In June 2013, President Obama issued a memorandum directing EPA to develop carbon emission standards for both new and existing power plants under the Clean Air Act's New Source Performance Standards ("NSPS"). In October 2015, EPA promulgated a CPP which consists of NSPS regulating carbon dioxide from existing power plants at a level of approximately 32% below 2005 levels by 2030. The CPP would not regulate combined heat and power generating facilities such as at Northshore's Silver Bay Power. The CPP directed states to submit SIPs to EPA by September 2016, but during February 2016, the U.S. Supreme Court stayed the CPP immediately halting implementation. In March 2017, President Trump signed the Energy Independence Executive Order which called for, among other things, a review of the CPP and, if appropriate, reconsideration proceedings to suspend, revise, or rescind the rule. On the same day, Administrator Pruitt signed a notice indicating EPA’s intent to review and, if appropriate, to propose to revise or rescind the CPP. The U.S. Court of Appeals for the D.C. Circuit has been holding CPP litigation in abeyance since April 2017. During October 2017, following a review as directed by President Trump’s Energy Independence Executive Order, the EPA proposed a rule to repeal the CPP and accepted comments on the proposed rule until mid-January 2018. The ultimate outcome of these carbon emission standards is not expected in the near term.

Due to the ~~EPA's Tailoring Rule and~~ potential patchwork of federal, state or regional carbon restriction schemes, our business and customer base could suffer negative financial impacts over time as a result of increased energy, environmental and other costs to comply with the limitations that would be imposed on GHG emissions. We believe our exposure can be reduced substantially by numerous factors, including currently contemplated regulatory flexibility mechanisms, such as allowance allocations, fixed process emissions exemptions, offsets and international provisions; emissions reduction opportunities, including energy efficiency, biofuels and fuel flexibility; and business opportunities associated with pursuing combined heat and power partnerships and new products, including DR-grade pellets, HBI, fluxed pellets and other efficiency-improving technologies.

We have worked proactively to develop a comprehensive, enterprise-wide GHG management strategy aimed at considering all significant aspects associated with GHG initiatives to plan effectively for and manage climate change issues, including risks and opportunities as they relate to the environment; stakeholders, including shareholders and the public; legislative and regulatory developments; operations; products and markets.

Regional Haze FIP Rule

In June 2005, the EPA finalized amendments to its regional haze ~~rules. The~~ rules that require states to establish goals and emission reduction strategies for improving visibility in all Class I national parks and wilderness areas to natural background levels by 2064. Among the states with Class I areas are Michigan and Minnesota, in which we currently own mining operations, and ~~manage mining~~Indiana, in which we own steelmaking operations. The first phase of the regional haze rule required analysis and installation of ~~Best Available Retrofit Technology ("BART")~~BART on eligible emission sources and incorporation of BART and associated emission limits into SIPs.

EPA disapproved Minnesota's and Michigan's BART SIPs for taconite furnaces and instead promulgated a Taconite Regional Haze FIP in February 2013. We ~~along with other stakeholders,~~ petitioned the Eighth Circuit Court of Appeals for a review of the FIP and ~~in May 2013, we~~ filed a joint motion for stay of the 2013 FIP, which was granted in June 2013. We ~~along with the other stakeholders,~~ reached a settlement agreement with EPA, ~~to resolve certain items in the 2013 FIP. The settlement agreement,~~ which was subsequently published in the Federal Register ~~in January 2015 and fully executed in April 2015, prompted EPA to grant partial reconsideration of the 2013 FIP in July 2015. Subsequently, EPA published a FIP revision final rule~~ to implement components of the settlement agreement in April 2016, with an effective date of May 12, 2016. We believe the 2016 Regional Haze FIP reflects progress toward a more technically and economically feasible regional haze implementation plan. In November 2016, the Eighth Circuit Court of Appeals terminated the June 2013 stay and extended the deadlines in the original 2013 FIP. Cost estimates associated with implementation of the 2013 and 2016 FIPs are reflected in our five-year capital plan.

Due to inconsistencies in language describing the procedures for calculating NO_xNOx emission limits between the settlement agreement and the 2016 FIP final rule, we jointly filed a Petition for Reconsideration and Petition for Judicial Review in June 2016. We have been working toward a settlement agreement with EPA to resolve the outstanding issue with the emission limit calculation method and anticipate resolution of the issue in ~~2019.~~2021. The outcome of this proceeding is not expected to have a material adverse impact on us.

In 2020, the states began a second decadal review, which examined if additional technological controls are warranted for certain sources. The states are required to submit their updated Regional Haze SIPs by July 2021. At this time, we do not expect any state will require additional emission control requirements on our operations. We will review and comment on SIPs as necessary in the ~~business.~~states in which we operate.

NO₂Conductivity

Conductivity, the measurement of water’s ability to conduct electricity, is a surrogate parameter that generally increases as the amount of dissolved minerals in water increases. In December 2016, EPA issued a notice soliciting public comments on its draft guidance, Field-Based Methods for Developing Aquatic Life Criteria for Specific Conductivity. In April 2017, comments were submitted by our trade associations providing objective evidence indicating the draft methodology was scientifically flawed and SO₂ ~~NAAQS~~unfit for promulgation. EPA confirmed in October 2019 that the 2016 draft guidance was rescinded in accordance with an August 2019 EPA memorandum regarding draft guidance documents and further expressed that EPA must update the science and subject future recommended methods or criteria for conductivity to peer review and public comment. Although the adoption of the previously proposed methodology is unlikely in the states, the Fond du Lac Band in Minnesota adopted certain conductivity criteria in 2020. We are assessing the impact of those criteria on our Minnesota iron ore mining and pelletizing operations and evaluating methods to challenge the criteria as a whole or on a site-by-site basis.

~~During~~Definition of “Waters of the United States” Under the Clean Water Act

The EPA and Army Corps of Engineers published a final rule in October 2019 repealing the 2015 rule that was to become effective on December 23, 2019. On April 21, 2020, the EPA and the Department of the Army published the Navigable Waters Protection Rule in the Federal Register to finalize a revised definition of “waters of the United States” under the Clean Water Act. For the first time, the agencies have streamlined the definition so that it includes four simple categories of jurisdictional waters, provides clear exclusions for many water features that traditionally have not been regulated, and defines terms in the regulatory text that have never been defined before. The rule is on

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appeal in various jurisdictions. The rule is not expected to have a material adverse effect on us, but we will continue to assess the potential impacts to our operations.

Regulation of Discharges to Groundwater

In general, states traditionally have regulated discharges of pollutants to groundwater through various programs such as wellhead protection programs and regulations related to remediation. In April 2020, the United States Supreme Court held in County of Maui v. Hawaiʻi Wildlife Fund that EPA (and delegated states) have jurisdiction under the NPDES program if the discharge to groundwater is the “functional equivalent” of a discharge to waters of the United States. Until now, the NPDES program has only regulated direct discharges to waters of the United States from point sources. EPA subsequently issued a guidance document on what the term “functional equivalent” means. Although we do not anticipate that broadening EPA jurisdiction over groundwater discharges will materially adversely affect our operations, the impact to our operations is not reasonably estimable at this time.

Raw Materials and Energy

Our steelmaking operations require iron ore, coke, coal, ferrous and carbon and stainless scrap, chrome, nickel and zinc as primary raw materials. We also consume natural gas, electricity, industrial gases and diesel fuel at our steelmaking and mining operations. As a vertically integrated steel company, we are able to internally supply a majority of our raw materials needed for our steelmaking operations. We also attempt to reduce the risk of future supply shortages and price volatility in other ways. If multi-year contracts are available in the marketplace for those raw materials that we cannot supply internally, we may use these contracts to secure sufficient supply to satisfy our key raw material needs. When multi-year contracts are not available, or are not available on acceptable terms, we purchase the remainder of our raw materials needs under annual contracts or conduct spot purchases. We also regularly evaluate alternative sources and substitute materials. Additionally, we may hedge portions of our energy and raw materials purchases to reduce volatility and risk. We believe that we have secured, or will be able to secure, adequate supply to fulfill our raw materials and energy requirements for 2021.

The raw materials needed to produce a ton of steel will fluctuate based upon the specifications of the final steel products, the quality of raw materials and, to a lesser extent, differences among steel production equipment. For example, generally, in our integrated steelmaking facilities, we consume approximately 1.4 net tons of coal to produce one net ton of coke. The process to produce one ton of raw steel generally requires approximately 1.4 net tons of iron ore pellets, 0.4 net tons of coke and 0.3 net tons of steel scrap. At normal operating levels, we also consume approximately 6 MMBtu’s of natural gas per net ton produced. Additionally, on average, our EAF's require 1.1 net tons of ferrous or stainless scrap to produce one net ton of high quality steel. We consume approximately 420 kilowatt-hours of electricity per net ton of steel produced. While these estimated consumption amounts are presented to give a general sense of raw material and energy consumption used in our steel production, substantial variations may occur.

Our investment into HBI production provides us access, when needed, to clean iron units in order to make advanced steel and stainless products. This access to our own production provides us flexibility and allows us to avoid the risks and carbon footprints of imported iron substitutes. Iron substitutes imported into the U.S. are traditionally sourced from regions of the world that have historically experienced greater political turmoil and have lower pollution standards than the U.S. Our investment demonstrates our raw material and company strategy in responsibly managing the risks of pricing, availability and overall carbon footprint of our critical inputs.

We typically purchase ferrous and stainless steel scrap, natural gas, a substantial portion of our electricity and most other raw materials at prevailing market prices, which may fluctuate with market supply and demand.

Iron Ore

We own or co-own five active iron ore mines in Minnesota and Michigan. Based on our ownership in these mines, our share of annual rated iron ore production capacity is approximately 28.0 million long tons, which supplies all of the iron ore needed for our steelmaking operations. Refer to Part I - Item 2. Properties for additional information.

Coke and Coal

We own five cokemaking facilities, including two coke batteries located within our steelmaking facilities. These facilities currently provide over half of ~~2010, EPA promulgated rules~~the coke requirements for our steelmaking operations and have an annual rated capacity of approximately 3.9 million tons. Additionally, we have coke supply agreements with suppliers that ~~required each state~~provide our remaining requirements. Our purchases of coke are made under annual or multi-year agreements

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with periodic price adjustments. We typically purchase most of our metallurgical coal under annual fixed-price agreements. We have annual rated metallurgical coal production capacity of 2.3 million net tons from our Princeton mine, which supplies a portion of our metallurgical coal needs. We believe there are adequate external supplies of coke and coal available at competitive market prices to ~~use~~meet our needs. Refer to Part I - Item 2. Properties for additional information.

Steel Scrap and Other Materials

Generally, approximately 43% of our steel scrap requirements are generated internally through normal operations. We believe that supplies of steel scrap, chrome, nickel and zinc adequate to meet the needs of our steelmaking operations are readily available from outside sources at competitive market prices.

Energy

We consume a large amount of natural gas, electricity, industrial gases and diesel fuel, which are significant costs to our operations. The majority of our energy requirements are purchased from outside sources. Access to long-term, low cost sources of energy in various forms is critically important to our operations.

Natural gas is procured for our operations utilizing a combination of ~~air quality monitoring~~long-term, annual, quarterly, monthly and ~~computer modeling~~spot contracts from various suppliers at market-based pricing. We believe access to ~~determine each state's attainment classification status against new one-hour NO~~₂low-cost and SO₂ ~~NAAQS. During the third quarter~~reliable sources of ~~2011, the EPA issued guidance~~natural gas is available to ~~the regulated community on conducting refined air quality dispersion modeling and implementing the new NO~~₂ ~~and SO~~₂ ~~standards. In 2012, Minnesota issued Administrative Orders ("AOs") requiring taconite facilities to conduct modeling to demonstrate compliance with the NO~~₂ ~~and SO~~₂ ~~NAAQS pursuant to the Taconite Regional Haze SIP Long Term Strategy ("LTS"). Compliance with the LTS modeling demonstrations was originally set~~meet our operations’ requirements.

We purchase electricity for June 2017, but Minnesota has not advanced work on its 2012 AOs and is expected to remove NAAQS modeling obligations under the LTS in light of reduction in haze emissions associated with implementation of the taconite Regional Haze FIP regulations.

~~All~~all of our operations in ~~Minnesota and Michigan are expected~~either regulated or deregulated markets. Due to ~~be in attainment for NO~~₂ ~~and SO~~₂ ~~NAAQS without incurring additional capital investment. While~~the distinct nature of these markets, we ~~will continue~~procure electricity through either long-term or annual contracts. Some operations also use self-generated coke oven gas and/or blast furnace gas to ~~monitor these developments and assess potential impacts, we do not anticipate further capital investments will be necessary~~produce electricity, which reduces our need to ~~address NO~~₂ ~~and SO~~₂ ~~NAAQS requirements at this time.~~

~~CERCLA 108(b)~~

In December 2016, EPA published a proposed amendment to CERCLA section 108(b) which is focused on developing financial assurance for managing hazardous substances in the hardrock mining industry. EPA had a court-mandated deadline for publication of the final rule by December 1, 2017. The proposed rule would have required hardrock mining facilities to calculate their level of financial responsibility based on a formula included in the rule, secure an instrument or otherwise self-insure for the calculated amount, demonstrate to EPA the proof of the security, and maintain the security until EPA releases facilitiespurchase electricity from the CERCLA 108(b) regulations. The iron mining industry notified EPA of several errors upon which EPA drafted the rule, including a mistaken reliance on reporting data from a wholly different industry sector (iron and steel toxic release inventory reporting).external sources. We also ~~participated~~closely monitor developments at the state and federal levels that could impact electricity availability or cost and incorporate such changes into our electricity supply strategy in ~~developing industry specific and national trade association comments and advocating directly with EPA and the White House Office~~order to maintain reliable, low-cost supply. We believe there is an adequate supply of Management & Budget to address this and other errors with goals of exempting iron ore mining from CERCLA 108(b) applicability and correcting other deficiencies with the proposed rule. On December 1, 2017 EPA signed a federal register notice of EPA's decision not to issue final regulations for financial responsibility requirements for the hardrock mining industry under section 108(b) of CERCLA because EPA determined that the risks associated with these facilities' operations are addressed by existing federal and state programs and regulations and modern industry practices. In 2018, several environmental groups filed a challenge to EPA's decision to not issue a final rule. This challenge is anticipated to be decided by the courts during 2019. Cliffs is participating as part of the industry intervenor party via representation through the American Iron and Steel Institute and will continue to participate in and monitor the challenge as it proceeds.

~~Energy~~

~~Electricity~~

WEPC is the sole supplier of electric power to our Tilden mine. During April 2015, the Tilden mine executed a special electricity contract with WEPC. The term of the contract is through 2019. WEPC provides 170 megawatts ofcompetitively priced electricity to Tilden at special rates that are regulated by the MPSC. The pricing under this contract is generally fixed except Tilden is subject to frequent changes in WEPC's power supply adjustment factor. During August 2016, Tilden executed a new 20-year special contract with WEPC that is anticipated to start on June 1, 2019 and would replace the previous special contract.

Minnesota Power supplies electric power to the Hibbing and United Taconite mines. During September 2008, Hibbing finalized an agreement with terms from November 2008 through December 2015. The agreement was approved by the MPUC in 2009. The terms of the agreement included an automatic five-year extension that began January 2016. The United Taconite mine executed a new ten-year agreement with Minnesota Power that also included Northshore's Babbitt Mine. This agreement was finalized in May 2016 and was approved by the MPUC in November 2016.

~~Silver Bay Power, a wholly-owned subsidiary with a 115 megawatt power plant, is able to provide the majority of Northshore’s electrical energy~~fulfill our requirements. Silver Bay Power has an interconnection agreement with Minnesota Power for backup power when excess generation is necessary. In May 2016, Silver Bay Power entered into an agreement with Minnesota Power to purchase roughly half of Northshore's electricity needs from Minnesota Power through 2019. Beginning January 1, 2020, Silver Bay Power will purchase 100% of the electricity requirements of Northshore from Minnesota Power and Silver Bay Power plans to idle both of its generating units except under certain circumstances.

~~Process and Diesel Fuel~~

We purchase industrial gases under long-term contracts with various suppliers. We believe we have ~~a long-term contract providing for the transport~~access to adequate supplies of ~~natural gas on the Northern Natural Gas Pipeline~~industrial gases to meet our needs.

We predominantly purchase diesel fuel for our ~~Mining and Pelletizing segment operations. Tilden has the capability~~mining operations under long-term contracts with various suppliers.We believe we have access to adequate supplies of burning natural gas, coal or, to a lesser extent, oil. Hibbing and Northshore have the capability to burn natural gas and oil. United Taconite has the ability to burn coal, natural gas and petroleum coke. Consistent with 2018, we expect that during 2019 our Mining and Pelletizing segment operations will utilize both natural gas and coal to heat furnaces and produce power at our Silver Bay Power facility.

~~All of our mines utilize diesel fuel mainly for our mobile fleet. Thompson Gas supplies~~ diesel fuel to ~~all of~~meet our Mining and Pelletizing segment locations from various refineries in the Midwest. Our contracts with Thompson Gas expired at the end of 2018, and the parties are negotiating extensions on these supply agreements.needs.

~~Employees~~Human Capital

As of December 31, ~~2018,~~2020, we ~~had~~employed approximately 25,000 people. Approximately 24,000 were employed in the U.S., with the remainder employed in Ontario, Canada. Approximately 24,000 employees were employed at production facilities, with the balance employed in corporate support roles. The vast majority of our approximately 20,000 hourly employees were subject to collective bargaining agreements (approximately 18,500) with various labor unions. Overall, we have good relations with our workforce and the labor unions that represent our hourly employees.

We believe that our future success largely depends upon our continued ability to attract and retain a ~~total~~highly skilled workforce. We provide our employees with competitive salaries, incentive-based bonus programs that provide above-market compensation opportunities when the Company performs well, development programs that enable continued learning and growth, and a robust benefit package that promotes well-being across all aspects of ~~2,926~~their lives, including health care, retirement planning and paid time off. In addition to these programs, we have used targeted, equity-based grants with vesting conditions to facilitate retention of key personnel. These tools have enabled us to increase the retention of key personnel, including our corporate and site leadership teams and critical technical talent.

The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health, safety and wellness of our employees.

2018 2017 2016
Mining and Pelletizing segment - Salaried¹
514
503
485
Mining and Pelletizing segment - Hourly^1,3
2,208
2,182
2,189
Metallics segment - Salaried 26
6
—
Discontinued Operations - Salaried²
2
79
86
Corporate & Support Services - Salaried 176
168
167
Total 2,926
2,938
2,927

¹ Includes our employees and our employees of the joint venture contained within our Mining and Pelletizing segment.
² Excludes contracted mining employees.
³ Excludes employees considered on lay-off status as a result of an indefinite or temporary idle.

~~Hourly~~ We provide our employees and their families with access to a variety of innovative, flexible and convenient health and wellness programs, including benefits that provide protection and security so they can have peace of mind concerning events that may require time away from work or that impact their financial well-being; that support their physical and mental health by providing tools and resources to help them improve or maintain their health and encourage engagement in healthy behaviors; and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families. In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations. This includes having all employees who could perform their work remotely work from home, while implementing numerous safety measures for employees continuing critical on-site work at our Michigan and Minnesota iron ore mining operations, excluding Northshore, are represented by the USW and are covered by labor agreements between the USW and our various operating entities. These labor agreements cover approximately 1,800 active USW-represented employees at our Empire and Tilden mines in Michigan, and our United Taconite and Hibbing mines in Minnesota and are valid through September 30, 2022. Employees at our Northshore operations are not represented by a union and are not, therefore, covered by a collective bargaining agreement.operations.

Hourly employees at our LS&I railroads in Michigan are represented by seven unions covering approximately 100 employees. These labor agreements are covered by the Railway Labor Act and are subject to reopening for bargaining in 2020.

Salaried employees at our Mining and Pelletizing segment, Metallics segment, Corporate and Support Services are not represented by a union and are not, therefore, covered by collective bargaining agreements.

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Safety

~~Safety~~Safe production is our primary core value as we continue toward achieving a zero injury culture at ~~all of~~ our facilities. We constantly monitor ~~measure and track~~ our safety performance and make continuous improvements to affect change. Best practices and incident learnings are shared globally to ensure each ~~mine site~~facility can ~~effectively~~ administer ~~our~~the most effective policies and procedures for enhanced workplace safety. Progress toward achieving our objectives is accomplished through a focus on proactive sustainability initiatives, and results are measured against established industry and company benchmarks, including our company-wide Total Reportable Incident ~~Rate ("TRIR").~~Rate. During ~~2018,~~2020, our ~~TRIR~~Total Reportable Incident Rate (including contractors) was ~~1.20~~0.92 per 200,000 ~~man-hours~~hours worked.

Refer to Exhibit95 Mine Safety Disclosures (filed herewith) for mine safety information required in accordance with Section 1503(a) of the Dodd-Frank Act.

Available Information

Our headquarters are located at 200 Public Square, Suite 3300, Cleveland, Ohio 44114-2315, and our telephone number is (216) 694-5700. We are subject to the reporting requirements of the Exchange Act and its rules and regulations. The Exchange Act requires us to file reports, proxy statements and other information with the SEC.

The SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s home page at www.sec.gov.

We use our website, www.clevelandcliffs.com,, as a channel for routine distribution of important information, including news releases, investor presentations and financial information. We also make available, free of charge on our website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file these documents with, or furnish them to, the SEC. In addition, our website allows investors and other interested persons to sign up to receive automatic email alerts when we post news releases and financial information on our website.

