NEW YORK (TheStreet) -- In early 2011, Cliffs Natural Resources (CLF) made an all-in bet on recovering iron ore prices through a $4.9 billion acquisition of Quebec-based miner Consolidated Thompson. Within 18 months, iron ore prices plummeted to lows not seen since the depths of the financial crisis, and in January 2014, fledgling activist hedge fund Casablanca Capital bought $200 million of Cliffs' stock and said it had a plan to turn the company around.
For six months, Cliffs and Casablanca have battled over their competing strategies in what looks to be one of the thorniest activist investments in recent memory. If the price of iron ore has dropped nearly 50% since Cliffs signed its Consolidated Thompson deal, the company's shares have fallen almost as much since Casablanca disclosed its 5.2% stake in late January 2014.
In mid-March, after lengthy discussions between Casablanca and Cliffs over strategy and board seats, it appeared a settlement to bring a slate of Casablanca-nominated directors onto Cliffs' board was near. By April, Cliffs abruptly ended those talks and by May, the company insinuated that a successful hostile campaign by Casablanca could force the company to repurchase outstanding loans, triggering a liquidity crisis.
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