2.1		)		(2.2		)		(43.2		)		—				(47.5		)
Net cash used by financing activities	(406.3		)		(448.8		)		(32.8		)		512.7				(375.2		)
Effect of exchange rate changes on cash	—				—				(2.3		)		—				(2.3		)
Decrease in cash and cash equivalents, including cash classified within other current assets related to discontinued operations	(129.1		)		(1.4		)		(41.6		)		—				(172.1		)
Less: decrease in cash and cash equivalents from discontinued operations, classified within other current assets	—				—				(17.0		)		—				(17.0		)
Net decrease in cash and cash equivalents	(129.1		)		(1.4		)		(24.6		)		—				(155.1		)
Cash and cash equivalents at beginning of year	948.9				2.1				27.3				—				978.3
Cash and cash equivalents at end of year	$	819.8			$	0.7			$	2.7			$	—			$	823.2

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Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2017
(In Millions)
	Cleveland-Cliffs Inc.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Net cash provided (used) by operating activities	$	(166.8	)		$	430.0			$	74.9			$	—			$	338.1
INVESTING ACTIVITIES
Purchase of property, plant and equipment	(3.4		)		(79.8		)		(51.7		)		—				(134.9		)
Deposits for property, plant and equipment	—				(11.7		)		(5.1		)		—				(16.8		)
Intercompany investments	225.7				(7.3		)		(45.1		)		(173.3		)		—
Other investing activities	(7.7		)		3.4				—				—				(4.3		)
Net cash provided (used) by investing activities	214.6				(95.4		)		(101.9		)		(173.3		)		(156.0		)
FINANCING ACTIVITIES
Net proceeds from issuance of common shares	661.3				—				—				—				661.3
Proceeds from issuance of debt	1,771.5				—				—				—				1,771.5
Debt issuance costs	(28.6		)		—				—				—				(28.6		)
Repurchase of debt	(1,720.7		)		—				—				—				(1,720.7		)
Acquisition of noncontrolling interest	(105.0		)		—				—				—				(105.0		)
Distributions of partnership equity	—				(52.9		)		—				—				(52.9		)
Intercompany financing	45.0				(277.6		)		59.3				173.3				—
Other financing activities	(5.8		)		(4.5		)		(16.4		)		—				(26.7		)
Net cash provided (used) by financing activities	617.7				(335.0		)		42.9				173.3				498.9
Effect of exchange rate on cash	—				—				3.3				—				3.3
Increase (decrease) in cash and cash equivalents, including cash classified within other current assets related to discontinued operations	665.5				(0.4		)		19.2				—				684.3
Less: increase in cash and cash equivalents from discontinued operations, classified within other current assets	—				—				18.8				—				18.8
Net increase (decrease) in cash and cash equivalents	665.5				(0.4		)		0.4				—				665.5
Cash and cash equivalents at beginning of year	283.4				2.5				26.9				—				312.8
Cash and cash equivalents at end of year	$	948.9			$	2.1			$	27.3			$	—			$	978.3

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•	We tested the operating effectiveness of internal controls related to the Company’s estimation of mineral reserve quantities and the related mine closure dates.

•	We evaluated the experience, qualifications and objectivity of management’s experts, including in-house mine engineers.

•	For an iron ore mine subject to the Company’s routine annual assessment we evaluated management’s assessment by:

◦	Understanding the process used by management to survey and analyze the geological and operational status of current year mine production.

◦	Evaluating the historical accuracy of management’s technical model as compared to actual mine production results.

◦	Comparing the mine plan, updated for current year depletion, to

▪	Presentations to the Audit Committee.

▪	Information by asset group, asset retirement obligation valuation models, and depreciation, depletion and amortization expense calculations.

•	For an iron ore mine subject to the Company’s periodic in-depth evaluation of its mineral reserve estimate:

◦	We evaluated management’s determination of the size and scope of the iron ore body, by:

▪	Understanding the process used by management to complete research and exploration activities including mineralized resource drill samples.

▪	Understanding the methodology utilized by management to apply the research and exploration data to the development of a technical model of the iron ore body.

▪	Evaluating the historical accuracy of management’s technical model as compared to actual mine production results.

◦	We evaluated management’s estimates of future iron ore prices, production costs and capital expenditures (the “financial assumptions”), by:

▪	Understanding and testing the methodology utilized by management for development of the

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▪	Evaluated management’s ability to accurately forecast future iron ore prices, production costs and capital expenditures by comparing actual results to management’s historical forecasts.

▪	Evaluated the reasonableness of management’s estimates of future iron ore prices to forecasted information included in analyst reports.

▪	Evaluated the reasonableness of management’s forecast for production costs and capital expenditures by comparing the forecasts to: (1) historical results and (2) internal communications to management and the Board of Directors.

◦	We evaluated management’s mine plan for the proven and probable mineral reserves, by:

▪	Understanding the process used by management to develop the mine plan for proven and probable mineral reserves applying key inputs such as the technical model of the iron ore body and the financial assumptions.

▪	Comparing the mine plan to

•	Presentations to the Audit Committee.

•	Historical mine plan(s).

•	Information by asset group, asset retirement obligation valuation models, and depreciation, depletion and amortization expense calculations.

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**	Confidential treatment requested and/or approved as to certain portions, which portions have been omitted and filed separately with the Securities and Exchange Commission.

***	Certain immaterial schedules and exhibits to this exhibit have been omitted pursuant to the provisions of Regulation S-K, Item 601(a)(5). A copy of any of the omitted schedules and exhibits will be furnished to the Securities and Exchange Commission upon request.

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