We also make available, free of charge, ~~on our website,~~ the charters of the Audit Committee, Strategy and Sustainability Committee, Governance and Nominating Committee and Compensation and Organization Committee as well as the Corporate Governance Guidelines and the Code of Business Conduct and Ethics adopted by our Board of Directors. These documents are available through our investor relations page on our website at www.clevelandcliffs.com. The SEC filings are available by selecting “Financial Information” and then “SEC Filings,” and corporate governance materials are available by selecting “Corporate Governance” for the Board Committee Charters, operational governance guidelines and the Code of Business Conduct and Ethics.

References to our website or the SEC’s website do not constitute incorporation by reference of the information contained on such websites, and such information is not part of this Annual Report on Form 10-K.

Copies of the above-referenced information are also available, free of charge, by calling (216) 694-5700 or upon written request to:

Cleveland-Cliffs Inc.

Investor Relations

200 Public Square, Suite 3300

Cleveland, OH 44114-2315

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS ~~OF THE REGISTRANT~~

Following are the names, ages and positions of the executive officers of the Company as of February ~~8, 2019.~~26, 2021. Unless otherwise noted, all positions indicated are or were held with Cleveland-Cliffs Inc.



Name			Age	Position(s) Held
Lourenco Goncalves			6163	Chairman, President and Chief Executive Officer (August 2014 – present); and Chairman, President and Chief Executive Officer of Metals USA Holdings Corp., anAmerican manufacturer and processor of steel and other metals (May 2006 – April2013).
Clifford T. Smith			5961	Executive Vice President, Chief Operating Officer (January 2019 – present); Executive Vice President, Business Development (April 2015 – ~~December 2018); and~~ January 2019).
Keith A. Koci			56	Executive Vice President, ~~Seaborne Iron Ore (January 2014~~Chief Financial Officer (February 2019 – ~~April 2015)~~present); and Senior Vice President and Chief Financial Officer, Metals USA Holdings Corp. (2013 – February 2019).
Terry G. Fedor			5456	Executive Vice President, Chief Operating Officer, Steel Mills (March 2020 – present); Executive Vice President, Operations (February 2019 – March 2020); and Executive Vice President, U.S. Iron Ore (January 2014 – ~~present); and VicePresident, U.S. Iron Ore Operations (February 2011 –~~ January ~~2014)~~2019).
~~Timothy K. Flanagan~~Traci L. Forrester			4149	Executive Vice President, ~~Chief Financial Officer~~Business Development (May 2019 – present); Vice President (January 2018 – May 2019); Deputy General Counsel & Assistant Secretary (January 2017 – ~~present); Treasurer (March 2016~~– ~~December 2017~~)May 2019); and ~~Vice President, Corporate Controller and Chief Accounting Officer (March 2012~~Assistant General Counsel (August 2013 – ~~December 2016)~~January 2017).
James D. Graham			5355	Executive Vice President (November 2014 – present); Chief Legal Officer (March 2013 – present); and Secretary (March 2014 – present)~~; and Vice President (January 2011 – October 2014)~~.
Maurice D. Harapiak			5759	Executive Vice President, Human Resources (March 2014 – present); and Chief Administration Officer (January 2018 – present)~~; and Regional Director, Human Resources - Barrick Gold of North America, a gold mining company (November2011 – March 2014)~~.
~~Terrence R. Mee~~Kimberly A. Floriani			4938	~~Executive Vice President, Global Commercial (October 2014 - present); and Vice President, Global Iron Ore Sales (February 2014 – October 2014).~~
~~R. Christopher Cebula~~	48	Vice President, Corporate Controller & Chief Accounting Officer ~~(February 2017~~(April 2020 – present); ~~and Senior~~ Director, ~~Corporate~~Accounting & Reporting (August 2015 – April 2020); Manager, Financial ~~Planning & Analysis (April 2013~~Reporting (January 2012 – ~~February 2017)~~August 2015).

All executive officers serve at the pleasure of the Board. There are no arrangements or understandings between any executive officer and any other person pursuant to which an executive officer was selected to be an officer of the Company. There is no family relationship between any of our executive officers, or between any of our executive officers and any of our directors.

~~As part~~

Table of our strategy to protect our core Mining and Pelletizing operations, we have sold or otherwise disposed of several non-core assets, such as our North American Coal assets. Some of the transactions under which we sold or otherwise disposed of our non-core assets included provisions transferring certain liabilities to the purchasers or acquirers of those non-core assets. While we believe that all such transfers were completed properly and are legally binding, if the purchaser fails to fulfill its obligations, we may be at risk that some court or regulatory body could disagree and determine that we remain responsible for liabilities we intended to and did transfer.Contents

~~Our ability to collect payments from our customers depends on their creditworthiness.~~

Our ability to receive payment for products sold and delivered to our customers depends on the creditworthiness of our customers. Generally, we deliver our Mining and Pelletizing products to our customers’ facilities in advance of payment for those products. Under this practice for most of our customers, title and risk of loss with respect to Mining and Pelletizing products does not pass to the customer until payment for the pellets is received; however, there is typically a period of time in which pellets, for which we have reserved title, are within our customers’ control. Where we have identified credit risk with certain customers, we have put in place alternate payment terms from time to time.

Customers outside of the U.S. may be subject to pressures and uncertainties that may affect their ability to pay, including trade barriers, exchange controls, and local, economic and political conditions. Downturns in the economy and disruptions in the global financial markets have affected the creditworthiness of our customers from time to time. Some of our customers are highly leveraged. If economic conditions worsen or prolonged global, national or regional economic recession conditions return, it is likely to impact significantly the creditworthiness of our customers and could, in turn, increase the risk we bear on payment default for the credit we provide to our customers and could limit our ability to collect receivables. Failure to receive payment from our customers for products that we have delivered could affect adversely our results of operations, financial condition and liquidity.

~~Our operating expenses could increase significantly if the price of electrical power, fuel or other energy sources increases.~~

Our mining operations require significant use of energy. Energy expenses, which make up approximately 20% to 25% in the aggregate of our operating costs in our Mining and Pelletizing locations, are sensitive to changes in electricity prices and fuel prices, including diesel fuel and natural gas prices. Prices for electricity, natural gas and fuel oils can fluctuate widely with availability and demand levels from other users. During periods of peak usage, supplies of energy may be curtailed and we may not be able to purchase them at historical rates. A disruption in the transmission of energy, inadequate energy transmission infrastructure, or the termination of any of our energy supply contracts could interrupt our energy supply and affect adversely our operations. While we have some long-term contracts with electrical suppliers, we are exposed to fluctuations in energy costs that can affect our production costs. As an example, our mines in Minnesota are subject to changes in Minnesota Power’s rates, such as periodic rate changes that are reviewed and approved by the state public utilities commission in response to an application filed by Minnesota Power. We also enter into market-based pricing supply contracts for natural gas and diesel fuel for use in our operations. Those contracts expose us to price increases in energy costs, which could cause our profitability to decrease significantly. In addition, U.S. public utilities may pass through additional capital and operating cost increases to their customers related to new or pending U.S. environmental regulations that may require significant capital investment and use of cleaner fuels in the future and which may impact U.S. coal-fired generation capacity.

~~We are subject to a variety of financial market risks.~~

Financial market risks include those caused by changes in the value of investments, changes in commodity prices, interest rates and foreign currency exchange rates. We have established policies and procedures to manage such risks; however, certain risks are beyond our control and our efforts to mitigate such risks may not be effective. These factors could have a material adverse effect on our results of operations.

Changes in credit ratings issued by nationally recognized statistical rating organizations could adversely affect our cost of financing and the market price of our securities.

Credit rating agencies could downgrade our ratings ~~either~~ due to various developments, including matters arising out of the AK Steel Merger or the AM USA Transaction, incurring additional indebtedness and other factors specific to our ~~business,~~businesses, a prolonged cyclical downturn in the steel and mining industries, whether due to the COVID-19 pandemic or ~~steel industry,~~otherwise, or macroeconomic trends (such as global or regional recessions), and trends in credit and capital markets more generally. Any decline in our credit ratings may result in an increase to our cost of future financing ~~and~~or limit our access to the capital markets, which ~~would~~could harm our financial condition, ~~and results of operations,~~ hinder our ability to refinance existing indebtedness on acceptable terms, or have an adverse effect on the market price of our securities and ~~may affect adversely~~ the terms under which we purchase goods and services.

Our actual operating results may differ significantly from our guidance.

From time to time, we release guidance, including that set forth under “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations-Outlook”~~Operations–Outlook” in our Annual Reports on Form 10-K and our Quarterly Reports on Form 10-Q, regarding our future performance. This guidance, which consists of forward-looking statements, is prepared by our management and is qualified by, and subject to, the assumptions and the other information included in our Annual Reports on Form 10-K and our Quarterly Reports on Form 10-Q. Our guidance is not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither our independent registered public accounting firm nor any other independent or outside party compiles or examines the guidance and, accordingly, no such person expresses any opinion or any other form of assurance with respect thereto.

Guidance is based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. The principal reason that we release such data is to provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any such ~~persons.~~

third parties.

Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results will vary from the guidance. Investors should also recognize that the reliability of any forecasted financial data diminishes the further in the future that the data are forecast. In light of the foregoing, investors are urged to put the guidance in context and not to place undue reliance on it.

Any failure to successfully implement our operating strategy or the occurrence of any of the ~~events or circumstances set forth~~risks described in our Annual Reports on Form 10-K or our Quarterly Reports on Form 10-Q could result in actual operating results being different than the guidance, and such differences may be adverse and material.

~~We rely on our joint venture partners to meet their payment obligations and we are subject to risks involving the acts or omissions of our joint venture partners.~~

~~We co-own and manage one of our four operating Mining and Pelletizing mines with ArcelorMittal and U.S. Steel. We rely on our joint venture partners to make their~~ required capital contributions and to pay for their share of the iron ore produced. One of our Mining and Pelletizing joint venture partners is also our customer. If one or both of our joint venture partners fail to perform their obligations, the remaining joint venture partners, including ourselves, may be required to assume additional material obligations, including significant capital contribution, costs of environmental remediation, pension and postretirement health and life insurance benefit obligations. For example, a premature closure of a mine due to the failure of a joint venture partner to perform its obligations could result in significant fixed mine-closure costs, including severance, employment legacy costs and other employment costs; reclamation and other environmental costs; and the costs of terminating long-term obligations, including energy and transportation contracts and equipment leases.

We cannot control the actions of our joint venture partners because we have a minority interest in such joint venture. Further, in spite of performing customary due diligence prior to entering into a joint venture, we cannot guarantee full disclosure of prior acts or omissions of the sellers or those with whom we may in the future enter into joint ventures. Such risks could have a material adverse effect on the business, results of operations or financial condition of our existing or future joint venture interests.

Our assets as of December 31, ~~2018~~2020 include a deferred tax asset, the full value of which we may not be able to realize.

We recognize deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities. At December 31, ~~2018,~~2020, the net deferred tax asset was ~~approximately $464.8~~$492 million, primarily related to U.S. ~~net operating loss carryforwards.~~NOLs. We regularly review our deferred tax assets for recoverability based on our history of earnings, expectations for future earnings and expected timing of reversals of temporary differences. Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income. We believe the recorded net deferred tax asset at December 31, ~~2018~~2020, is fully realizable based on our expected future earnings. However, our assumptions and estimates are inherently subject to business, economic and competitive uncertainties and contingencies, many of which are beyond our control and some of which may change. As a result, we could ultimately lose a portion of our deferred tax asset related to ~~net operating loss carryforwards~~NOLs due to expiration, which could have a material adverse effect on our results of operations and cash flows.

The ability to use our NOLs and certain other tax attributes to offset future taxable income may be subject to certain limitations.

If a corporation undergoes an “ownership change” within the meaning of Section 382 of the IRC, the corporation’s NOLs and certain other tax attributes arising before the “ownership change” are subject to limitations after the “ownership change.” An “ownership change” under Section 382 of the IRC generally occurs if one or more

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shareholders or groups of shareholders who own at least 5% of the corporation’s equity increase their ownership in the aggregate by more than 50 percentage points over their lowest ownership percentage within a rolling period that begins on the later of three years prior to the testing date and the date of the last “ownership change.” If an “ownership change” were to occur, Section 382 of the IRC would impose an annual limit on the amount of pre-ownership change NOLs and other tax attributes the corporation could use to reduce its taxable income, potentially increasing and accelerating the corporation’s liability for income taxes, and also potentially causing tax attributes to expire unused. The amount of the annual limitation is determined based on a corporation’s value immediately prior to the ownership change.

As of December 31, 2020, after taking into account limitations (or disallowance) on use, we had $2,510 million and $1,009 million of available U.S. federal and state NOLs, respectively, including amounts acquired in the AK Steel Merger. The use of our common shares in the Acquisitions in conjunction with subsequent issuances or sales of our shares (including transactions that are outside of our control) could cause us to experience an “ownership change.” If we experience an “ownership change” under Section 382 of the IRC, further limitations (or disallowances) may apply and similar rules may also apply under state and foreign laws. Consequently, we may not be able to utilize a material portion of our NOLs and other tax attributes, which, in addition to increasing our U.S. federal and state income tax liability, could adversely affect our share price, financial condition, results of operations and cash flows.

Holders of our common shares may not receive dividends on ~~the~~their common shares.

We are not required to declare cash dividends on our common shares and, in April 2020, we announced the suspension of future dividends. Holders of our common shares are entitled to receive only such dividends as our Board ~~of Directors~~ may from time to time declare out of funds legally available for such payments. We are incorporated in Ohio and governed by the Ohio General Corporation Law, which allows a corporation to pay dividends, in general, in an amount that cannot exceed its surplus, as determined under Ohio law. Our ability to pay dividends will be subject to our future earnings, capital requirements and financial condition, as well as our compliance with covenants and financial ratios related to existing or future indebtedness, business prospects and other factors that our Board may deem relevant. Additionally, our ABL Facility contains, and agreements governing any of our future debt may contain, covenants and other restrictions that, in certain circumstances, could limit the level of dividends that we are able to pay on our common shares. ~~Although~~

IV. OPERATIONAL RISKS

We face significant risks relating to our recent acquisitions of the AK Steel and ArcelorMittal USA businesses.

During 2020, we ~~recently have declared~~completed both the AK Steel Merger and the AM USA Transaction. These recent transformative acquisitions involve a number of significant risks and uncertainties that may adversely affect us, including the following:

•inability to realize anticipated synergies or other expected benefits or cost savings;

•additional debt incurred or assumed in connection with the acquisitions could limit our financial flexibility, including our ability to acquire additional assets and make further strategic investments in the future;

•diversion of financial resources to the new operations or acquired businesses;

•assumption of substantial additional environmental exposures, commitments, contingencies and remediation and reclamation projects;

•liabilities for acquired pension and OPEB obligations, which could require us to make significant cash ~~dividends on~~expenditures and funding contributions in excess of current estimates and contribution rates;

•impairment of recorded tangible and intangible asset values, including goodwill, could result in material non-cash charges to our results of operations in the future;

•failure to successfully integrate acquired systems, business processes, policies and procedures;

•exposure to unknown liabilities and unforeseen costs that were not discovered during due diligence;

•loss of human capital resources and support services historically provided by ArcelorMittal and potential failure of ArcelorMittal or its affiliates to perform under various contracts entered into in connection with the AM USA Transaction, including the intellectual property license agreement, slab supply agreement and

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transition services agreement, which could adversely impact our integration of the ArcelorMittal USA operations;

•potential loss of key employees, suppliers or customers; and

•other challenges associated with managing the larger, more complex and integrated combined businesses.

If one or more of these risks and uncertainties were to materialize, we could experience reduced sales, higher costs, lower profitability and other adverse impacts to our operations and businesses.

In addition, in connection with the closing of the AM USA Transaction, we issued approximately 78 million of our common shares ~~we are not required~~ to ~~declare cash dividends on~~an indirect, wholly owned subsidiary of ArcelorMittal, equating to approximately 16% of our then-outstanding common shares. On February 11, 2021, in connection with our sale of 20 million of our common shares ~~and our Board~~in an underwritten public offering, such subsidiary of ~~Directors may reduce, defer or eliminate~~ArcelorMittal, as a selling shareholder in the offering, sold 40 million of our common shares. We believe such subsidiary of ArcelorMittal continues to hold approximately 38 million of our common shares, equating to approximately 8% of our outstanding common shares following completion of such offering. Although ArcelorMittal and its affiliates are subject to certain restrictions and requirements under an Investor Rights Agreement with respect to its and its affiliates' ownership and voting of our common shares, at such a level of beneficial ownership, ArcelorMittal and its affiliates may be able to exert influence over us and actions requiring the approval of our common shareholders. Under the Investor Rights Agreement, ArcelorMittal and its affiliates are permitted to transfer all of our common shares held by them, subject to certain restrictions on transfers to persons whose beneficial ownership of our common shares following any such transfer would exceed 5% or 10% of our then-outstanding common shares. Sales of our shares by ArcelorMittal and its affiliates or other shareholders, coupled with the increase in the outstanding number of our common shares, may affect the market for, and the market price of, our common shares in an adverse manner.

We also issued 583,273 shares of Series B Preferred Stock to an indirect, wholly owned subsidiary of ArcelorMittal in connection with the closing of the AM USA Transaction. Pursuant to the terms of the Series B Preferred Stock, from and after the 24-month anniversary of the issue date of the Series B Preferred Stock (the “24-Month Anniversary”), each holder of a share ~~dividend~~of Series B Preferred Stock is entitled to receive cash dividends (the “Additional Dividends”) that will accrue and compound at a significant rate. Although the Series B Preferred Stock is redeemable at our option 180 days after the issue date, the agreements governing our debt may restrict us from paying the redemption price at any given time. If we are unable to redeem the Series B Preferred Stock prior to the 24-Month Anniversary and we become obligated to pay the Additional Dividends, we may be required to divert financial resources from our operations or borrow additional debt in order to satisfy such obligations, which could have a material adverse effect on our business, financial condition and results of operations.

We have limited ability to control our joint venture operations, rely on our joint venture partners to meet their payment obligations, and are subject to risks involving the acts or omissions of our joint venture partners.

As part of the AM USA Transaction, we acquired ArcelorMittal USA’s interest in Hibbing and again became the manager of Hibbing, which we co-own with U.S. Steel. In our steel business, we are party to various joint venture arrangements primarily related to downstream steel processing operations. Due to shared ownership, we have limited ability to control our joint venture operations, and we cannot control the actions of our joint venture partners. Accordingly, we rely on our joint venture partners to make their required capital contributions and to pay for their share of joint venture obligations. If our joint venture partners experience financial hardship or fail to perform their obligations, we may be required to assume additional material obligations to minimize operational disruption or as part of a liquidation, including significant capital contributions, costs of environmental remediation, and pension and OPEB obligations.

Our operating expenses could increase significantly if the price of raw materials, electrical power, fuel or other energy sources increases.

Our operations require significant use of energy and raw materials. Energy expenses are sensitive to changes in electricity, energy transportation and fuel prices, including diesel fuel and natural gas. Although we are self-sufficient in iron ore, other raw materials or production inputs where we are wholly or partially dependent on third-party suppliers include industrial gases, graphite electrodes, scrap, chrome, zinc, coke and coal. Prices for electricity, natural gas, fuel oils and raw materials can fluctuate widely with availability and demand levels from other users, including fluctuations caused by the impact of the COVID-19 pandemic. During periods of peak usage, although some operations have contractual arrangements in place whereby they receive certain offsetting payments in exchange for electricity load reduction, supplies of energy and raw materials in general may be curtailed and we may not be able to purchase them at historical rates. A disruption in the transmission of energy, inadequate energy transmission

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infrastructure, or the termination of any of our energy supply contracts could interrupt our energy supply and adversely affect our operations. While we have some long-term contracts with electrical, natural gas and raw material suppliers, we are exposed to fluctuations in energy, natural gas and raw material costs that can affect our production costs. As an example, our Toledo direct reduction plant is subject to changes in the market price of natural gas, which is a key input in the direct reduction of iron ore pellets to produce HBI. We enter into many market-based pricing supply contracts for electricity, natural gas and diesel fuel for use in our operations. Those contracts expose us to price increases in energy costs, which could cause our profitability to decrease significantly. In addition, U.S. public utilities may impose rate increases and pass through additional capital and operating cost increases to their customers related to new or pending U.S. environmental regulations or other charges that may require significant capital investment and use of cleaner fuels in the future. In particular, the recent decision of the U.S. Court of Appeals for the District of Columbia vacating and remanding the Affordable Clean Energy Rule, as well as recent executive orders from President Biden regarding the environment and climate change, indicate that new or revised regulations under the Biden Administration could result in rate increases from U.S. utilities.

The majority of our steel shipments are sold under contracts that do not allow us to pass through all increases in raw materials, supplies and energy costs. Some of our steel shipments to contract customers include variable-pricing mechanisms allowing us to adjust the total sales price based on changes in specified raw materials, supplies and energy costs. Those adjustments, however, rarely reflect all of our underlying raw materials, supplies and energy cost changes. The scope of the adjustment may also be limited by the terms of the negotiated language, including limitations on when the adjustment occurs. Our need to consume existing inventories may also delay the impact of a change in prices of raw materials or supplies. Significant changes in raw material costs may also increase the potential for inventory value write-downs in the event of a reduction in selling prices and our inability to realize the cost of the inventory.


~~IV.~~	~~OPERATIONAL RISKS~~

~~Mine~~Steelmaking facility or mine closures entail substantial costs. If our assumptions underlying our accruals for closure costs prove to be inaccurate or we prematurely close one or more of our facilities or mines, our results of operations and financial condition would likely be ~~affected adversely.~~adversely affected.

If faced with overcapacity in the market or other adverse conditions, including as a result of the COVID-19 pandemic, we may seek to rationalize assets through asset sales, temporary shutdowns, indefinite idles or facility closures. If we ~~prematurely~~indefinitely idle or permanently close any of our facilities or mines, our production and revenues would be reduced unless we were able to increase production at our other facilities or mines in an offsetting amount, which may not be ~~possible.~~ possible, and could result in customers responding negatively by taking current or future business away from us if we seek to transition production to a different facility. Alternatively, we could fail to meet customer specifications at the facilities to which products are transitioned, resulting in customer dissatisfaction or claims.

The closure of a steelmaking facility or mining operation involves significant ~~fixed~~ closure costs, including ~~accelerated employment legacy costs, severance-related obligations,~~ reclamation and other environmental costs, ~~and~~ the costs of terminating long-term obligations, including customer, energy and transportation contracts and equipment ~~leases.~~ leases, and certain accounting charges, including asset impairment and accelerated depreciation. In addition, a permanent steelmaking facility or mine closure could accelerate and significantly increase employment legacy costs, including our expense and funding costs for pension and OPEB obligations and multiemployer pension withdrawal liabilities. A number of employees would be eligible for immediate retirement under special eligibility rules that apply upon a steelmaking facility or mine closure. All employees eligible for immediate retirement under the pension plans at the time of the permanent closure also could be eligible for OPEB, thereby accelerating our obligation to provide these benefits. Certain closures would precipitate a pension closure liability significantly greater than an ongoing operation liability and may trigger certain severance liability obligations.

We base our assumptions regarding the life of our mines on detailed studies we perform from time to time, but those studies and assumptions are subject to uncertainties and estimates that may not be accurate. We recognize the costs of reclaiming open pits, stockpiles, tailings ponds, roads and other mining support areas based on the estimated mining life of our property. If our assumptions underlying our accruals for closure costs, including reclamation and other environmental costs, prove to be inaccurate or insufficient, or our liability in any particular year is greater than currently anticipated, our results of operations and financial condition could be adversely affected. In addition, if we were to significantly reduce the estimated life of any of our mines, the~~mine-closure~~ mine closure costs would be applied to a shorter period of production, which would increase costs per ton produced and could ~~significantly and~~ adversely affect our results of operations and financial condition.

~~A mine permanent closure could accelerate and significantly increase employment legacy costs, including our expense and funding costs for pension and other postretirement benefit obligations. A number~~

Table of employees would be eligible for immediate retirement under special eligibility rules that apply upon a mine closure. All employees eligible for immediate retirement under the pension plans at the time of the permanent mine closure also could be eligible for postretirement health and life insurance benefits, thereby accelerating our obligation to provide these benefits. Certain mine closures would precipitate a pension closure liability significantly greater than an ongoing operation liability and may trigger certain severance liability obligations.Contents

Our sales and competitive position depend on the ability to transport our products to our customers at competitive rates and in a timely manner.

~~In our Mining and Pelletizing operations, disruption~~Disruption of the lake, ~~and~~ rail and/or trucking transportation services because of weather-related problems, including ice and winter weather conditions on the Great Lakes or St. Lawrence Seaway, climate change, strikes, lock-outs, driver shortages and other disruptions in the trucking industry, rail network constraints, global or domestic pandemics or epidemics (such as the COVID-19 pandemic) or other infectious disease outbreaks, in each case causing a business disruption, or other events and lack of alternative transportation options could impair our ability to move products internally among our facilities and to supply ~~iron ore~~products to our customers at competitive rates or in a timely manner and, thus, could adversely affect our sales, margins and profitability. Further, ~~reduced~~ dredging issues and environmental changes, particularly at Great Lakes ports, could impact ~~negatively~~adversely our ability to move certain of our ~~iron ore~~ products ~~because lower water levels restrict the tonnage that vessels can haul, resulting~~or result in higher freight rates. Similarly, we depend on third-party transportation services for delivery of raw materials to us, and failures or delays in delivery would have an adverse effect on our ability to maintain steady-state production operations to meet customer obligations.

Natural or human-caused disasters, weather conditions, disruption of energy, unanticipated geological conditions, equipment failures, infectious disease outbreaks, and other unexpected events may lead our customers, our suppliers or our facilities to curtail production or shut down operations.

Operating levels within our industry and the ~~mining industry~~industries of our customers and suppliers are subject to unexpected conditions and events that are beyond the ~~industry’s~~industries’ control. Those events, including the occurrence of an infectious disease or illness, such as the COVID-19 pandemic, could cause industry members or their suppliers to curtail production or shut down a portion or all of their operations, which could reduce the demand for our ~~iron ore~~ products and ~~could~~adversely affect ~~adversely~~ our sales, margins and profitability. For example, the temporary production shutdowns in the automotive industry during 2020 as a result of the COVID-19 pandemic and associated reduction in demand for our products led to our decision to temporarily idle certain steelmaking facilities and iron ore mines.

Interruptions in production capabilities inevitably will increase our production costs and reduce our profitability. We do not have meaningful excess capacity for current production needs, and we are not able to quickly increase production or restart production at one mine to offset an interruption in production at another mine. Additionally, restart production costs can be even higher if required to be taken during extremely cold weather conditions.

~~A portion of our production costs are fixed regardless of current operating levels. As noted, our~~Our operating levels are subject to conditions beyond our control that can delay deliveries or increase the cost of ~~mining at particular mines~~production for varying lengths of time. ~~These~~Factors that could cause production disruptions could include adverse weather conditions (for example, extreme winter weather, tornadoes, floods, and the lack of availability of process water due to drought) and natural and man-made disasters, lack of adequate raw materials, energy or other supplies, and infectious disease outbreaks, such as the COVID-19 pandemic. In addition, factors that could adversely impact production and operations at our mining operations include tailings dam failures, pit wall failures, unanticipated geological conditions, including variations in the amount of rock and soil overlying ~~the~~ deposits of iron ore and coal, variations in rock and other natural materials, and variations in geologic conditions and ~~ore~~ processing changes.

~~The manufacturing processes that take place in our~~Our mining operations, ~~as well as in our~~ processing facilities, steelmaking and logistics operations depend on critical pieces of equipment. This equipment may, on occasion, be out of service because of unanticipated ~~failures.~~failures or unplanned outages. In addition, ~~all~~most of our mines and production and processing facilities have been in operation for several decades, and the equipment is aged. In the future, we may experience additional ~~material plant~~lengthy shutdowns or periods of reduced production because of equipment failures. Further, remediation of any interruption in production capability may require us to make

large capital expenditures that could have a negative ~~effect~~impact on our profitability and cash flows. Our business interruption insurance would not cover all of the lost revenues associated with equipment failures. Longer-term business disruptions could result in a loss of customers, which could adversely ~~could~~ affect our future sales levels and ~~therefore,~~revenues.

Many of our ~~profitability.~~

~~Regarding the impact of unexpected events happening to our suppliers, many of our~~production facilities and mines are dependent on one source for electric power, ~~and for~~ natural ~~gas.~~gas, industrial gases and/or certain other raw materials or supplies. A significant interruption in service from our ~~energy~~ suppliers due to the COVID-19 pandemic, terrorism or sabotage, weather conditions, natural disasters, equipment failure or any other cause ~~can~~could result in substantial losses that may not be fully recoverable, either from our business interruption insurance or responsible third parties.

We incur certain costs when production capacity is idled, ~~including~~as well as increased costs to resume production at previously idled ~~facilities and costs to idle~~ facilities.

Our decisions concerning which ~~mines~~facilities to operate and at what ~~capacity~~production levels are made based in part upon our ~~customers'~~customers’ orders for products, ~~the quality of and cost to mine and process the remaining ore body,~~ as well as the quality, performance capabilities and cost ~~performance~~ of our ~~mines.~~operations. During depressed market conditions, we may concentrate production at certain ~~mines~~facilities and not operate others in response to customer demand, and as a result we ~~will~~may incur idle ~~facility costs. In 2016, two~~costs that could offset our anticipated savings from not operating the idled facility. For example, due to reduced demand as a result of the COVID-19 pandemic, certain of our ~~Minnesota~~steelmaking facilities and iron ore mines were temporarily idled ~~for a portion~~during portions of ~~the year,~~2020 and we ~~indefinitely idled~~continued to incur

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certain fixed costs at those facilities. We cannot predict whether our operations will experience additional disruptions in the ~~Empire mine in Michigan in August 2016.~~future.

When we restart idled facilities, we incur certain costs to replenish inventories, prepare the previously idled facilities for operation, perform the required repair and maintenance activities, and prepare employees to return to work safely and to resume production responsibilities. The amount of any such costs can be material, depending on a variety of factors, such as the period of idle time, necessary repairs and available employees, and is difficult to project.

~~If faced with overcapacity in the iron ore market, we may seek to rationalize assets through asset sales, temporary shutdowns, indefinite idles or closures of facilities.~~

We may not have adequate insurance coverage for some business risks.

~~As noted above, our~~Our operations are generally subject to a number of hazards and risks, which could result in personal injury or damage to, or destruction of, equipment, properties or facilities. The insurance that we maintain to address risks that are typical in our ~~business~~businesses may not provide adequate coverage. Insurance against some risks, such as liabilities for environmental pollution, tailings basin breaches, or certain hazards or interruption of certain business activities, may not be available at an economically reasonable cost, or at all. Even if available, we may self-insure where we determine it is most ~~cost-effective~~cost effective to do so. As a result, despite the insurance coverage that we carry, accidents or other negative developments involving our production, mining, ~~production~~processing or transportation activities causing losses in excess of policy limits, or losses arising from events not covered under insurance policies, could have a material adverse effect on our ~~operations.~~financial condition and cash flows.

A disruption in or failure of our ~~information technology~~IT systems, including those related to cybersecurity, could adversely affect our business operations and financial performance.

We rely on the accuracy, capacity, integrity and security of our ~~information technology (“IT”)~~IT systems for the ~~operations~~operation of many of our business processes and to comply with regulatory, legal and tax requirements. While we maintain some of our critical ~~information technology~~IT systems, we are also dependent on third parties to provide important IT services relating to, among other things, operational process technology at our facilities, human resources, electronic communications and certain finance functions. Further, in connection with the Acquisitions, we inherited certain legacy hardware and software IT systems that can be supported only by a very limited number of specialists in the market, and our increased reliance on these legacy IT systems may increase the risk of IT system disruption or failure, which could adversely affect our operations.

Despite the security measures that we have implemented, including those related to cybersecurity, our IT systems could be breached or damaged by computer viruses, natural or man-made incidents or disasters, or unauthorized physical or electronic ~~access.~~access or intrusions. Though we have controls in place, we cannot provide assurance that a ~~cyber-attack~~cyberattack will not occur. Furthermore, we may have little or no oversight with respect to security measures employed by third-party service providers, which may ultimately prove to be ineffective at countering threats. We may also experience increased risk of IT system failures or cyberattacks as many of our employees continue to work from home as part of our response to the COVID-19 pandemic. In addition, we may experience increased risk of IT system failures or cyberattacks as transitional activities relating to the Acquisitions are in progress, since these activities expose each company to the other’s security vulnerabilities, and because the Acquisitions may attract the attention of potential cyber criminals.

Failures of our IT systems, whether caused maliciously or inadvertently, may result in the disruption of our business processes, or in the unauthorized release of sensitive, confidential, personally identifiable or otherwise protected information, or result in the corruption of data, each of which could adversely affect our ~~business~~businesses. For example, cybersecurity vulnerabilities could result in an interruption of the functionality of our automated manufacturing operating systems, which, if compromised, could cease, threaten, delay or slow down our ability to produce or process steel or any of our other products for the duration of such interruption, which could result in reputational harm and may adversely affect our results of operations, financial condition and cash flows. In addition, any compromise of the security of our IT systems could result in a loss of confidence in our security measures and subject us to litigation, regulatory investigations and negative publicity that could adversely affect our reputation and financial ~~performance. In addition,~~condition.Our customers, suppliers and vendors may also access or store certain of our sensitive information on their IT systems, which, if breached, attacked or accessed by unauthorized persons, could likewise expose our sensitive information and adversely impact our businesses. Furthermore, as cybersecurity threats continue to evolve and become more sophisticated, we may be required to incur significant costs and invest additional resources to protect against and, if required, remediate the damage caused by such disruptions or system failures in the future.

~~Our profitability could be affected adversely by the failure~~

Table of ~~outside contractors and/or suppliers to perform.~~Contents

We rely on outside companies to provide key services, including the design and construction of our HBI facility in Toledo, Ohio. Additionally, we use contractors to help complete certain capital projects, such as upgrades to our existing Mining and Pelletizing facilities. A contractor's or supplier's failure to perform could affect adversely our production, sales, and our ability to fulfill customer requirements. Such failure to perform in a significant way would result in additional costs for us, which also could affect adversely our production rates, sales and results of operations.V. DEVELOPMENT AND SUSTAINABILITY RISKS


V.	~~DEVELOPMENT AND SUSTAINABILITY RISKS~~

The cost and time to implement a strategic capital project may prove to be greater than originally anticipated.

WeFrom time to time, we undertake strategic capital projects, such as ~~the HBI project,~~our recently-completed Toledo direct reduction plant, in order to enhance, expand or upgrade our ~~mines~~production and ~~production~~mining capabilities or diversify our customer base. Our ability to achieve the anticipated production volumes, revenues or otherwise realize acceptable returns on strategic capital projects that we may undertake is subject to a number of risks, many of which are beyond our control, including a variety of market (such as a volatile pricing environment for ~~iron ore)~~our products), operational, permitting and labor-related factors. Further, the cost to implement any given strategic capital project ultimately may prove to be greater and may take more time than originally anticipated. Inability to achieve the anticipated results from the implementation of our strategic capital projects, ~~the~~ incurring of unanticipated implementation costs or penalties, or the inability to meet contractual obligations could adversely affect ~~adversely~~ our results of operations and future earnings and cash flow generation.

We must continually ~~must~~ replace reserves depleted by production. Exploration activities may not result in additional discoveries.

Our ability to replenish ~~our ore~~mineral reserves is important to our long-term viability. Depleted ~~ore~~ reserves must be replaced by further delineation of existing ~~ore~~mineral bodies or by locating new deposits in order to maintain production levels over the long term. ~~For example, in 2017 we made investments in~~Decisions to defer mine development activities may adversely impact our ~~Tilden and Empire mines and in land in Minnesota~~ability to ~~provide~~substantially increase future ~~potential ore reserves. Based on the economic reserve analysis performed during 2018, we revised the mine plan for Northshore to add ore reserves and extend mine life.~~mineral production. Resource exploration and development are highly speculative in nature. Exploration projects involve many risks, require substantial expenditures and may not result in the discovery of sufficient additional mineral deposits that can be mined ~~profitably.~~economically. Once a ~~site with mineralization~~mineral body is discovered, it may take several years from the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish recoverable proven and probable reserves and to construct mining and processing facilities. As a result, there is no assurance that current or future exploration programs will be successful, and there is a risk that depletion of reserves will not be offset by discoveries or acquisitions.

We rely on estimates of our recoverable reserves, which is complex due to geological characteristics of the properties and the number of assumptions made.

We regularly evaluate our iron ore and coal reserves based on revenues and costs and update them as required in accordance with SEC ~~Industry Guide 7 and will update, to the extent we are not already compliant, to comply~~regulations. We anticipate further updating our mining properties disclosure in accordance with the ~~SEC's~~SEC’s Final Rule 13-10570, Modernization of Property Disclosures for Mining Registrants, which became effective February 25, 2019, and which rescinds SEC Industry Guide 7. 7 following a two-year transition period, which means that we will be required to comply with the new rule no later than our fiscal year beginning January 1, 2021.

Estimates of reserves and future net cash flows necessarily depend upon a number of variable factors and assumptions, some of which are beyond our control, such as production capacity, effects of regulations by governmental agencies, future prices for iron ore and coal, future industry conditions and operating costs, severance and excise taxes, development costs, and costs of extraction and ~~reclamation, all of which may vary considerably from actual results.~~reclamation. Estimating the quantity and grade of reserves requires us to determine the size, shape and depth of our mineral bodies by analyzing geological data, such as samplings of drill holes. In addition to the geology assumptions regarding our mines, assumptions are also required to determine the economic feasibility of mining these reserves, including estimates of future commodity prices and demand, the mining methods we use, and the related costs incurred to develop and mine our reserves. For these reasons, estimates of the economically recoverable quantities of mineralized deposits attributable to any particular group of properties, classifications of such reserves based on risk of recovery and estimates of future net cash flows prepared by different engineers or by the same engineers at different times may vary substantially as the criteria change. Estimated ~~ore~~ reserves could be affected by future industry conditions, future changes in the ~~SEC's~~SEC’s mining property disclosure requirements, geological conditions and ongoing mine planning. Actual volume and grade of reserves recovered, production rates, revenues and expenditures with respect to our reserves will likely vary from estimates, and if such variances are material, our sales and profitability could be ~~affected adversely.~~adversely affected.

Defects in title or loss of any leasehold interests in our mining properties could limit our ability to mine these properties or result in significant unanticipated costs.

~~A portion~~Many of our ~~mining~~ operations are conducted on properties we lease, license or as to which we have easements or other possessory interests, which we refer to as "leased properties." Consistent with industry practice, title to most of these leased properties and mineral rights are not usually verified until we make a commitment to develop a property, which may not occur until after we have obtained necessary permits and completed exploration of the leased property. In some cases, title with respect to leased properties is not verified at all because we instead rely on title information or representations and warranties provided by lessors or grantors.interests. We generally do not maintain title insurance on our ~~owned or leased mining~~ properties. A title defect or the loss of any lease, license, easement or ~~easement~~other possessory interest for any ~~leased~~ mining property

could adversely affect ~~adversely~~ our ability to mine any associated reserves. In addition, from time to time the rights of third parties for competing uses of adjacent, overlying or underlying lands, such as for roads, easements, ~~and~~ public facilities or other mining activities, may affect our ability to operate as planned if our title is not superior or mutually acceptable arrangements cannot be negotiated.

Any challenge to our title could delay the exploration and development of some reserves, deposits or surface rights, cause us to incur unanticipated costs, and could ultimately result in the loss of some or all of our interest in those ~~reserves or surface rights.~~ properties.

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In the event we lose reserves, deposits or surface rights, we may ~~have~~be required to shut down or significantly alter ~~the sequence of our~~impacted mining operations, ~~which may affect adversely our~~thereby affecting future production, revenues and cash flows. Additionally, if we lose any leasehold interests relating to any of our pellet plants or loadout facilities, we may need to find an alternative location to process our iron ore and load it for delivery to customers, which could result in significant unanticipated costs. Finally, we could incur significant liability if we inadvertently mine on property we do not own or lease.

In order to continue to foster growth in our ~~business~~businesses and maintain stability of our earnings, we must maintain our social license to operate with our stakeholders.

~~As a mining company, maintaining~~Maintaining a strong reputation and consistent operational, environmental and safety ~~history~~track record is vital in order to continue to foster growth and maintain stability in our earnings. As stakeholders’ sustainability expectations increase and regulatory requirements continue to evolve, maintaining our social license to operate becomes increasingly important. ~~We incorporate social license expectations in our ERM program.~~ Our ability to maintain our reputation and strong operating ~~history~~track record could be threatened, including by challenges relating to the integration of the AK Steel and ArcelorMittal USA businesses or by circumstances outside of our control, such as disasters caused or suffered by other companies in the steel and mining ~~companies.~~industries. If we are not able to respond effectively to these and other challenges to our social license to operate, our reputation could be damaged significantly. Damage to our reputation could adversely affect ~~adversely~~ our operations and ability to foster growth ~~in our company.~~projects.

~~Estimates and timelines relating to new development projects are uncertain and we may incur higher costs and lower economic returns than estimated.~~VI. HUMAN CAPITAL RISKS

Mining industry development projects typically require a number of years and significant expenditures before production is possible. Such projects could experience unexpected problems and delays during development, construction and start-up.

Our decision to develop a project typically is based on the results of feasibility studies, which estimate the anticipated economic returns of a project. The actual project profitability or economic feasibility may differ from such estimates as a result of any of the following factors, among others: changes in tonnage, grades and metallurgical characteristics of ore or other raw materials to be mined and processed; estimated future prices of the relevant product; changes in customer demand; higher construction and infrastructure costs; the quality of the data on which engineering assumptions were made; higher production costs; adverse geotechnical conditions; availability of adequate labor force; availability and cost of water and energy; availability and cost of transportation; fluctuations in inflation and currency exchange rates; availability and terms of financing; delays in obtaining environmental or other government permits or changes in laws and regulations including environmental laws and regulations; weather or severe climate impacts; and potential delays relating to social and community issues.

Our HBI project will require the commitment of substantial resources. Any unanticipated costs or delays associated with our HBI project could have a material adverse effect on our financial condition or results of operations.

Our ongoing efforts with respect to our HBI project require the commitment of substantial capital expenditures. We currently expect to incur capital expenditures through 2020 on the HBI project of approximately $830 million on the development of the HBI production plant in Toledo, Ohio, of which $180 million has already been incurred, and $90 million for upgrades at the Northshore plant to enable it to produce significantly increased levels of DR-grade pellets that could be used as feedstock for the HBI production plant and/or sold commercially. Each of these estimates are exclusive of construction-related contingencies and capitalized interest. Our estimated expenses may increase as personnel and equipment associated with advancing development and commercial production are added. The progress of our HBI project and the amounts and timing of expenditures will depend in part on the following:

•~~receiving and maintaining required federal, state and local permits;~~

~~completing infrastructure and construction work and the completion of 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.~~

~~Most of these activities require significant lead times and must be advanced concurrently.~~

Any unanticipated costs or delays associated with our HBI project could have a material adverse effect on our financial condition or results of operations and could require us to seek additional capital, which may not be available on commercially acceptable terms or at all.

~~Our ability to realize the benefits of any potential acquisitions is uncertain.~~

Should we determine to pursue any acquisitions, the success of the same is subject to risks and uncertainties, including our ability to realize operating efficiencies expected from an acquisition; the size or quality of the mineral potential; delays in realizing the benefits of an acquisition; difficulties in retaining key employees, customers or suppliers of the acquired business; the risks associated with the assumption of contingent or undisclosed liabilities of acquisition targets; the impact of changes to our allocation of purchase price; and the ability to generate future cash flows or the availability of financing.

Moreover, any acquisition opportunities we pursue could affect materially our liquidity and capital resources and may require us to incur indebtedness, seek equity capital or both. Future acquisitions could also result in us assuming more long-term liabilities relative to the value of the acquired assets than we may have assumed in previous acquisitions.


~~VI.~~	~~HUMAN CAPITAL RISKS~~

Our profitability could be adversely affected ~~adversely~~ if we fail to maintain satisfactory labor relations.

~~Production in our mines~~Our production is dependent upon the efforts of our employees. We are party to labor agreements with various labor unions that represent employees at the majority of our operations. Such labor agreements are negotiated periodically, and, therefore, we are subject to the risk that these agreements may not be able to be renewed on reasonably satisfactory terms. It is difficult to predict what issues may arise as part of the collective bargaining process, and whether negotiations concerning these issues will be successful. Due to union activities or other employee actions, we could experience labor disputes, work stoppages or other disruptions in our production ~~of iron ore~~ that could affect us adversely. ~~The USW represents all labor employees at our Mining and Pelletizing operations owned and/or managed by Cliffs or its subsidiary companies except for Northshore. Our~~We have labor agreements ~~with the USW~~that will expire at ~~four of our Mining~~five locations in 2021 and ~~Pelletizing operations were ratified~~sixteen locations in ~~October 2018 and extended for a four-year term, effective as of October 1, 2018.~~

2022. If we enter into a new labor agreement with any union that significantly increases our labor costs relative to our competitors or fail to come to an agreement upon expiry, our ability to compete or continuity of production may be materially and adversely affected.

We may encounter labor shortages for critical operational positions, which could adversely affect ~~adversely~~ our ability to produce our products.

We are predicting a long-term shortage of skilled workers ~~for the mining~~in heavy industry and in certain highly specialized IT roles, and competition for the available workers limits our ability to attract and retain employees as well as engage third-party contractors. As our experienced employees retire, we may have difficulty replacing them at competitive wages.

In addition, the ongoing COVID-19 pandemic has resulted and may continue to result in increased government restrictions and regulation, including quarantines of our personnel and potential inability to access facilities, which has adversely affected and could continue to adversely affect our operations.

Our expenditures for ~~post-retirement benefit~~pension and ~~pension~~OPEB obligations could be materially higher than we have predicted if our underlying assumptions differ from actual outcomes, there are ~~mine closures,~~regulatory changes or our joint venture partners fail to perform their obligations that relate to employee pension plans.

We provide defined benefit pension plans and OPEB to certain eligible union and non-union employees, including our share of expense and funding obligations with respect to our unconsolidated joint ~~venture.~~ventures. Our pension and OPEB expenses and our required contributions to our pension and OPEB plans are affected directly by the value of plan assets, the projected and actual rate of return on plan assets, and the actuarial assumptions we use to measure our defined benefit pension plan obligations, including the rate at which future obligations are discounted.

We cannot predict whether changing market or economic conditions, regulatory changes or other factors will increase our pension and OPEB expenses or our funding obligations, diverting funds we would otherwise apply to other uses.

We have calculated our unfunded pension and OPEB obligations based on a number of ~~assumptions, including our joint venture partners satisfying their funding obligations.~~assumptions. If our assumptions do not materialize as expected, cash expenditures and costs that we incur could be materially higher. Moreover, we cannot be certain that regulatory changes will not increase our obligations to provide these or additional benefits. These obligations also may increase substantially in the event of adverse medical cost trends or unexpected rates of early retirement, particularly for bargaining unit retirees. In addition, changes in the laws governing pensions could also materially adversely affect our costs and ability to meet our pension obligations.

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We also contribute to certain multiemployer pension plans, including the Steelworkers’ Pension Trust, for which we are one of the largest contributing employers. If other contributors were to default on their obligations to contribute to any such plans, we could become liable for additional unfunded contributions to the plans.

In addition, some of the transactions in which we previously sold or otherwise disposed of our non-core assets included provisions transferring certain pension and other liabilities to the purchasers or acquirers of those assets. While we believe that all such transfers were completed properly and are legally binding, if the purchaser fails to fulfill its obligations, we may be at risk that a court, arbitrator or regulatory body could disagree and determine that we remain responsible for pension and other liabilities that we intended to and did transfer.

We depend on our senior management team and other key employees, and the loss of these employees could adversely affect our ~~business.~~businesses.

Our success depends in part on our ability to attract, retain, develop and motivate our senior management and key employees. Achieving this objective may be difficult due to a variety of factors, including fluctuations in the global economic and industry conditions, competitors’ hiring practices, cost reduction activities, and the effectiveness of our compensation programs. Competition for qualified personnel can be intense. We must continue to recruit, retain, develop and motivate our senior management and key personnel in order to maintain our business and support our projects. A loss of senior management and key personnel could prevent us from capitalizing on business opportunities, and our operating results could be adversely affected. We are also subject to the risk that the COVID-19 pandemic may impact the health or effectiveness of members of our senior management team or other key employees.



Item 1B.			Unresolved Staff Comments

We have no unresolved comments from the SEC.

Mining and Pelletizing Mineral Reserves
as of December 31, 2018
(In Millions of Long Tons)
Proven Probable Proven & Probable
Saleable Product^2,3
Previous Year
Property Cliffs Share Tonnage % Grade Tonnage % Grade Tonnage
% Grade⁵

Process Recovery⁴
Tonnage Proven & Probable Crude Ore Saleable Product
Tilden¹
100 % 241.7
34.6
82.7
33.9
324.4
34.4
38% 122.1
346.3
129.2
Northshore 100 % 299.5
25.3
535.6
23.7
835.1
24.3
32% 270.1
793.2
255.9
United Taconite 100 % 398.9
22.5
415.5
21.9
814.4
22.2
32% 259.5
829.1
264.6
Hibbing 23 % 125.1
19.7
24.7
19.6
149.8
19.7
27% 39.7
178.7
47.2
Totals 1,065.2
1,058.5
2,123.7
691.4
2,147.3
696.9

¹ Tilden hematite reported grade is percent FeT; all other properties are percent magnetic iron.
² Saleable product is a standard pellet containing 60% to 66% Fe calculated from both proven and probable mineral reserves.
³ Saleable product is reported on a dry basis; shipped products typically contain 1% to 4% moisture.
⁴ Process recovery includes all factors for converting crude ore tonnage to saleable product.
⁵Cutoff grades are 15% magnetic iron for Hibbing, 17% for United Taconite, 19% for Northshore and 20% for Tilden. Cutoff for Tilden hematite is 25% FeT.

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Item 3.			Legal Proceedings

~~Bluestone Litigation. On April 7, 2017, the Company was served with an Amended Complaint adding Cliffs, among others, as a defendant~~Legal Proceedings Relating to a lawsuit brought by Bluestone Coal Corporation and Double-Bonus Mining Company against Pinnacle Mining Company, LLC and Target Drilling, Inc. in the U.S. District Court for the Southern District of West Virginia. The Amended Complaint alleges that the defendants deviated from plans authorized by plaintiffs and MSHA in the drilling of a borehole in 2013 and 2014 at the Pinnacle mine and through an inactive portion of plaintiffs’ mine. Plaintiffs further allege negligence and trespass in the drilling of the borehole and claim compensatory and punitive damages due to flooding. On October 3, 2018, the parties reached a settlement in full. We do not believe that our portion of the agreed-upon amount will have a material adverse impact on our business. The Court entered an order dismissing the case with prejudice subject to reopening on good cause shown within 90 days. However, on October 14, 2018, Mission Coal Company, LLC and ten of its affiliates, including Pinnacle Mining Company, LLC, filed a petition in the U.S. Bankruptcy Court for the Northern District of Alabama for relief under Chapter 11 of Title 11 of the U.S. Bankruptcy Code. We are reviewing this bankruptcy petition but do not believe it will have a material adverse effect on our settlement. In light of the Mission Coal bankruptcy, the Court granted plaintiffs' motion to extend the deadline for potentially reopening the Bluestone case on good cause shown for an additional 120 days.Business

~~CCAA Proceedings.~~ Refer to NOTE 13 - DISCONTINUED OPERATIONS for a description of the CCAA proceedings with respect to the Bloom Lake Group and the Wabush Group. Such description is incorporated by reference into this Item 3.

Mesabi Metallics Adversary Proceeding. On September 7, 2017, Mesabi Metallics Company LLC (f/k/a Essar Steel Minnesota LLC) ("Mesabi Metallics") filed a complaint against Cleveland-Cliffs Inc. in the Essar Steel Minnesota LLC and ESML Holdings Inc. bankruptcy proceeding that is pending in the United States Bankruptcy Court, District of Delaware. Mesabi Metallics alleges tortious interference with its contractual rights and business relations involving certain vendors, suppliers and contractors, violations of federal and Minnesota antitrust laws through monopolization, attempted monopolization and restraint of trade, violation of the automatic stay, and civil conspiracy with unnamed Doe defendants. Mesabi Metallics amended its complaint to add additional defendants, including, among others, our subsidiary, Cleveland-Cliffs Minnesota Land Development Company LLC ("Cliffs Minnesota Land"), and to add additional claims, including avoidance and recovery of unauthorized post-petition transfers of real estate interests, claims disallowance, civil contempt and declaratory relief. Mesabi Metallics seeks, among other things, unspecified damages and injunctive relief. Cliffs and Cliffs Minnesota Land filed counterclaims against Mesabi Metallics, Chippewa Capital Partners ("Chippewa"), and Thomas M. Clarke ("Clarke") for tortious interference and civil conspiracy, as well as additional claims against Chippewa and Clarke for aiding and abetting tortious interference, for which we seek, among other things, damages and injunctive relief. Our counterclaim against Clarke for libel was dismissed on jurisdictional grounds. The parties filed various dispositive motions on certain of the claims, including a motion for partial summary judgment to settle a dispute over real estate transactions between Cliffs Minnesota Land and Glacier Park Iron Ore Properties LLC ("GPIOP"). A ruling in favor of Cliffs, Cliffs Minnesota Land and GPIOP was issued on July 23, 2018, finding that ~~Mesabi's~~Mesabi Metallics' leases had terminated and upholding Cliffs' and Cliffs Minnesota Land's purchase and lease of the contested real estate interests. Mesabi Metallics filed a Motion for Leave to File an Interlocutory Appeal, which was denied on September 10, 2019. Discovery is ~~fully briefed. The parties have filed additional motions for partial summary judgment and motions to dismiss with respect to other pending claims and counterclaims.~~ongoing. We believe the claims asserted against us are ~~unmeritorious~~without merit, and we intend to continue to vigorously defend against any remaining claims in the lawsuit.

~~Seneca Coal Resources Litigation.~~ ~~We are~~Mesabi Trust Arbitration. On December 9, 2019, Mesabi Trust filed a ~~plaintiff~~demand for arbitration with the American Arbitration Association against Northshore and Cleveland-Cliffs Inc. alleging various breaches of a royalty agreement under which Northshore extracts iron ore from Mesabi Trust lands in ~~a lawsuit~~return for paying royalties to Mesabi Trust. In its demand, Mesabi Trust asserts that we ~~filed against Seneca Coal Resources, LLC and others~~improperly based royalty payments for intercompany sales of DR-grade pellets on ~~December 20, 2016, alleging, among other things, breach~~artificially low pricing of ~~the Unit Purchase Agreement (“UPA”) dated December 22, 2015, wherein Seneca purchased certain~~DR-grade pellet sales to one of our ~~coal properties. That dispute, which~~arms’ length third-party customers. Mesabi Trust further asserts that we ~~amended~~paid royalties too soon on DR-grade pellets stockpiled at Northshore and destined for shipment to our Toledo direct reduction plant. The allegations also include ~~claims of fraudulent transfers~~failure to provide access to information and ~~violations of~~individuals necessary to determine compliance with the ~~Racketeer Influenced~~royalty agreement. In addition to seeking damages and ~~Corrupt Organizations provisions of~~costs, Mesabi Trust seeks declarations as to the Organized Crime Control Act of 1970 against individual defendants, including Clarke, is currently being litigated in Delaware Superior Court. On July 2, 2018, Seneca filed suit against us, a subsidiary of ours,methodology and ~~certain~~timing for calculating royalties on our intercompany DR-grade pellet sales, and that Mesabi Trust should have full and unfettered access to all of our ~~employees,~~information and employees. During 2020, the parties appointed a three-member arbitration panel and engaged in ~~the Delaware Chancery Court, alleging that we failed to disclose certain liabilities in connection with the UPA and seeking monetary damages or, alternatively, reformation of the UPA.~~discovery. The lawsuit filed in Chancery Court asserts identical claims to those that Seneca filed as counterclaims in Delaware Superior Court on the same day, and the two cases will proceed as one consolidated matter in the Superior Court. We have filed motions to dismiss certain claims against us and to dismiss all claims against our employees individually.arbitration hearing is scheduled for May 2021. We believe the claims ~~Seneca has~~ asserted against us are ~~unmeritorious~~without merit, and we intend to vigorously ~~pursue this lawsuit and~~ defend against ~~the related counterclaims. On October 14, 2018, Mission Coal Company, LLC and ten of its affiliates, including Seneca and certain~~them.

Certain Legacy Legal Proceedings Relating to our Steel Operations. Certain of our ~~former coal properties,~~acquired subsidiaries have been named as defendants, among many other named defendants, in numerous lawsuits filed ~~a petition~~since 1990 claiming injury allegedly resulting from exposure to asbestos. Similar lawsuits seeking monetary relief continue to be filed in various jurisdictions in the U.S. ~~Bankruptcy Court~~, which cases are vigorously defended. Although predictions about the outcome of pending litigation is subject to uncertainties, based upon present knowledge, we believe it is unlikely that the resolution in the aggregate of these claims will have a materially adverse effect on our consolidated results of operations, cash flows or financial condition.

Legal Proceedings Relating to Environmental Matters

SEC regulations require us to disclose certain information about administrative or judicial proceedings involving the environment and to which a governmental authority is a party if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to SEC regulations, we use a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is required. We believe that this threshold is reasonably designed to result in disclosure of any such proceedings that are material to our business or financial condition. Applying this threshold, we are disclosing the following environmental proceedings for the ~~Northern District~~period covered by this report:

Dearborn Works Air NOVs. On November 18, 2019, November 26, 2019, and March 16, 2020, EGLE issued NOVs with respect to the basic oxygen furnace electrostatic precipitator at Dearborn Works alleging violations of ~~Alabama for relief under Chapter 11~~manganese, lead and opacity limits. We are investigating these claims and will work with EGLE to attempt to resolve

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them. We intend to vigorously contest any claims that cannot be resolved through a settlement. Until a settlement is reached with EGLE or the claims of the ~~U.S. Bankruptcy Code. On December 4, 2018,~~NOVs are otherwise resolved, we cannot reasonably estimate the ~~Court entered an order staying all~~costs, if any, associated with any potentially required work.

Additional information for this item relating to certain other environmental proceedings may be found under the headings EPA Administrative Order In Re: Ashland Coke and Burns Harbor Water Issues in ~~this litigation due~~NOTE 21 - COMMITMENTS AND CONTINGENCIES to ~~Mission Coal Company's bankruptcy filing.~~the consolidated financial statements in Part II – Item 8. Financial Statements and Supplementary Data, which information is incorporated herein by reference.

~~Taconite MACT Compliance Review.~~ EPA Region 5 issued Notices of Violation during the first quarter of 2014 to Empire, Tilden and United Taconite related to alleged historical violations of the Taconite MACT rule and certain elements of their respective state-issued Title V operating permits dating back to 2010. EPA proposed, and we agreed to, a tolling agreement which targeted a completion of the enforcement action by March of 2019. Based on current information, we anticipate the final settlement for alleged exceedances at United Taconite to be resolved by consent decree with a civil cash penalty of less than $0.1 million and a supplemental environmental project. We anticipate the final settlement for alleged exceedances at Tilden and Empire to be resolved by consent decree with a total penalty of no more than $0.2 million and $0.1 million, respectively, to be comprised of a combination of cash penalty and a potential supplemental environmental project. This enforcement matter is not anticipated currently to have a material adverse impact on our business.



Item 4.			Mine Safety Disclosures

We are committed to protecting the occupational health and well-being of each of our employees. Safety is one of our core values, and we strive to ensure that safe production is the first priority for all employees. Our internal objective is to achieve zero injuries and incidents across the Company by focusing on proactively identifying needed prevention activities, establishing standards and evaluating performance to mitigate any potential loss to people, equipment, production and the environment. We have implemented intensive employee training that is geared toward maintaining a high level of awareness and knowledge of safety and health issues in the work environment through the development and coordination of requisite information, skills and attitudes. We believe that through these policies, we have developed an effective safety management system.

Under the Dodd-Frank Act, each operator of a coal or other mine is required to include certain mine safety results within its periodic reports filed with the SEC. As required by the reporting requirements included in §1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K, the required mine safety results regarding certain mining safety and health matters for each of our mine locations that are covered under the scope of the Dodd-Frank Act are included in Exhibit 95 of Part IV –Item 15. Exhibits and Financial Statement Schedules of this Annual Report on Form 10-K.

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PART II



Item 5.			Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Stock Exchange Information

Our common shares (ticker symbol CLF) are listed on the NYSE.

Holders

At February ~~5, 2019,~~24, 2021, we had ~~1,153~~2,586 shareholders of record.

~~Dividends~~

On October 18, 2018, the Board of Directors declared a quarterly cash dividend on our common shares of $0.05 per share. The cash dividend was paid on January 15, 2019, to shareholders of record as of the close of business on January 4, 2019. The Board of Directors determined that the cash dividend may be paid out of capital surplus. Any determination to pay dividends on our common shares in the future will be at the discretion of our Board of Directors and dependent upon then-existing conditions, including our operating results and financial condition, capital requirements, contractual restrictions, business prospects and other factors that our Board of Directors may deem relevant. Additionally, our ABL Facility contains, and agreements governing any of our future debt may contain, covenants and other restrictions that, in certain circumstances, could limit the level of dividends that we are able to pay on our common shares. There can be no assurance that we will pay a dividend in the future.

Shareholder Return Performance

The following graph shows changes over the past five-year period in the value of $100 invested in: (1) Cliffs' common shares; (2) S&P 500 ~~Stock~~ Index; (3) S&P ~~Total Market~~Small Cap 600 Index; and (4) S&P Metals and Mining Select Industry Index. The values of each investment are based on price change plus reinvestment of all dividends reported to shareholders, based on monthly granularity.


		2015	2016	2017	2018	2019	2020
Cleveland-Cliffs Inc.	Return %	—	432.28	(14.27)	6.66	12.60	77.46
	Cum $	100.00	532.28	456.32	486.71	548.04	972.55
S&P 500 Index	Return %	—	11.93	21.80	(4.39)	31.48	18.39
	Cum $	100.00	111.93	136.33	130.35	171.38	202.90
S&P Small Cap 600 Index	Return %	—	26.46	13.15	(8.52)	22.74	11.24
	Cum $	100.00	126.46	143.09	130.90	160.66	178.72
S&P Metals and Mining Select Industry Index	Return %	—	105.09	20.61	(26.76)	14.70	15.97
	Cum $	100.00	205.09	247.36	181.17	207.80	240.98

2013 2014 2015 2016 2017 2018
Cleveland-Cliffs Inc. Return % —
(71.56) (77.87) 432.28 (14.27) 6.66
Cum $ 100.00
28.44 6.29 33.50 28.72 30.63
S&P 500 Index - Total Returns Return % —
13.65 1.38 11.93 21.80 (4.39)
Cum $ 100.00
113.65 115.22 128.96 157.08 150.18
S&P Total Market Index Return % —
(25.63) (50.76) 105.09 20.61 (26.76)
Cum $ 100.00
74.37 36.62 75.10 90.58 66.34
S&P Metals and Mining Return % —
12.43 0.46 12.62 21.13 (5.30)
Cum $ 100.00
112.43 112.95 127.20 154.08 145.91

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Issuer Purchases of Equity Securities

The following table presents information with respect to repurchases by usthe Company of our common shares during the periods indicated:

ISSUER PURCHASES OF EQUITY SECURITIES


Period	Total Number of Shares (or Units) Purchased1	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs
October 1 - 31, 2020	2,293	$	6.69	—	$	—
November 1 - 30, 2020	3,594	7.23		—	—
December 1 - 31, 2020	262	12.88		—	—
Total	6,149	$	7.27	—	$	—

1 All shares were delivered to us to satisfy tax withholding obligations due upon the vesting or payment of stock awards.

Period
Total Number of Shares
(or Units) Purchased¹

Average Price Paid per Share
(or Unit)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs²
October 1 - 31, 2018 739
$ 12.34
—
$ —
November 1 - 30, 2018 500,000
$ 8.83
500,000
$ 195,583,300
December 1 - 31, 2018 4,907,210
$ 8.75
4,907,210
$ 152,650,610
Total 5,407,949
$ 8.76
5,407,210
—

¹Includes 739 shares that were delivered to us in October 2018 to satisfy tax withholding obligations due upon the vesting or payment of stock awards.
² On November 26, 2018, we announced a new share repurchase program which was authorized by the Board of Directors, pursuant to which we may buy back our outstanding common shares in the open market or in private negotiated transactions up to a maximum of $200 million dollars. The program may be executed through open-market purchases, including through Rule 10b5-1 agreements, or privately negotiated transactions. The authorization is effective until December 31, 2019.



Item 6.			Selected Financial Data

[Reserved]

Table of ~~$46.6 million, predominantly due to:~~Contents

An increase in the average year-to-date realized product revenue rate of $12.32 per long ton or 16.3% during the year ended December 31, 2017, compared to 2016, which resulted in an increase of $228.2 million. This is predominantly due to:


◦	~~An increase in Platts 62% Price, which positively affected the realized revenue rate by $9 per long ton or $176 million;~~


◦	~~An increase in the average annual daily market price and customer pricing for hot-rolled coil steel, which positively affected the realized revenue rate by $5 per long ton or $100 million; and~~


◦	~~Higher pellet premiums, which positively affected the realized revenue rate by $5 per long ton or $94 million.~~


◦	~~These increases were offset partially by changes in customer and contract mix and carryover pricing impacts, which negatively affected the realized revenue rate by $5 per long ton or $84 million; and~~


◦	~~Higher index freight rates, a component in some of our contract pricing formulas, which negatively affected the realized revenue rate by $3 per long ton or $63 million.~~

~~Higher sales volumes of 0.5 million long tons during the year ended December 31, 2017, which resulted in increased revenues of $36.7 million due to:~~


◦	Increased demand from a customer, providing additional sales volume of 1.8 million long tons, compared to the prior year when the customer had sufficient inventory due to the idle of one of its facilities and additional suppliers;


◦	Increased demand from a customer, providing additional sales volume of 1.3 million long tons, resulting from the fourth quarter 2015 termination of its contract causing a nine-month gap in sales to that customer; and


◦	An increase in exports to Asia in order to offset a fourth quarter reduction in domestic nomination from a major customer and fewer domestic spot contracts, providing additional sales volume of 0.9 million long tons compared to 2016.


◦	~~These increases were offset partially by 2.8 million long tons that were sold in 2016 on separate spot contracts with two customers and were not renewed; and~~


◦	~~Decreased sales to a customer due to timing of payments and a lower 2017 nomination, resulting in a decrease in sales volume of 0.8 million long tons.~~

Cost of goods sold and operating expenses increased $77.4 million during the year ended December 31, 2017 compared to 2016, excluding the freight and reimbursements increase of $46.6 million, predominantly as a result of:

Higher spending on repairs and maintenance of $44 million or $2 per long ton, higher profit sharing and benefit costs of $35 million or $2 per long ton, and higher energy rates for natural gas, diesel and electricity of $23 million or $1 per long ton; and

~~Increased sales volumes as discussed above which resulted in increased costs of $18 million period-over-period.~~

~~These increases were offset partially by decreased idle costs of $55 million or $3 per long ton due to the idle of the United Taconite and Northshore mines during the prior year.~~

Production

~~Our share~~During 2020, we produced 4 million net tons of production in our Mining and Pelletizing segment increased by 17.5% during the year ended December 31, 2017 when compared to 2016. The increase in production volume primarily is attributable to all active mining facilities fully operating in 2017 compared to the various idled operations during 2016. United Taconite was fully operating during the year ended December 31, 2017, adding an incremental 3.3raw steel, 17 million long tons of ~~production, compared~~iron ore pellets and 1 million net tons of coke. During 2020, certain of our operations were temporarily idled in response to the ~~previous year's~~COVID-19 pandemic, with most restarting and resuming production ~~levels as a result~~in the second quarter of ~~being idled for~~2020 and the first seven months of 2016. Secondly, Northshore added incremental tonnage of 2.1 million long tons during the year ended December 31, 2017, when it was substantially at full production, compared to its previous year's production tonnage when it was fully idled for the first four months of 2016. These production gains were offset partially by the indefinite idle of the Empire mine in August 2016, lowering production by 2.8 million long tons, compared to the prior year when the mine was operating.

~~Other Operating Income (Expense)~~

~~The following is a summary of~~ ~~Other operating income (expense)~~:

(In Millions)
2017 2016
Variance
Favorable/
(Unfavorable)
Selling, general and administrative expenses $ (102.9 ) $ (115.8 ) $ 12.9
Miscellaneous - net 25.5
(33.6 ) 59.1
$ (77.4 ) $ (149.4 ) $ 72.0

~~Selling, general and administrative expenses~~ during the year ended December 31, 2017 decreased $12.9 million over 2016. The favorable variance for the year ended December 31, 2017 was driven by a $3.3 million decrease in incentive compensation and $3.5 million of union signing bonuses in 2016, that were not repeated in 2017. In addition, external services costs, excluding costs for early stage HBI project spending, decreased by $5.4 million for the year ended December 31, 2017 compared to the prior year. These favorable variances were offset partially by early-stage HBI project spending of $2.3 million.

~~The following is a summary of~~ ~~Miscellaneous - net~~:

(In Millions)
2017 2016 Variance
Favorable/
(Unfavorable)
Foreign exchange remeasurement $ 13.9
$ (17.8 ) $ 31.7
Michigan Electricity Matters accrual 1.3
(12.4 ) 13.7
Management and royalty fees 5.1
9.0
(3.9 )
Empire idle costs 5.0
(8.2 ) 13.2
Gain (loss) on disposal of assets 0.9
(4.9 ) 5.8
Other (0.7 ) 0.7
(1.4 )
$ 25.5
$ (33.6 ) $ 59.1

For the year ended December 31, 2017, there was an incrementally favorable impact of $31.7 million driven by the change in foreign exchange remeasurement of short-term intercompany loans that are denominated in currency that is not the functional currency of the entity that holds the loans. There was an incrementally favorable impact of $13.7 million related to the FERC ruling on the proceedings regarding cost allocations for continued operation of the Presque Isle power plant in Michigan (referred to above as the Michigan Electricity Matters) that was recordedremainder in the third quarter of ~~2016~~2020. Dearborn Works' hot strip mill, anneal and adjusted in the fourth quarter of 2017. In addition, there was an incrementally favorable impact of $13.2 million in Empire mine idle costs driven primarily by an asset retirement obligation adjustment.

~~Other Income (Expense)~~

~~The following is a summary of~~ ~~Other expense~~:

(In Millions)
2017 2016
Variance
Favorable/
(Unfavorable)
Interest expense, net $ (126.8 ) $ (193.9 ) $ 67.1
Gain (loss) on extinguishment/restructuring of debt (165.4 ) 166.3
(331.7 )
Other non-operating income 10.2
7.3
2.9
$ (282.0 ) $ (20.3 ) $ (261.7 )

~~The loss on extinguishment/restructuring of debt for the year endedDecember 31, 2017~~of~~$165.4 million was related to the repurchase of certain of our unsecured senior notes~~temper operations and ~~the redemption in full of our then-outstanding~~

secured notes. This compares to a gain of $166.3 million for the year ended December 31, 2016, primarily related to the issuance of our 8.00% 2020 1.5 Lien Notes through an exchange offer on March 2, 2016.

~~Interest expense, net~~ for the year ended December 31, 2017 had a favorable variance of $67.1 million versus the prior year, predominantly as a result of the debt restructuring activities that occurred throughout 2017. These debt restructurings resulted in a reduction of our effective interest rate to 5.8% and extended our debt maturities.

~~Refer to NOTE 6 - DEBT AND CREDIT FACILITIES for further discussion.~~

~~Income Taxes~~

Our tax rate is affected by permanent items, such as depletion and the relative amount of income we earn in various foreign jurisdictions with tax rates that differ from the U.S. statutory rate. It also is affected by discrete items that may occur in any given period, but are not consistent from period to period. The following represents a summary of our tax provision and corresponding effective rates:

(In Millions)
2017 2016 Variance
Income tax benefit $ 252.4
$ 12.2
$ 240.2
Effective tax rate (233.3 )% (11.1 )% (222.2 )%

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

(In Millions)
2017 2016
Tax at U.S. statutory rate $ 37.9
35.0 % $ 38.6
35.0 %
Increase (decrease) due to:
Impact of tax law change - remeasurement of deferred taxes 407.5
376.6
149.1
135.1
Prior year adjustments in current year (1.1 ) (1.0 ) (11.8 ) (10.7 )
Valuation allowance build (reversal):
Tax law change - remeasurement of deferred taxes (407.5 ) (376.6 ) (149.1 ) (135.1 )
Current year activity (466.3 ) (431.0 ) 122.9
111.3
Repeal of AMT (235.3 ) (217.5 ) —
—
Prior year adjustments in current year (3.5 ) (3.2 ) 9.3
8.4
Tax uncertainties (1.4 ) (1.3 ) (11.3 ) (10.2 )
Worthless stock deduction —
—
(73.4 ) (66.5 )
Impact of foreign operations 477.9
441.7
(40.6 ) (36.8 )
Percentage depletion in excess of cost depletion (61.6 ) (56.9 ) (36.1 ) (32.7 )
Other items, net 1.0
0.9
(9.8 ) (8.9 )
Provision for income tax benefit and effective income tax rate including discrete items $ (252.4 ) (233.3 )% $ (12.2 ) (11.1 )%

Our tax provision for the year ended December 31, 2017 was a benefit of $252.4 million and a negative 233.3% effective tax rate compared with a benefit of $12.2 million and an effective tax rate of negative 11.1% for the prior year. The increase in income tax benefit from the prior year is primarily due to the repeal of AMT through U.S. income tax reform legislation. The impact of tax law change due to remeasurement of deferred taxes primarily relates to the statutory rate reduction in the U.S. that decreased the deferred tax assets by $334.1 million and the Luxembourg rate reduction that decreased the deferred tax assets by $73.4 million. Both of these asset reductions were 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 30%, differ from the U.S. statutory rate of 35%.

~~See NOTE 10 - INCOME TAXES for further information.~~

~~Income from discontinued operations, net of tax~~

~~For the year ended December 31, 2017, we recorded~~ ~~Income from discontinued operations, net of tax~~ ~~of $2.5 million. During 2017, the Wabush Scully Mine was sold~~AK Coal remain permanently idled as part of the ~~ongoing CCAA proceedings for~~permanent cost reduction efforts. Our Columbus and Monessen facilities acquired through the ~~Wabush Group, which resulted in a net gain~~AM USA Transaction are temporarily idled due to impacts of ~~$31.4 million. The gain was offset by an estimated liability~~the COVID-19 pandemic. During 2019, we produced 20 million long tons of ~~$55.6 million, which was established based on the probable assertion of a preference claim against the Company and was classified as~~ ~~Contingent claims~~ ~~in the Statements of Consolidated Financial Position. Additionally, for the year ended December 31, 2017, we recorded income of $21.2 million within~~ ~~Income from discontinued operations, net of tax~~ ~~relating to our Asia Pacific Iron Ore operations.~~iron ore pellets.

For the year ended December 31, 2016 we recorded a gain from discontinued operations of $76.7 million, which was attributable to income generated by our Asia Pacific Iron Ore operations of $96.6 million, offset partially by a loss related to our North American Coal and Eastern Canadian Iron Ore operations.

~~Refer to NOTE 13 - DISCONTINUED OPERATIONS for further information.~~

~~Noncontrolling Interest~~

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, in exchange for its interest in Empire. The agreement had no direct impact on the ~~Loss (income) attributable to noncontrolling interest~~ in the Statements of Consolidated Operations. However, for the year ended December 31, 2017, the Empire mine was indefinitely idled resulting in a loss attributable to the noncontrolling interest of $3.9 million. In comparison, during the year ended December 31, 2016, the Empire mine was operating and had income of $25.2 million attributable to the noncontrolling interest.

~~EBITDA and Adjusted EBITDA~~

We evaluate performance based on EBITDA and Adjusted EBITDA, which are non-GAAP measures. These measures allow management and investors to focus on our ability to service our debt as well as illustrate how the business is performing. Additionally, EBITDA and Adjusted EBITDA assist management and investors in their analysis and forecasting as these measures approximate the cash flows associated with operational earnings.

(In Millions)
2017 2016

Net income $ 363.1
$ 199.3
Less:
Interest expense, net (132.0 ) (200.5 )
Income tax benefit 252.4
12.2
Depreciation, depletion and amortization (87.7 ) (115.4 )
EBITDA $ 330.4
$ 503.0
Less:
Gain (loss) on extinguishment/restructuring of debt $ (165.4 ) $ 166.3
Impact of discontinued operations 22.0
108.4
Foreign exchange remeasurement 13.9
(17.8 )
Total Adjusted EBITDA $ 459.9
$ 246.1

EBITDA:
Mining and Pelletizing $ 534.9
$ 342.4
Metallics (0.4 ) —
Corporate and Other (including discontinued operations) (204.1 ) 160.6
Total EBITDA $ 330.4
$ 503.0

Adjusted EBITDA:
Mining and Pelletizing $ 559.4
$ 359.6
Metallics (0.4 ) —
Corporate and Other (99.1 ) (113.5 )
Total Adjusted EBITDA $ 459.9
$ 246.1

EBITDA for the year ended December 31, 2017 decreased by $172.6 million on a consolidated basis from 2016. The unfavorable variance in EBITDA for the year ended December 31, 2017 was driven primarily by an incrementally negative impact of $331.7 million related to debt extinguishment/restructuring activities compared to the prior year partially offset by an increase in sales margin of $187.5 million compared to the prior year.

Adjusted EBITDA increased by $213.8 million for the year ended December 31, 2017 from the comparable period in 2016. The increase primarily was attributable to higher consolidated sales margin of $187.5 million for the year ended December 17, 2017, compared to the prior year.

Liquidity, Cash Flows and Capital Resources

Our primary sources of liquidity are Cash and cash equivalents and cash generated from our ~~operating~~operations, availability under the ABL Facility and other financing activities. Our capital allocation decision-making process is focused on ~~returning capital to shareholders~~preserving healthy liquidity levels, while maintaining the strength of our balance sheet and creating financial flexibility to manage through the inherent cyclical demand for our products and volatility in commodity prices. We are focused on maximizing the cash generation of our operations, ~~as well as~~ reducing ~~operating costs,~~debt, and aligning capital investments with our strategic priorities and the requirements of our business plan, including regulatory and permission-to-operate related projects.

~~During 2018,~~Since the onset of the COVID-19 pandemic in the U.S., our primary focus has been on maintaining adequate levels of liquidity to manage through a potentially prolonged economic downturn. In alignment with this, we ~~took action consistent~~made several operational adjustments, including facility closures, idles and extended maintenance outages. Along with the cost savings achieved through these operational adjustments, during 2020, we reduced planned capital expenditures for the year, reduced overhead costs and suspended our ~~capital allocation priorities~~quarterly dividend payment. Additionally, on April 17, 2020 and April 24, 2020, we issued $400 million aggregate principal amount and an additional $555 million aggregate principal amount, respectively, of ~~returning capital~~9.875% 2025 Senior Secured Notes to ~~shareholders, maintaining~~further bolster our liquidity position and pay-down existing debt. We also issued an additional $120 million aggregate principal amount of 6.75% 2026 Senior Secured Notes on June 19, 2020, the ~~strength~~net proceeds of which we used to finance construction of our ~~balance sheet, improving~~Toledo direct reduction plant. Prior to such use, the net proceeds were used to temporarily reduce the outstanding borrowings under our ~~financial flexibility and executing on opportunities that will allow~~ABL Facility. We believe these measures have helped us to ~~increase~~maintain healthy liquidity levels during the COVID-19 pandemic.

Now that business conditions have improved and we expect to generate healthy free cash flow during 2021, we believe we have the ability to lower our long-term ~~profitability.~~debt balance. Our stated initial target will be to reduce total debt to less than three times our annual Adjusted EBITDA. We ~~have remained focused on protecting~~also look at the composition of our ~~business based on~~debt, as well, as we are interested in both extending our maturity profile and increasing our ratio of unsecured debt to secured debt. These actions will better prepare us to ~~allocate capital to both sustaining our existing operations and our two major capital projects:~~navigate more easily through potentially volatile industry conditions in the ~~HBI plant~~future. In furtherance of these goals, we consummated certain financing transactions in ~~Toledo, Ohio~~February 2021.

On February 11, 2021, we sold 20 million common shares and the ~~upgrade~~indirect, wholly owned subsidiary of ArcelorMittal to which approximately 78 million common shares were issued as part of the consideration paid by us in connection with the closing of the AM USA Transaction sold 40 million common shares, in each case at a price per share to the ~~Northshore plant~~underwriter of $16.12, in an underwritten public offering. We also granted the underwriter an option to ~~replace~~purchase up to ~~3.5~~an additional 9 million ~~long tons~~common shares from us at a price per share to the underwriter of ~~blast furnace pellet production with DR-grade pellet production. Additionally, we executed a strategy~~$16.12. The underwriter has until March 10, 2021 to ~~mitigate our costs as we exited the Asia Pacific Iron Ore operations, including~~exercise such option, which it may do in full, in part or not at all. We did not receive any proceeds from the sale of ~~all~~the common shares by the selling shareholder in the offering. We intend to use the net proceeds to us from the offering, plus cash on hand, to redeem up to approximately $334 million aggregate principal amount of our outstanding 9.875% 2025 Senior Secured Notes. We intend to use any remaining ~~assets~~net proceeds to us following such redemption to reduce borrowings under our ABL Facility.

On February 17, 2021, we issued $500 million aggregate principal amount of 4.625% 2029 Senior Notes and $500 million aggregate principal amount of 4.875% 2031 Senior Notes in an offering that was exempt from the registration requirements of the ~~operations,~~Securities Act. We intend to use the net proceeds from the notes offering to redeem all of the outstanding 4.875% 2024 Senior Secured Notes and ~~took additional steps~~6.375% 2025 Senior Notes issued by Cleveland-Cliffs Inc. and all of the outstanding 7.625% 2021 AK Senior Notes, 7.50% 2023 AK Senior Notes and 6.375% 2025 AK Senior Notes issued by AK Steel Corporation (n/k/a Cleveland-Cliffs Steel Corporation), and pay fees and expenses in connection with such redemptions, and reduce borrowings under our ABL Facility.

In connection with the underwritten public offering, we provided notice to ~~reduce~~redeem $322.4 million aggregate principal amount of our 9.875% 2025 Senior Secured Notes on March 11, 2021. In connection with the notes offering, we provided notice to redeem all of the outstanding 4.875% 2024 Senior Secured Notes, 6.375% 2025 Senior Notes,

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7.625% 2021 AK Senior Notes, 7.50% 2023 AK Senior Notes and 6.375% 2025 AK Senior Notes on March 12, 2021. Refer to NOTE 22 – SUBSEQUENT EVENTS for more information regarding February 2021 financing transactions.

The application of the net proceeds to us from the February 2021 financing transactions will shift our debt horizon, by providing a four-year window in which none of our long-term ~~debt and extend our maturities by extinguishing $227.4 million of our existing debt.~~

notes are due, clearing the way for us to fully focus on operational integration.

Based on our outlook for the next 12 months, which is subject to continued changing demand from ~~steelmakers that utilize our products~~customers and volatility in ~~iron ore and~~ domestic steel prices, we expect to ~~generate~~have ample liquidity through cash generated from operations and availability under our ABL Facility sufficient to meet the needs of our ~~existing~~ operations and service our debt ~~obligations and fund our dividends.~~

~~Refer to “Outlook” for additional guidance regarding expected future results, including projections on pricing, sales volume and production.~~obligations.

The following discussion summarizes the significant ~~activities that impacted~~items impacting our cash flows during ~~2018~~2020 and comparative years as well as ~~those~~ expected impacts to ~~impact~~ our future cash flows over the next 12 months. Refer to the Statements of Consolidated Cash Flows for additional information.

Operating Activities

Net cash ~~provided~~used by operating activities was $478.5 million and $338.1 million for the years ended December 31, 2018 and 2017, respectively. The incremental increase in cash provided by operating activities during 2018 was primarily due to the improved operating results previously discussed related to our Mining and Pelletizing operating segment, offset partially by year-over-year changes in cash used by our discontinued operations.

~~Net cash provided by operating activities increased to $338.1~~$261 million for the year ended December 31, ~~2017,~~2020, compared to net cash provided by operating activities of ~~$303.0~~$563 million for ~~2016.~~the year ended December 31, 2019. The ~~increase~~change in cash used by operating activities during 2020, compared to cash provided by operating activities ~~during 2017~~in 2019, was due primarily ~~due~~ to the ~~improved~~slowing economy in connection with the COVID-19 pandemic, resulting in reduced customer demand and the need to temporarily idle many of our operations, which had an adverse effect on our operating ~~results previously discussed related to our Mining and Pelletizing operating segment offset partially by cash outflows for working capital. The~~results. Our working capital ~~change in 2017 versus 2016~~ was ~~primarily driven by the repeal of corporate AMT~~negatively impacted as a result of ~~tax reform, which impacted our taxes receivable, and the timing of inventory and~~ArcelorMittal USA's accounts receivable ~~movements.~~

~~Driving~~factoring arrangement that was in place prior to the ~~increase in our taxes receivable is Public Law 115–97, commonly known as~~AM USA Transaction. This negatively impacted working capital by $315 million for the “Tax Cuts and Jobs Act”, which among other things, repealed the corporate AMT and reduced the federal corporate tax rate to 21% for tax years beginning January 1, 2018. Along with the repeal of AMT, Public Law 115–97 provides that existing AMT credit carryovers are refundable beginning with the filing of the calendar year ~~2018 tax return. As of~~ended December 31, ~~2018, we have AMT credit carryovers of $117.3 million in~~ ~~Income tax receivable, current~~2020 and ~~$117.3 million in~~ ~~Income tax receivable, non-current, which are~~is expected to ~~be fully refunded between~~impact the ~~years 2019 and 2022.~~first quarter of 2021 by approximately $260 million.

Our U.S. ~~cash~~Cash and cash equivalents balance at December 31, ~~2018~~2020 was ~~$821.6~~$90 million, or ~~99.8%~~84% of our consolidated ~~total cash~~Cash and cash equivalents balance, excluding cash related to our consolidated VIE of ~~$823.2~~$5 million. Additionally, we had a cash balance at December 31, ~~2018~~2020 of ~~$12.4~~$4 million classified as part of ~~Current~~Other current assets ~~of discontinued operations~~ in the Statements of Consolidated Financial Position ~~which will be utilized~~related to ~~support~~ our ~~exit from Australia.~~discontinued operations.

Investing Activities

Net cash used by investing activities was ~~$273.1 million for the year ended December 31, 2018, compared to $156.0 million for the year ended December 31, 2017. We had capital expenditures of approximately $296~~$2,042 million and ~~$152~~$644 million for the years ended December 31, ~~2018~~2020 and ~~2017,~~2019, respectively. ~~The 2018 capital expenditures include the continued development of our HBI project, sustaining capital spend and the upgrades at Northshore Mine.~~

~~Net cash used in investing activities was $156.0 million for~~During the year ended December 31, ~~2017 compared~~2020, we had net cash outflows of $658 million related to ~~$57.9~~the AM USA Transaction, net of cash acquired. Additionally, during the year ended December 31, 2020, we had net cash outflows of $869 million related to the AK Steel Merger, net of cash acquired, which included $590 million used to repay the former AK Steel Corporation revolving credit facility and $324 million used to purchase outstanding 7.50% 2023 AK Senior Notes. Refer to NOTE 3 - ACQUISITIONS for ~~2016. We~~additional details on the Acquisitions.

Additionally, we had capital expenditures, including capitalized interest, of ~~approximately $152~~$525 million and ~~$69~~$656 million for the years ended December 31, ~~2017~~2020 and ~~2016,~~2019, respectively. ~~The 2017 capital expenditures include sustaining capital spend, early-stage work on our HBI project~~We had cash outflows, including deposits and capitalized interest, for the ~~acquisition~~development of ~~certain real estate interests located in Itasca County west~~the Toledo direct reduction plant of ~~Nashwauk, Minnesota.~~

~~We spent approximately $69 million, $91~~$348 million and ~~$69~~$544 million ~~globally on expenditures related to sustaining capital during 2018, 2017~~for the years ended December 31, 2020 and ~~2016,~~2019, respectively. ~~Sustaining capital spend includes infrastructure, mobile equipment, environmental, safety and health, fixed equipment and product quality. Additionally, during~~During the year ended December 31, ~~2018,~~2019, we also had cash outflows, including deposits and capitalized interest, of ~~approximately $180 million on the development of the HBI production plant in Toledo, Ohio and approximately $50~~$43 million on the upgrades at ~~Northshore Mine.~~Northshore. Additionally, we spent $177 million and $69 million on sustaining capital expenditures during 2020 and 2019, respectively. Sustaining capital expenditures include capital expenditures related to infrastructure, mobile equipment, fixed equipment, product quality, environment, health and safety.

During 2020, in response to the COVID-19 pandemic, we temporarily limited our cash used for capital expenditures to critical sustaining capital, but have now resumed growth capital spending. During the fourth quarter of 2020, we completed construction of our Toledo direct reduction plant. We anticipate total cash used for capital expenditures ~~excluding amounts attributable to construction-related contingencies and capitalized interest,~~ during the next ~~twelve~~12 months to be ~~approximately $535~~between $600 million and $650 million. Included within this estimate is approximately $70 million for sustaining capital, $425 million related to the HBI production plant in Toledo, Ohio and approximately $40 million for upgrades at the Northshore plant to enable it to produce significantly increased levels of DR-grade pellets that could be sold commercially or used as feedstock for the HBI production plant. We expect to spend approximately $830 million on the HBI production plant and $90 million on the Northshore upgrades, exclusive of construction-related contingencies and capitalized interest, through 2020.

Financing Activities

Net cash used by financing activities was $375.2 million for the year ended December 31, 2018, compared with net cash provided by financing activities of $498.9 million for 2017. Uses of cash from financing activities during 2018 included the redemption of various tranches of unsecured debt. We redeemed in full all of our outstanding $400 million 5.90% 2020 Senior Notes and $500 million 4.80% 2020 Senior Notes and purchased certain other outstanding senior notes. The total aggregate principal amount of debt redeemed and purchased, including premiums, during 2018 was $234.5 million.

Additionally, on November 26, 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. We are not obligated to make any purchase and the program may be suspended or discontinued at any time. During 2018, we repurchased 5.4 million common shares at a cost of approximately $47.5 million in aggregate, including commissions and fees, or an average price of approximately $8.78 per share. As of December 31, 2018, there was approximately $152.7 million remaining under the authorization. The share repurchase program is active until December 31, 2019.

Other uses of cash for financing activities during 2018 included cash payments of $44.2 million for the second of three installments related to an agreement to distribute the net assets of the noncontrolling interest in Empire in exchange for the remaining interest in Empire and $44.0 million for repayment of lease liabilities.

Net cash provided by financing activities was ~~$498.9~~$2,059 million for the year ended December 31, ~~2017,~~2020, compared ~~with~~to net cash used by financing activities of ~~$206.4~~$394 million for ~~2016. Sources~~the year ended December 31, 2019. Cash provided by financing activities for the year ended December 31, 2020 primarily related to the issuances in separate offerings consummated on March 13, 2020 and June 19, 2020 of $845 million combined aggregate principal amount of 6.75% 2026 Senior Secured Notes, the issuances in separate offerings consummated on April 17, 2020 and April 24, 2020 of $955 million combined aggregate principal amount of 9.875% 2025 Senior Secured Notes and borrowings

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of $2,060 million under the ABL Facility. The net proceeds from the initial issuance of $725 million aggregate principal amount of the 6.75% 2026 Senior Secured Notes on March 13, 2020, along with cash on hand, were used to purchase $373 million aggregate principal amount of 7.625% 2021 AK Senior Notes and $367 million aggregate principal amount of 7.50% 2023 AK Senior Notes, in each case issued by AK Steel Corporation (n/k/a Cleveland-Cliffs Steel Corporation), that we accepted for purchase pursuant to our tender offers for any and all such notes then-outstanding in connection with the AK Steel Merger and to pay for the $44 million of debt issuance costs in the first quarter of 2020. The net proceeds from the additional issuance of $555 million aggregate principal amount of the 9.875% 2025 Senior Secured Notes on April 24, 2020 were used to repurchase $736 million aggregate principal amount of our outstanding senior notes of various series in private exchanges exempt from the registration requirements of the Securities Act. The net proceeds from the additional issuance of $120 million aggregate principal amount of 6.75% 2026 Senior Secured Notes on June 19, 2020 were used to finance construction of our Toledo direct reduction plant. Prior to such use, the net proceeds were used to temporarily reduce the outstanding borrowings under our ABL Facility. Additionally, during the year ended December 31, 2020, we repaid $550 million under the ABL Facility.

Net cash used by financing activities during 2019 primarily related to the repurchase of 24 million common shares for $253 million in the aggregate under the $300 million share repurchase program, which was active until December 31, 2019. Additionally, we issued $750 million aggregate principal amount of 5.875% 2027 Senior Notes, which provided net proceeds of approximately $714 million. The net proceeds from the notes offering, along with cash on hand, were used to redeem in full all of our then-outstanding 4.875% 2021 Senior Notes and to purchase $600 million aggregate principal amount of our outstanding 5.75% 2025 Senior Notes pursuant to a tender offer. In total, during 2019, we purchased $724 million aggregate principal amount of senior notes for $729 million in cash.

Additional uses of cash from financing activities during ~~2017~~2019 included payments of regular quarterly cash dividends and a special cash dividend on our common ~~share offering, generating net proceeds~~shares of ~~$661.3~~$72 million and a cash payment of $44 million related to the ~~issuance~~third and final annual installment of ~~$1.075 billion 5.75% 2025 Senior Notes, which provided further net proceeds~~the distribution of ~~$1.046 billion.~~ Empire partnership equity.

We ~~also had an issuance~~have temporarily suspended future dividend distributions as a result of ~~$400.0 million 4.875% 2024 Senior Secured Notes and an issuance~~impacts of ~~$316.25 million 1.5% 2025 Convertible Senior Notes, generating net proceeds~~the COVID-19 pandemic in order to preserve cash during this time of ~~$697.5 million.~~

~~Uses~~economic uncertainty. We anticipate future uses of cash ~~from~~and cash provided by financing activities during ~~2017 included~~ the ~~redemption of various tranches of secured and unsecured debt. We redeemed in full all~~next 12 months to include opportunistic debt transactions as part of our ~~outstanding $540 million 8.25%~~liability management strategy, similar to the transactions that occurred during 2020 ~~First Lien Notes, $218.5 million 8.00% 2020 1.5 Lien Notes~~ and ~~$544.2 million 7.75% 2020 Second Lien Notes~~February 2021, in addition to providing supplemental financing to meet cash requirements for business improvement opportunities.

The discussion of our Liquidity, Cash Flows and ~~purchased certain other outstanding senior notes through tender offers~~Capital Resources results for 2019 compared to 2018 can be found in Part II, Item 7., "Management's Discussion and ~~redemptions. The total aggregate principal amount~~Analysis of ~~debt redeemed~~Financial Condition and ~~purchased, including premiums, during 2017 was $1.721 billion. Additionally, we finalized an agreement to distribute~~Results of Operations", in our Annual Report on Form 10-K for the ~~net assets~~year ended December 31, 2019, filed with the SEC on February 20, 2020.

Table of the noncontrolling interest in Empire to ArcelorMittal in exchange for its interest in Empire and made the first distribution of $44.2 million, as previously discussed. We also acquired the remaining 15% equity interest in Tilden owned by U.S. Steel for $105.0 million.Contents

The following represents our future cash commitments and contractual obligations as of December 31, ~~2018:~~2020:

Payments Due by Period(In Millions)
Total
Less than
1 Year

1 - 3
Years

3 - 5
Years
More than 5 Years
Long-term debt $ 2,212.0
$ —
$ 124.0
$ —
$ 2,088.0
Interest on debt¹
964.6
110.6
218.3
209.2
426.5
Operating lease obligations 19.6
4.0
5.8
3.8
6.0
Capital lease obligations 18.5
4.2
7.8
5.4
1.1
Partnership distribution payable 44.2
44.2
—
—
—
Purchase obligations:
Open purchase orders 89.5
89.5
—
—
—
HBI production plant²
650.0
425.0
225.0
—
—
Minimum "take or pay" purchase commitments³
711.8
85.8
152.7
108.4
364.9
    Total purchase obligations 1,451.3
600.3
377.7
108.4
364.9
Other long-term liabilities:
  Pension funding minimums 365.1
15.9
79.2
118.8
151.2
  OPEB claim payments 93.3
3.5
6.8
6.6
76.4
Environmental and mine closure obligations 174.9
2.9
46.9
4.3
120.8
    Total other long-term liabilities 633.3
22.3
132.9
129.7
348.4
      Total $ 5,343.5

$ 785.6

$ 866.5

$ 456.5

$ 3,234.9

¹Refer to NOTE 6 - DEBT AND CREDIT FACILITIES for additional information regarding our debt and related interest rates.
² Includes purchase obligations and contracted amounts of approximately $400 million.
³ Includes minimum railroad transportation obligations, minimum electric power demand charges, minimum coal, diesel and natural gas obligations and minimum port facility obligations.

The above table does not reflect $4.2 million of unrecognized tax benefits, which we have recorded for uncertain tax positions, as we are unable to determine a reasonable and reliable estimate of the timing of future payments.


	Payments Due by Period (In Millions)
	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 Years
Long-term debt1	$	5,595	$	34	$	13	$	2,197	$	3,351
Interest on debt1	1,772		303		601		507		361
Operating lease obligations	363		70		99		72		122
Finance lease obligations	394		100		173		45		76
Purchase obligations:
Open purchase orders	347		342		5		—		—
Minimum "take or pay" purchase commitments2	8,853		2,865		2,708		1,607		1,673
Total purchase obligations	9,200		3,207		2,713		1,607		1,673
Other long-term liabilities:
Pension funding minimums	887		202		178		238		269
OPEB claim payments	1,777		144		280		269		1,084
Environmental and asset retirement obligations	589		27		51		42		469
Other	272		71		99		31		71
Total other long-term liabilities	3,525		444		608		580		1,893
Total	$	20,849	$	4,158	$	4,207	$	5,008	$	7,476

1 Refer to NOTE 8 - DEBT AND CREDIT FACILITIES for additional information regarding our debt and related interest rates.
2 Includes minimum railroad and vessel transportation obligations, minimum electric power demand charges, minimum diesel and natural gas obligations and minimum port facility obligations. Additionally, includes our coke purchase commitments related to our coke supply agreement with SunCoke Middletown.

Refer to NOTE 1921 - COMMITMENTS AND CONTINGENCIES for additional information regarding our future commitments and obligations.

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Capital Resources

We expect to fund our business obligations from available cash, current and future operations and existing and future borrowing arrangements. We also may pursue other funding strategies in the capital markets to strengthen our liquidity, extend debt maturities and/or fund strategic initiatives. The following represents a summary of key liquidity measures:


	(In Millions)
	December 31, 2020
Cash and cash equivalents	$	112
Cash and cash equivalents from discontinued operations, included within Other current assets	4
Less: Cash and cash equivalents from VIE's	(5)
Total cash and cash equivalents	$	111

Available borrowing base on ABL Facility1	$	3,500
Borrowings	(1,510)
Letter of credit obligations	(247)
Borrowing capacity available	$	1,743


1 As of December 31, 2020, the ABL Facility had a maximum borrowing base of $3.5 billion, determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.

(In Millions)
December 31,
2018 December 31, 2017
Cash and cash equivalents $ 823.2
$ 978.3

Available borrowing base on ABL Facility¹
$ 323.7
$ 273.2
ABL Facility loans drawn —
—
Letter of credit obligations and other commitments (55.0 ) (46.5 )
Borrowing capacity available $ 268.7
$ 226.7

¹The 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.

Our primary sources of funding are cash and cash equivalents, which totaled ~~$823.2~~$111 million as of December 31, ~~2018,~~2020, cash generated by our business, availability under the ABL Facility and other financing activities. 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.~~deposit. The combination of cash and availability under the ABL Facility gives us ~~$1,091.9 million~~$1.9 billion in liquidity entering the first quarter of ~~2019,~~2021, which is expected to be adequate to fund operations, letter of credit obligations, sustaining and expansion capital expenditures and other cash commitments for at least the next 12 months.

As of February 24, 2021, we had total liquidity of approximately $2.6 billion, consisting of approximately $200 million in cash and approximately $2.4 billion of availability under its ABL credit facility, of which approximately $850 million is expected to be used to redeem the senior notes for which notice of redemption was provided in connection with the offerings consummated in February 2021.

As of December 31, ~~2018,~~2020, 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. We believe that the cash on hand and the ABL Facility provide us sufficient liquidity to support our operating, investing and financing activities. We have the capability to issue additional unsecured notes and, subject to the limitations set forth in our existing ~~debt~~senior notes indentures, additional secured ~~indebtedness,~~debt, if we elect to access the debt capital markets. However, ~~available capacity of these~~our ability to issue additional notes could be limited by market conditions.

~~Consistent with our stated strategy, we~~We intend from time to time to seek to retire or purchase our outstanding senior notes with cash on hand, borrowings from existing credit sources or new debt financings and/or exchanges for debt or equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material.

Off-Balance Sheet Arrangements

In the normal course of business, we are a party to certain arrangements that are not reflected on our Statements of Consolidated Financial Position. These arrangements include minimum "take or pay" purchase commitments, such as minimum electric power demand charges, minimum coal, diesel and natural gas purchase commitments, minimum railroad transportation commitments and minimum port facility usage commitments; and financial instruments with off-balance sheet risk, such as bank letters of credit and bank ~~guarantees;~~guarantees.

Information about our Guarantors and ~~operating leases,~~the Issuer of our Guaranteed Securities

The accompanying summarized 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

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Being Registered,” and Rule 13-01 "Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralized a Registrant's Securities." Certain of our subsidiaries (the "Guarantor subsidiaries") have fully and unconditionally, and jointly and severally, guaranteed the obligations under (a) the 5.75% 2025 Senior Notes, the 6.375% 2025 Senior Notes, the 5.875% 2027 Senior Notes and the 7.00% 2027 Senior Notes issued by Cleveland-Cliffs Inc. on a senior unsecured basis and (b) the 4.875% 2024 Senior Secured Notes, the 6.75% 2026 Senior Secured Notes and the 9.875% 2025 Senior Secured Notes on a senior secured basis. See NOTE 7 - DEBT AND CREDIT FACILITIES for further information.

The following presents the summarized financial information on a combined basis for Cleveland-Cliffs Inc. (parent company and issuer of the guaranteed obligations) and the Guarantor subsidiaries, collectively referred to as the obligated group. Transactions between the obligated group have been eliminated. Information for the non-Guarantor subsidiaries was excluded from the combined summarized financial information of the obligated group.

Each Guarantor subsidiary is consolidated by Cleveland-Cliffs Inc. as of December 31, 2020. Refer to Exhibit 22.1, incorporated herein by reference, for the detailed list of entities included within the obligated group as of December 31, 2020 and December 31, 2019.

The guarantee of a Guarantor subsidiary with respect to Cliffs' 5.75% 2025 Senior Notes, 6.375% 2025 Senior Notes, 5.875% 2027 Senior Notes, 7.00% 2027 Senior Notes, 4.875% 2024 Senior Secured Notes, 6.75% 2026 Senior Secured Notes and 9.875% 2025 Senior Secured Notes will be automatically and unconditionally released and discharged, and such Guarantor subsidiary’s obligations under the guarantee and the related indentures (the “Indentures”) will be automatically and unconditionally released and discharged, upon the occurrence of any of the following, along with the delivery to the trustee of an officer’s certificate and an opinion of counsel, each stating that all conditions precedent provided for in the applicable Indenture relating to the release and discharge of such Guarantor subsidiary’s guarantee have been complied with:

(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 ~~primarily relate~~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), whether or not such Guarantor subsidiary is the surviving entity in such transaction, to ~~equipment~~a person which is not the Company or a subsidiary of the Company; provided that (i) such sale, exchange, transfer or disposition is made in compliance with the applicable Indenture, including the covenants regarding consolidation, merger and ~~office space.~~sale of assets and, as applicable, dispositions of assets that constitute notes collateral, and (ii) all the obligations of such Guarantor subsidiary under all debt of the Company or its subsidiaries terminate upon consummation of such transaction;

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

Each entity in the summarized combined financial information follows the same accounting policies as described in the consolidated financial statements. The accompanying summarized combined financial information does not reflect investments of the obligated group in non-Guarantor subsidiaries. The financial information of the obligated group is presented on a combined basis; intercompany balances and transactions within the obligated group have been eliminated. The obligated group's amounts due from, amounts due to, and transactions with, non-Guarantor subsidiaries and related parties have been presented in separate line items.

Summarized Combined Financial Information of the Issuer and Guarantor Subsidiaries:

The following table is summarized combined financial information from the Statements of Condensed Consolidated Financial Position of the obligated group:


	(In Millions)
	December 31, 2020		December 31, 2019
Current assets	$	4,903	$	891
Non-current assets	10,535		2,382
Current liabilities	(2,767)		(393)
Non-current liabilities	(10,563)		(2,792)

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The following table is summarized combined financial information from the Statements of Condensed Consolidated Operations of the obligated group:


	(In Millions)
	Year Ended
	December 31, 2020
Revenues1	$	5,170
Cost of goods sold	(5,008)
Loss from continuing operations	(120)
Net loss	(118)
Net loss attributable to Cliffs shareholders	(118)

1 Includes Realization of deferred revenue of $35 million for the year ended December 31, 2020.

As of December 31, 2020 and 2019, the obligated group had the following balances with non-Guarantor subsidiaries and other related parties:


	(In Millions)
	December 31, 2020		December 31, 2019
Balances with non-Guarantor subsidiaries:
Accounts receivable, net	$	69	$	—
Accounts payable	(17)		—

Balances with other related parties:
Accounts receivable, net	$	2	$	31
Other current assets	—		45
Accounts payable	(6)		—
Other current liabilities	—		(2)

Additionally, for the year ended December 31, 2020, the obligated group had Revenues of $893 million and Cost of goods sold of $602 million, in each case with other related parties.

Market Risks

We are subject to a variety of risks, including those caused by changes in commodity prices ~~foreign currency exchange rates~~ and interest rates. We have established policies and procedures to manage such risks; however, certain risks are beyond our control.

Pricing Risks

~~Commodity Price Risk~~

~~Our consolidated revenues include~~In the ordinary course of business, we are exposed to market risk and price fluctuations related to the sale of ~~a single product, iron ore pellets,~~our products, which are impacted primarily by market prices for HRC, and the purchase of energy and raw materials used in our operations, which are impacted by market prices for electricity, natural gas, ferrous and stainless steel scrap, chrome, coal, coke, nickel and zinc. Our strategy to address market risk has generally been to obtain competitive prices for our products and services and allow operating results to reflect market price movements dictated by supply and demand; however, we make forward physical purchases and enter into hedge contracts to manage exposure to price risk related to the purchases of certain raw materials and energy used in the ~~North American market.~~ production process.

Our financial results can vary ~~significantly~~for our operations as a result of fluctuations in ~~the~~ market ~~prices of iron ore, hot-rolled coil steel~~prices. We attempt to mitigate these risks by aligning fixed and ~~iron ore pellet premiums. World market prices for these commodities have fluctuated historically and are affected~~

~~by numerous factors beyond our control.The world market price that is most commonly utilized~~variable components in our ~~iron ore~~customer pricing contracts, supplier purchasing agreements and derivative financial instruments.

Some customer contracts have fixed-pricing terms, which increase our exposure to fluctuations in raw material and energy costs. To reduce our exposure, we enter into annual, fixed-price agreements for certain raw materials. Some of our existing multi-year raw material supply agreements have required minimum purchase quantities. Under adverse economic conditions, those minimums may exceed our needs. Absent exceptions for force

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majeure and other circumstances affecting the legal enforceability of the agreements, these minimum purchase requirements may compel us to purchase quantities of raw materials that could significantly exceed our anticipated needs or pay damages to the supplier for shortfalls. In these circumstances, we would attempt to negotiate agreements for new purchase quantities. There is a risk, however, that we would not be successful in reducing purchase quantities, either through negotiation or litigation. If that occurred, we would likely be required to purchase more of a particular raw material in a particular year than we need, negatively affecting our results of operations and cash flows.

Certain of our customer contracts include variable-pricing mechanisms that adjust selling prices in response to changes in the costs of certain raw materials and energy, while other of our customer contracts exclude such mechanisms. We may enter multi-year purchase agreements for certain raw materials with similar variable-price mechanisms, allowing us to achieve natural hedges between the customer contracts and supplier purchase agreements. Therefore, in some cases, price fluctuations for energy (particularly natural gas and electricity), raw materials (such as scrap, chrome, zinc and nickel) or other commodities may be, in part, passed on to customers rather than absorbed solely by us. There is a risk, however, that the variable-price mechanisms in the sales contracts ~~is the Platts 62% Price, which can fluctuate widely due to numerous factors, such as global economic growth or contraction,~~may not necessarily change in ~~demand for steel or changes~~tandem with the variable-price mechanisms in ~~availability~~our purchase agreements, negatively affecting our results of ~~supply.~~

~~Customer Supply Agreement~~

A supply agreement with one customer provides for supplemental revenue or refunds based on the average annual daily market price for hot-rolled coil steel at the time the iron ore product is consumed in the customer’s blast furnaces. At December 31, 2018, we had derivative assets of $89.3 million, representing the fair value of the pricing factors, based upon the amount of unconsumed long tonsoperations and an estimated average hot-rolled coil steel price for the period in which the iron ore is expected to be consumed in the customer's blast furnaces, subject to final pricing at a future date. We estimate that a $75 positive or negative change in the average daily market price for hot-rolled coil steel realized from the December 31, 2018 estimated price recorded would cause the fair value of the derivative instrument to increase or decrease by approximately $27 million, respectively, thereby impacting our consolidated revenues by the same amount. We have not entered into any hedging programs to mitigate the risk of adverse price fluctuations.

~~Volatile Energy and Fuel Costs~~

The volatile cost of energy is an important factor affecting the production costs at our iron ore operations. Our consolidated Mining and Pelletizing segment operations consumed 15 million MMBtu of natural gas at an average delivered price of $3.77 per MMBtu, excluding the natural gas hedge impact, or $3.65 per MMBtu net of the natural gas hedge impact during 2018. Additionally, our consolidated Mining and Pelletizing segment operations consumed 17 million gallons of diesel fuel at an average delivered price of $2.37 per gallon during 2018.cash flows.

Our strategy to address volatile natural gas rates and ~~diesel~~electricity rates includes improving efficiency in energy usage, identifying alternative providers and utilizing the lowest cost alternative fuels. ~~A full-year hedging program was implemented during~~If we are unable to align fixed and variable components between customer contracts and supplier purchase agreements, we use cash-settled commodity price swaps and options to hedge the ~~fourth quarter~~market risk associated with the purchase of ~~2017 in order~~certain of our raw materials and energy requirements. Additionally, we routinely use these derivative instruments to ~~manage the price risk~~hedge a portion of our natural gas, atelectricity and zinc requirements. Our hedging strategy is designed to protect us from excessive pricing volatility. However, since we do not typically hedge 100% of our ~~Mining and Pelletizing segment mines. Additionally, during~~exposure, abnormal price increases in any of these commodity markets might still negatively affect operating costs. The following table summarizes the ~~third quarter~~impact of 2018, we began entering into forward hedge contracts to manage our 2019 price of diesel fuel at our Mining and Pelletizing segment mines. We will continue to monitor relevant energy markets for risk mitigation opportunities and may make additional forward purchases or employ other hedging instruments in the future as warranted and deemed appropriate by management. In the near term, a 10% and 25% change in market price from the December 31, 2020 estimated price on our ~~2018 average natural gas and diesel fuel prices would result in a change of approximately $11 million in~~derivative instruments, thereby impacting our ~~annual fuel and energy cost based on expected consumption for 2019.~~pre-tax income by the same amount.

In the ordinary course of business, there may also be increases in prices relative to electricity costs at our mine sites. Specifically, Tilden has entered into large curtailable special contracts with Wisconsin Electric Power Company. Charges under those special contracts are subject to a power supply cost recovery mechanism that is based on variations in the utility's actual fuel and purchase power expenses.


	(In Millions)
	Positive or Negative Effect on Pre-tax Income
Commodity Derivative	10% Increase or Decrease		25% Increase or Decrease
Natural gas	$	28	$	69
Electricity	2		4
Zinc	1		2

Valuation of Goodwill and Other Long-Lived Assets

We assign goodwill arising from acquired companies to the reporting units that are expected to benefit from the synergies of the acquisition. Goodwill is tested on a qualitative basis for impairment at the reporting unit level on an annual basis (October 1) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition or sale or disposition of a significant portion of a reporting unit. As necessary, should our qualitative test indicate that it is more likely than not that the fair value of a reporting unit is less than its carry amount, we perform a quantitative test to determine the amount of impairment, if any, to the carrying value of the reporting unit and its associated goodwill.

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units and if a quantitative assessment is deemed necessary in determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated using a discounted cash flow methodology, which considers forecasted cash flows discounted at an estimated weighted average cost of capital. Assessing the recoverability of our goodwill requires significant assumptions regarding the estimated future cash flows and other factors to determine the fair value of a reporting unit, including, among other things, estimates related to forecasts of future revenues, expected Adjusted EBITDA, expected capital expenditures and working capital requirements, which are based upon our long-range plan estimates. The assumptions used to calculate the fair value of a reporting unit may change from year to year based on operating results, market conditions and other factors. Changes in these assumptions could materially affect the determination of fair value for each reporting unit.

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Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the assets may not be recoverable. Such indicators may ~~include, among others:~~include: a significant decline in expected future cash flows; a sustained, significant decline in market pricing; a significant adverse change in legal or environmental factors or in the business climate; changes in estimates of our recoverable reserves; and unanticipated ~~competition; and slower growth or production rates.~~competition. Any adverse change in these factors could have a significant impact on the recoverability of our long-lived assets and could have a material impact on our consolidated statements of operations and statement of financial position.

A comparison of each asset group's carrying value to the estimated undiscounted net future cash flows expected to result from the use of the assets, including cost of disposition, is used to determine if an asset is recoverable. Projected future cash flows reflect management's best ~~estimates~~estimate of economic and market conditions over the projected period, including growth rates in revenues and costs, and estimates of future expected changes in operating margins and capital expenditures. If the carrying value of the asset group is higher than its undiscounted net future cash flows, the asset group is measured at fair value and the difference is recorded as a reduction to the long-lived assets. We estimate fair value using a market approach, an income approach or a cost approach. ~~As of~~While we concluded that an event triggering the need for an impairment assessment did not occur during the year ended December 31, ~~2018, no impairment factors were present~~2020, a prolonged COVID-19 pandemic could impact the results of operations due to changes to assumptions that would indicate that the carrying value of our asset groups may not be ~~recoverable; as a result, no impairment assessment was required.~~

recoverable.

Interest Rate Risk

Interest payable on our senior notes is at fixed rates. Interest payable under our ABL Facility is at a variable rate based upon the applicable base rate plus the applicable base rate margin depending on the excess availability. As of December 31, ~~2018,~~2020, we had ~~no amounts drawn on~~$1,510 million outstanding under the ABL Facility. An increase in prevailing interest rates would increase interest expense and interest paid for any outstanding borrowings under the ABL Facility. For example, a 100 basis point change to interest rates under the ABL Facility at the December 31, 2020 borrowing level would result in a change of $15 million to interest expense on an annual basis.

Supply Concentration Risks

Many of our operations and mines ~~are dependent~~rely on one source for each of electric power and natural gas. A significant interruption or change in service or rates from our energy suppliers could materially impact ~~materially~~ our production costs, margins and profitability.

~~Outlook~~



		~~2019 Outlook Summary~~
~~Per Long Ton Information~~		~~Mining and Pelletizing~~
~~Cost of goods sold and operating expense rate~~		~~$73 - $78~~
~~Less:~~
~~Freight expense rate~~¹		$7
~~Depreciation, depletion & amortization rate~~		$4
~~Cash cost of goods sold and operating expense rate~~		~~$62 - $67~~

~~Sales volume (million long tons)~~		~~20.0~~
~~Production volume (million long tons)~~		~~20.0~~

¹~~Freight has an offsetting amount in revenue and has no impact on sales margin.~~

~~Mining and Pelletizing Outlook~~ ~~(Long Tons)~~

Based on the assumption that iron ore prices of $76 per metric ton, steel prices of $694 per short ton, and pellet premiums of $67.50 per metric ton will average for the remainder of 2019 their respective January averages, we would realize Mining and Pelletizing revenue rates in the range of $102 to $107 per long ton. Performing the same analysis using spot prices as of February 7, 2019, namely an iron ore price of $90.50 per metric ton, a steel price of $683 per short ton, and a pellet premium of $67.50 per metric ton, we would expect to realize Mining and Pelletizing revenue rates in the range of $111 to $116 per long ton for the full-year 2019.

For 2019, we expect full-year sales and production volumes of our productive capacity of approximately 20 million long tons. Our full-year 2019 Mining and Pelletizing cash cost of goods sold and operating expense expectation is $62 to $67 per long ton.

~~SG&A Expenses and Other Expectations~~

~~Full-year 2019 SG&A expenses are expected to be approximately $120 million. We note that of the $120 million expectation, approximately $20 million is considered non-cash.~~

Our full-year 2019 interest expense is expected to be approximately $100 million, compared to $119 million recorded in 2018. We expect approximately $20 million in cash interest related to the HBI project to be capitalized, compared to $6 million that was capitalized in 2018.

~~Our 2019 effective tax rate is expected to be approximately 10%. However, due to our net operating loss position, our cash tax payments are expected to be zero.~~

~~Additionally, we also expect to receive approximately $117 million in cash tax refunds during the third quarter of 2019.~~

~~Consolidated full-year 2019 depreciation, depletion and amortization is expected to be approximately $85 million, incurred ratably throughout the year.~~

~~Capital Expenditures~~

~~Our 2019 capital spending expectations are:~~

~~Approximately $425 million toward the HBI project in Toledo, OH;~~

~~Approximately $70 million in sustaining capital;~~

~~Approximately $40 million toward the completion of the upgrade at the Northshore mine; and~~

~~Approximately $20 million in capitalized interest.~~

Based on current market analysis, greater-than-expected customer demand and expansion opportunities explored during the HBI construction process, we are increasing the productive capacity of our Toledo HBI facility from 1.6 million metric tons to 1.9 million metric tons per year.

Recently Issued Accounting Pronouncements

Refer to NOTE 21 - ~~NEW~~BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING ~~STANDARDS~~POLICIES of the consolidated financial statements for a description of recent accounting pronouncements, including the respective dates of adoption and effects on results of operations and financial condition.

Critical Accounting Estimates

Management's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. Preparation of financial statements requires management to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and the related disclosures of contingencies. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are fairly presented in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Management believes that the following critical accounting estimates and judgments have a significant impact on our financial statements.

~~Revenue Recognition~~Business Combinations

~~Customer Supply Agreement~~

~~A supply agreement with one customer provides for supplemental revenue or refunds to the customer~~Assets acquired and liabilities assumed in a business combination are recognized and measured based on their estimated fair values at the ~~average annual daily steel market price for hot-rolled coil steel in~~acquisition date, while the ~~year the iron ore product is consumed in the customer’s blast furnace. The supplemental pricing is characterized~~acquisition-related costs are expensed 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 as a revenue adjustment each reporting period until the pellets are consumed and the amounts are settled.

~~The fair value~~incurred. Any excess of the ~~instrument is determined using a market approach based on an estimate of the average annual daily market price for hot-rolled coil steel, and takes into~~purchase consideration ~~current market conditions and nonperformance risk. At December 31, 2018, we had a derivative asset of $89.3 million, representing~~when compared to the fair value of the ~~pricing factors, based upon~~net tangible and intangible assets acquired, if any, is recorded as goodwill. We engaged independent valuation specialists to assist with the ~~amount~~determination of ~~unconsumed long tons~~the fair value of assets acquired, liabilities assumed, noncontrolling interest, and ~~an estimated average annual daily hot-rolled coil steel price related to~~goodwill, for the Acquisitions. If the initial accounting for the business combination is incomplete by the end of the reporting period in which the ~~iron ore is expected~~acquisition occurs, an estimate will be recorded. Subsequent to the acquisition date, and not later than one

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year from the acquisition date, we will record any material adjustments to the initial estimate based on new information obtained that would have existed as of the date of the acquisition. Any adjustment that arises from information obtained that did not exist as of the date of the acquisition will be ~~consumed~~recorded in the ~~customer's blast furnace at each respective steelmaking facility, subject to final pricing at a future date. We recognized net derivative revenue~~period the adjustment arises.

Valuation of ~~$425.8 million in~~ ~~Product revenues~~ ~~in the Statements of Consolidated Operations for the year ended December 31, 2018~~Goodwill and Other Long-Lived Assets

The ~~accuracy~~valuation of ~~our estimates typically increases as the year progresses based on~~goodwill and other long-lived assets includes various assumptions and are considered critical accounting estimates. Refer to "–Market Risks" above for additional information in the market becoming available. Our estimates for supplemental revenue adjustments have been materially correct related to the Mining and Pelletizing segment's product revenues for the year ended December 31, 2018 and 2017.information.

Mineral Reserves

We regularly evaluate our mineral reserves and update them as required in accordance with SEC Industry Guide 7. We perform an in-depth evaluation of our mineral reserve estimates by mine on a periodic basis, in addition to routine annual assessments. The ~~estimated~~determination of mineral reserves requires us, with the support of our third-party experts, to make significant estimates and assumptions related to key inputs including (1) the determination of the size and scope of the iron ore body through technical modeling, (2) the estimates of future iron ore prices, production costs and capital expenditures, and (3) management’s mine plan for the proven and probable mineral reserves. The significant estimates and assumptions could be affected by future industry conditions, geological conditions and ongoing mine planning. Additional capital and development expenditures may be required to maintain effective production capacity. Generally, as mining operations progress, haul distances increase. Alternatively, changes in economic conditions or the expected quality of mineral reserves could decrease capacity of mineral reserves. Technological progress could alleviate such factors or increase capacity of mineral reserves.

We use our mineral reserve estimates, combined with our estimated annual production levels, to determine the mine closure dates utilized in recording the fair value liability for asset retirement obligations for our active operating mines. Refer to NOTE 1114 - ~~ENVIRONMENTAL AND MINE CLOSURE~~ASSET RETIREMENT OBLIGATIONS, for further information. Since the liability represents the present value of the expected future obligation, a significant change in mineral reserves or mine lives could have a substantial effect on the recorded obligation. We also utilize mineral reserves for evaluating potential impairments of mine asset groups as they are indicative of future cash flows and in determining maximum useful lives utilized to calculate depreciation, depletion and amortization of long-lived mine ~~assets.~~assets and in determining the estimated fair value of mineral reserves established through the purchase price allocation in a business combination. The consolidated asset retirement obligation balance was $342 million as of December 31, 2020, of which $83 million related to active iron ore mine operations. The total asset balance associated with our Steelmaking reportable segment was $15,849 million as of December 31, 2020, of which $1,661 million related to long-lived assets associated with our combined iron ore mine asset groups, and is inclusive of $235 million related to iron ore mineral reserves acquired through the AM USA Transaction. Depreciation, depletion and amortization expense for the our combined iron ore mine asset groups was $78 million for the year ended December 31, 2020. Increases or decreases in mineral reserves or mine lives could significantly affect these items.

~~Valuation of Long-Lived Assets~~

In assessing the recoverability of our long-lived asset groups, significant assumptions regarding the estimated future cash flows and other factors to determine the fair value of the respective assets must be made, as well as the related estimated useful lives. If these estimates or their related assumptions change in the future as a result of changes in strategy or market conditions, we may be required to record impairment charges for these assets in the period such determination was made.

We monitor conditions that indicate that the carrying value of an asset or asset group may be impaired. 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. An impairment loss exists when projected undiscounted net 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. The impairment analysis and fair value determination can result in substantially different outcomes based on changes in critical assumptions and estimates, including the quantity and quality of remaining mineral reserves, future iron ore prices and production costs.

~~During 2018, 2017 and 2016 there were no impairment indicators present at our continuing operations; as a result, no impairment assessments were required.~~

~~Refer to NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES for further information regarding our policy on asset impairment.~~

Asset Retirement Obligations ~~and Environmental Remediation Costs~~

The accrued ~~mine~~ closure ~~obligations for~~obligation is predominantly related to our ~~active~~indefinitely idled and closed iron ore mining operations ~~provide~~and provides for contractual and legal obligations associated with the eventual closure of ~~the mining~~those operations. We perform an in-depth evaluation of the liability every three years in addition to our routine annual assessments. In ~~2017,~~2020, we employed a third-party ~~specialist~~specialists to assist in the evaluation. Our obligations are determined based on detailed estimates adjusted for factors that a market participant would consider (e.g., inflation, overhead and profit), which are escalated at an assumed rate of inflation to the estimated closure dates, and then discounted using the current credit-adjusted risk-free interest rate. The estimate also incorporates incremental increases in the closure cost estimates and changes in estimates of mine ~~lives.~~lives for our active mine sites. The closure date for each ~~location~~of our active mine sites is determined based on the exhaustion date of the remaining iron ore reserves, which is dependent on our estimate of mineral reserves. The estimated obligations for our active mine sites are particularly sensitive to the impact of changes in mine lives given the difference between the inflation and discount rates. The closure dates for a majority of our steelmaking facilities are indefinite, and as such, the asset retirement obligations are recorded at present values using estimated ranges of the economic lives of the underlying assets. Changes in the base estimates of legal and contractual closure costs due to changes in legal or contractual requirements, available technology, inflation, overhead or profit rates also could have a significant impact on the recorded obligations. Refer to NOTE 14 - ASSET RETIREMENT OBLIGATIONS, for further information.

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Environmental Remediation Costs

We have a formal policy for environmental protection and remediation. Our obligations for known environmental matters at active and closed ~~mining~~ operations ~~and other sites~~ have been recognized based on estimates of the cost of investigation and remediation at each ~~site.~~facility. If the obligation can only be estimated as a range of possible amounts, with no specific amount being more likely, the minimum of the range is accrued. Management reviews its environmental remediation sites quarterly to determine if additional cost adjustments or disclosures are required. The characteristics

of environmental remediation obligations, where information concerning the nature and extent of clean-up activities is not immediately available and which are subject to changes in regulatory requirements, result in a significant risk of increase to the obligations as they mature. Expected future expenditures are not discounted to present value unless the amount and timing of the cash disbursements can be reasonably estimated. ~~Potential insurance recoveries are not recognized until realized. Refer to NOTE 11 - ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS, for further information.~~

Income Taxes

Our income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management's best assessment of estimated future taxes to be paid. We are subject to income taxes in the U.S. and various foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense.

Deferred income taxes arise from temporary differences between tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax assets, 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 operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and changes in accounting policies and incorporate assumptions including the amount of future state, federal and foreign pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage the underlying businesses.

At December 31, ~~2018~~2020 and ~~2017,~~2019, we had a ~~total~~ valuation allowance of ~~$1,287.3~~$836 million and ~~$1,983.1~~$441 million, respectively, against our deferred tax assets. Of ~~this amount, $44.1~~these amounts, $439 million and ~~$593.8~~$44 million relate to the U.S. deferred tax assets at December 31, ~~2018~~2020 and ~~2017,~~2019, respectively, and ~~$1,243.2~~$397 million and ~~$1,389.3~~$397 million relate to foreign deferred tax assets, respectively.

~~As of~~At 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 relates 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 be reflective of 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 deduction limitation as well as permanent tax adjustments. The IRC Section 163(j) limitation will limit our interest 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 average annual taxable income required to fully utilize the 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 deferred tax asset will be realized before the end of the carryforward period. ~~We also released the state valuation allowance except~~See NOTE 12 - INCOME TAXES for ~~the valuation allowance recorded on deferred tax assets~~further information and considerations related to ~~state net operating losses in jurisdictions where we no longer operate and~~ the ~~losses will not be utilized. The valuation allowance related to foreign tax credits will be retained as the credits will expire prior to utilization.~~release.

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, unless and until sufficient positive evidence exists to support the realization of such assets.

Changes in tax laws and rates also could affect recorded deferred tax assets and liabilities in the future. In 2017, both the U.S. and Luxembourg reduced the statutory rate; this decreased the deferred tax assets and related valuation allowance by $407.5 million. The U.S. tax legislation also repealed the corporate AMT which resulted in a reversal of the valuation allowance related to the AMT credits and an income tax benefit of $234.6 million for the year ended December 31, 2017. At December 31, 2018, we have recorded an ~~Income tax receivable, current~~ ~~of $117.3 million and an~~ ~~Income tax receivable, non-current~~ of $117.3 million, which represents the AMT credits to be refunded in 2019 through 2022. These receivables represent the full amount of refundable AMT credits as the IRS has confirmed they will not be subject to sequestration. We had recorded a $15 million reserve against the AMT credit receivable during the first quarter of 2018, based on preliminary guidance from the IRS. Near year-end, the IRS issued final guidance that AMT credit refunds would not be subject to sequestration and we reversed the previously recorded reserve. There was no net impact on the full year 2018.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various jurisdictions across our global operations. The ultimate impact of the U.S. income tax reform legislation may differ from our current estimates due to changes in the interpretations and assumptions made as well as additional regulatory guidance that may be issued.

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.

We recognize tax liabilities in accordance with ASC 740, Income Taxes, and we adjust these liabilities when our judgment changes because of evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined. Refer to NOTE 1012 - INCOME TAXES, for further information.

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Employee Retirement Benefit Obligations

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

The defined benefit pension plans largely are noncontributory and benefits generally are based on employees' years of service and average earnings for a defined period prior to retirement, or a minimum formula.

~~Following~~following is a summary of our U.S. defined benefit pension and OPEB funding and expense:


	Pension				OPEB
	Funding		Expense (Benefit)		Funding		Expense (Benefit)
2018	$	28	$	13	$	4	$	(6)
2019	16		22		4		(2)
2020	50		(31)		25		8
2021 (Estimated)1	202		(168)		144		86

1 The estimated 2021 pension funding includes $118 million, which was deferred as a result of the CARES Act.

Pension OPEB
Funding Expense Funding Expense (Benefit)
2016 $ 1.2
$ 16.5
$ 1.1
$ (4.0 )
2017 $ 24.4
$ 18.0
$ 2.1
$ (6.1 )
2018 $ 27.6
$ 12.7
$ 3.8
$ (5.9 )
2019 (Estimated) $ 15.9
$ 21.5
$ 3.5
$ (2.8 )

Assumptions used in determining the benefit obligations and the value of plan assets for defined benefit pension plans and ~~postretirement benefit~~OPEB plans, ~~(primarily~~primarily consisting of retiree healthcare ~~benefits)~~benefits, that we offer are evaluated periodically by management. Critical assumptions, such as the discount rate used to measure the benefit obligations, the expected long-term rate of return on plan assets, the medical care cost trend, and the rate of compensation increase are reviewed annually.

AsThe following represents weighted-average assumptions used to determine benefit obligations and net benefit costs:


	Pension				Other Benefits
	December 31,				December 31,
	2020		2019		2020		2019
Discount rate	2.34	%	3.27	%	2.71	%	2.71	%
Compensation rate increase	2.56		2.53		3.00		3.00
Expected return on plan assets	7.69		8.25		6.82		7.00

The following represents assumed weighted-average health care cost trend rates:


	December 31,
	2020		2019
Health care cost trend rate assumed for next year	6.05	%	6.50	%
Ultimate health care cost trend rate	4.59		5.00
Year that the ultimate rate is reached	2031		2026

The discount rates used to measure plan liabilities as of the December 31 ~~2018 and 2017, we used the following assumptions:~~

Pension and Other Benefits
2018 2017

Plan discount rates:
Iron Hourly Pension Plan 4.31
% 3.60
%
Salaried Pension Plan 4.21
3.52

Ore Mining Pension Plan 4.33
3.61

SERP 4.22
3.50

Hourly OPEB Plan 4.29
3.60

Salaried OPEB Plan 4.27
3.57

Rate of compensation increase - Salaried 3.00
3.00

Rate of compensation increase - Hourly 2.00
2.00

Pension plan expected return on plan assets 8.25
8.25

OPEB plan expected return on plan assets 7.00
7.00

Health care cost trend rate assumed for next year 6.75
7.00

Ultimate health care cost trend rate 5.00
5.00

Year that the ultimate rate is reached 2026
2026

measurement date are determined individually for each plan. The ~~increase in the~~ discount rates ~~in 2018 was driven~~are determined by matching the projected cash flows used to determine the plan liabilities to a projected yield curve of high-quality corporate bonds available at the measurement date. Discount rates for expense are calculated using the granular approach for each plan.

Depending on the plan, we use either company-specific base mortality tables or tables issued by the ~~change~~Society of Actuaries. We adopted the Pri-2012 mortality tables from the Society of Actuaries in ~~corporate bond yields, which were up approximately 70 basis points compared to the prior year.~~

~~Additionally, on~~2019. On December 31, ~~2018,~~2020, the assumed mortality improvement projection was ~~changed~~updated from generational scale ~~MP-2017~~MP-2019 to generational scale ~~MP-2018. The healthy~~MP-2020 for the Pri-2012 mortality ~~assumption remains the RP-2014 mortality tables with blue collar and white collar adjustments made for certain hourly and salaried groups to determine the expected life~~tables.

Table of ~~our plan participants.~~Contents

Following are sensitivities of potential further changes in these key assumptions on the estimated ~~2019~~2021 pension and OPEB expense and the pension and OPEB ~~benefit~~ obligations as of December 31, ~~2018:~~2020:


	Increase in Expense				Increase in Benefit Obligation					(In Millions)
	(In Millions)				(In Millions)					Increase (Decrease) in Expense				Increase in Benefit Obligation
	Pension		OPEB		Pension		OPEB			Pension		OPEB		Pension		OPEB
Decrease discount rate 0.25%	$	1.6	$	0.2	$	25.0	$	6.6	Decrease discount rate 0.25%	$	(4)	$	(2)	$	164	$	131
Decrease return on assets 1.00%	$	6.6	$	2.4	N/A		N/A		Decrease return on assets 1.00%	53		8		N/A		N/A

Changes in actuarial assumptions, including discount rates, employee retirement rates, mortality, compensation levels, plan asset investment performance and healthcare costs, are determined based on analyses of actual and expected factors. Changes in actuarial assumptions and/or investment performance of plan assets may have a significant impact on our financial condition due to the magnitude of our retirement obligations.

Refer to NOTE 810 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further information.

Forward-Looking Statements

This report contains statements that constitute "forward-looking statements" within the meaning of the federal securities laws. As a general matter, forward-looking statements relate to anticipated trends and expectations rather than historical matters. Forward-looking statements are subject to uncertainties and factors relating to ~~Cliffs’~~our operations and business environment that are difficult to predict and may be beyond our control. Such uncertainties and factors may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These statements speak only as of the date of this report, and we undertake no ongoing obligation, other than that imposed by law, to update these statements. Uncertainties and risk factors that could affect ~~Cliffs’~~our future performance and cause results to differ from the forward-looking statements in this report include, but are not limited to:

•disruptions to our operations relating to the COVID-19 pandemic, including the heightened risk that a significant portion of our workforce or on-site contractors may suffer illness or otherwise be unable to perform their ordinary work functions;

~~uncertainty~~•continued volatility of steel and iron ore market prices, which directly and indirectly impact the prices of the products that we sell to our customers;

•uncertainties associated with the highly competitive and cyclical steel industry and our reliance on the demand for steel from the automotive industry, which has been experiencing a trend toward light weighting that could result in lower steel volumes being consumed;

•potential weaknesses and uncertainties in global economic conditions, ~~including downward pressure on prices caused by~~excess global steelmaking capacity, oversupply ~~or imported products,~~of iron ore, prevalence of steel imports and reduced market demand, including as a result of the COVID-19 pandemic;

•severe financial hardship, bankruptcy, temporary or permanent shutdowns or operational challenges, due to the COVID-19 pandemic or otherwise, of one or more of our major customers, including customers in the automotive market, key suppliers or contractors, which, among other adverse effects, could lead to reduced demand for our products, increased difficulty collecting receivables, and customers and/or suppliers asserting force majeure or other reasons for not performing their contractual obligations to us;

•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~~USMCA and/or other trade agreements, tariffs, treaties or ~~policies;~~

policies, as well as the uncertainty of obtaining and maintaining effective antidumping and countervailing duty orders to counteract the harmful effects of unfairly traded imports;

~~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 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, including climate change and other environmental regulation that may be proposed under the Biden Administration, and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other ~~authorization~~authorizations of, or from, any governmental or regulatory ~~entity~~authority and costs related to implementing improvements to ensure compliance with regulatory ~~changes;~~changes, including potential financial assurance requirements;

•potential impacts to the environment or exposure to hazardous substances resulting from our operations;

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

•adverse changes in credit ratings, interest rates, foreign currency rates and tax laws;

•limitations on our ability to ~~continue to pay cash dividends, and the amount and timing~~realize some or all of ~~any cash dividends;~~our deferred tax assets, including our NOLs;

~~availability of capital and~~ •our ability to ~~maintain adequate liquidity;~~

realize the anticipated synergies and benefits of the Acquisitions and to successfully integrate the businesses of AK Steel and ArcelorMittal USA into our ~~ability to maintain appropriate relations~~existing businesses, including uncertainties associated with ~~unions~~maintaining relationships with customers, vendors and employees;

•additional debt we assumed, incurred or issued in connection with the Acquisitions, as well as additional debt we incurred in connection with enhancing our liquidity during the COVID-19 pandemic, may negatively impact our credit profile and limit our financial flexibility;

•known and unknown liabilities we assumed in connection with the Acquisitions, including significant environmental, pension and OPEB obligations;

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

~~events~~•supply chain disruptions or ~~circumstances that~~changes in the cost or quality of energy sources or critical raw materials and supplies, including iron ore, industrial gases, graphite electrodes, scrap, chrome, zinc, coke and coal;

•liabilities and costs arising in connection with any business decisions to temporarily idle or permanently close a mine or production facility, which could ~~impair or~~ adversely impact ~~the viability of a mine and~~ the carrying value of associated assets and give rise to impairment charges or closure and reclamation obligations, as well as uncertainties associated with restarting any ~~resulting impairment charges;~~previously idled mine or production facility;

•problems or disruptions associated with transporting products to our customers, moving products internally among our facilities or suppliers transporting raw materials to us;

•uncertainties associated with natural or human-caused disasters, adverse weather conditions, unanticipated geological conditions, ~~supply or price of energy,~~critical equipment failures, infectious disease outbreaks, tailings dam failures and other unexpected events;

Table 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, 2018:~~

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~~Name~~	~~Location~~	~~Status of Operations~~
~~Northshore~~	~~Minnesota~~	~~Active~~
~~United Taconite~~	~~Minnesota~~	~~Active~~
~~Tilden~~	~~Michigan~~	~~Active~~
~~Empire~~	~~Michigan~~	~~Indefinitely Idled~~

Business Combinations

~~Intercompany transactions~~Assets acquired and ~~balances~~liabilities assumed in a business combination are ~~eliminated upon consolidation.~~

~~Equity Method Investments~~

~~Investments in unconsolidated ventures that we have~~recognized and measured based on their estimated fair values at the ~~ability~~acquisition date, while the acquisition-related costs are expensed as incurred. Any excess of the purchase consideration when compared to ~~exercise significant influence over, but not control, are accounted for under~~ the ~~equity method.~~

~~Our 23% ownership interest in Hibbing~~fair value of the net tangible and intangible assets acquired, if any, is recorded as goodwill. We engaged independent valuation specialists to assist with the determination of the fair value of assets acquired, liabilities assumed, noncontrolling interest, and goodwill, for the Acquisitions. If the initial accounting for the business combination is incomplete by the end of the reporting period in which the acquisition occurs, an ~~equity method investment. As~~estimate will be recorded. Subsequent to the acquisition date, and not later than one year from the acquisition date, we will record any material adjustments to the initial estimate based on new information obtained that would have existed as of ~~December 31, 2018 and 2017, our investment in Hibbing was $15.4 million and $11.0 million, respectively, classified in~~ ~~Other liabilities~~the date of the acquisition. Any adjustment that arises from information obtained that did not exist as of the date of the acquisition will be recorded in the ~~Statements of Consolidated Financial Position.~~

~~Our share of equity income (loss) is eliminated against consolidated product inventory upon production, and against~~ ~~Cost of goods sold and operating expenses~~ ~~when sold. This effectively reduces our cost for our share of~~period the ~~mining ventures' production cost, reflecting the cost-based nature of our participation in unconsolidated ventures.~~

~~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, 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 first of which was paid upon the execution of the agreement, the second of which was paid in August 2018 and the final of which is due August 2019. Upon payment of the first installment, we assumed ArcelorMittal'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 and income attributable to the noncontrolling interest of the Empire mining venture was $3.9 million and $25.2 million for the years ended December 31, 2017 and 2016, respectively.~~

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 now 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~~.adjustment arises.

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~~Credit Loss

Trade accounts receivable are recorded at the point control transfers and ~~represents~~represent 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 amount of probable credit losses in our existing accounts receivable.~~ We establish provisions for expected lifetime losses on accounts receivable ~~when it~~at the time a receivable is ~~probable that all or part of the outstanding balance will not be collected.~~recorded based on historical experience, customer credit quality and forecasted economic conditions. We regularly review our accounts receivable balances and the allowance for credit loss and establish or adjust the allowance as necessary using the specific identification ~~method. There was no allowance for doubtful accounts at December 31, 2018~~method in accordance with CECL. We evaluate the aggregation and ~~2017~~risk characteristics of receivable pools and ~~no bad debt expense for~~develop loss rates that reflect historical collections, current forecasts of future economic conditions over the ~~years ended December 31, 2018, 2017~~time horizon we are exposed to credit risk, and ~~2016.~~payment terms or conditions that may materially affect future forecasts.

Inventories

~~The Mining and Pelletizing segment product inventories~~Inventories are ~~stated at the lower of cost or market. Cost of iron ore inventories is determined using the LIFO method.~~

~~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~~generally stated at the lower of cost or net realizable value using average cost, ~~less an allowance~~excluding depreciation and amortization. Certain iron ore inventories are stated at the lower of cost or market using the LIFO method.

Refer to NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION for ~~obsolete and surplus items. The allowance for obsolete and surplus items was~~ ~~$12.6 million~~ ~~at December 31, 2018 and 2017.~~

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

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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 1215 - DERIVATIVE INSTRUMENTS ~~AND HEDGING ACTIVITIES~~ for further information.

Property, Plant and Equipment

Our properties are stated at the lower of cost less accumulated ~~depreciation or fair value.~~depreciation. 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. ~~We use the double-declining balance method of depreciation for certain mining equipment.~~ Depreciation and depletion ~~is provided~~are recorded over the following estimated useful lives:

Asset Class

Basis

Life

~~Office~~Land, land improvements and ~~information technology~~mineral rights

~~Straight line~~

~~3 to 15 years~~

~~Buildings~~Land and mineral rights

~~Straight line~~Units of production

~~45 years~~Life of mine

~~Mining equipment~~Land improvements

~~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~~Buildings

Straight line

~~Life of mine~~20 to 45 years

~~Mineral rights~~Equipment

~~Units of production~~Straight line/Double declining balance

~~Life of mine~~3 to 20 years

Refer to NOTE 56 - PROPERTY, PLANT AND EQUIPMENT for further information.

~~Capitalized Stripping Costs~~Goodwill

~~During~~Goodwill represents the ~~development phase, stripping costs are capitalized as a part~~excess purchase price paid over the fair value of the ~~depreciable cost of building, developing and constructing a mine. These capitalized costs are~~net assets during an acquisition. Goodwill is not amortized, ~~over the productive life of the mine using the units of production method. The production phase does not commence until the removal of~~but is assessed for impairment on an annual basis on October 1 (or more than a de minimis amount of saleable mineral material occurs in conjunction with the removal of overburden or waste material for purposes of obtaining access to an ore body. The stripping costs incurred in the production phase of a mine are variable production costs included in the costs of the inventory produced (extracted) during the period that the stripping costs are incurred.

Stripping costs related to expansion of a mining asset of proven and probable reserves are variable production costs that are included in the costs of the inventory produced during the period that the stripping costs are incurred.frequently if necessary).

Other Intangible Assets and Liabilities

~~Our mine permits~~Intangible assets and liabilities are subject to periodic amortization on a ~~straight line~~straight-line basis over their estimated useful ~~life, which corresponds~~lives as follows:

Type

Basis

Useful Life

Intangible assets:

Customer relationships

Straight line

18 years

Developed technology

Straight line

17 years

Trade names and trademarks

Straight line

10 years

Mining permits

Straight line

Life of mine

Intangible liabilities:

Above-market supply contracts

Straight line

Contract term

Refer to NOTE 7 - GOODWILL AND INTANGIBLE ASSETS AND LIABILITIES for further information.

Leases

We determine if an arrangement contains a lease at inception. We recognize right-of-use assets and lease liabilities associated with leases based on the ~~life~~present value of ~~mine.~~the future minimum lease payments over the lease term at the commencement date. Lease terms reflect options to extend or terminate the lease when it is reasonably certain that the option will be exercised. For short-term leases (leases with an initial lease term of 12 months or less), right-of-use assets and lease liabilities are not recognized in the consolidated balance sheet, and lease expense is recognized on a straight-line basis over the lease term.

Refer to NOTE 13 - LEASE OBLIGATIONS for further information.

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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, ~~2018, 2017~~2020, 2019 and ~~2016,~~2018, no impairment ~~factors~~indicators 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.

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 79 - FAIR VALUE OF FINANCIAL INSTRUMENTS and NOTE 810 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further information.

Pensions and Other Postretirement Benefits

We offer defined benefit pension plans, defined contribution pension plans and ~~other postretirement benefit~~OPEB plans, primarily consisting of retiree healthcare benefits ~~to most employees in the United States~~ as part of aour total compensation and benefits ~~program.~~programs.

We recognize the funded or unfunded status of our ~~postretirement benefit~~pension and OPEB obligations on our December 31, ~~2018~~2020 and ~~2017~~2019 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 ~~postretirement benefit~~pension and OPEB obligations, the amount of the surplus is recorded as an asset; if the ~~postretirement benefit~~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 ~~postretirement~~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

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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 ~~2 - NEW ACCOUNTING STANDARDSand NOTE 8~~10 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further information.

Labor Agreements

At December 31, 2020, we employed approximately 25,000 people, of which approximately 18,500 were represented by labor unions under various agreements. We have agreements that will expire at five locations in 2021 and sixteen locations in 2022. Workers at some of our North American facilities are covered by agreements with the USW or other unions that have various expiration dates.

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 atfor each ~~mine site~~applicable operation 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~~operations 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~~operations are reflected in earnings in the period an estimate is revised. ~~See~~

Refer to NOTE 1114 - ~~ENVIRONMENTAL AND MINE CLOSURE~~ASSET RETIREMENT OBLIGATIONS for further information.

Environmental Remediation Costs

We have a formal policy for environmental protection and restoration. ~~Our mining and exploration~~Certain of our operating 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 cannot be 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. ~~See~~

Refer to NOTE 1121 - ~~ENVIRONMENTAL~~COMMITMENTS AND ~~MINE CLOSURE OBLIGATIONS~~CONTINGENCIES for further information.

Revenue Recognition ~~- Pre-Adoption~~

Sales are recognized when our performance obligations are satisfied. Generally, our performance obligations are satisfied, control of ~~Topic 606~~

~~Prior~~our products is transferred and revenue is recognized at a single point in time, when title transfers to our customer for product shipped according to shipping terms. Shipping and other transportation costs charged to customers are treated as fulfillment activities and are recorded in both revenue and cost of sales at 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 weretime control is 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 ~~Product revenues~~ 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~~

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.customer. Refer to NOTE 24 - ~~NEW ACCOUNTING STANDARDS~~REVENUES for further information.

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.

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 premiums, Platts international indexed freight rates and changes in specified Producer Price Indices, 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 average annual daily market price for hot-rolled coil steel 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 $422.6 million, $120.6 million and $55.9 million for the years ended December 31, 2018, 2017 and 2016, respectively.~~

As of December 31, 2018, under the new accounting standard, we had finished goods of 0.8 million long tons in transit or stored at the Port of Toledo 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.

~~Deferred Revenue~~

~~The table below summarizes our deferred revenue balances:~~

(In Millions)

Deferred Revenue (Current)¹
Deferred Revenue (Long-Term)
Year Ended
December 31, Year Ended
December 31,
2018 2017 2018 2017
Opening balance as of January 1 $ 23.8
$ 16.2
$ 51.4
$ 64.3
Closing balance as of December 31 21.0
22.4
38.5
51.4
Increase (Decrease) $ (2.8 ) $ 6.2
$ (12.9 ) $ (12.9 )

¹ The opening balance for the year ended December 31, 2018 includes a $1.4 million adjustment from the December 31, 2017 balance due to the adoption of Topic 606.

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 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, 2018 and December 31, 2017, installment amounts received in excess of sales totaled $51.3 million and $64.2 million, respectively, related to this agreement. As of December 31, 2018, and December 31, 2017, deferred revenue of $12.8 million was recorded in ~~Other current liabilities~~ ~~and $38.5 million and $51.4 million, respectively, was recorded as long-term in~~ ~~Other 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 recognized on these transactions totaling $8.2 million and $9.6 million was deferred and included in ~~Other current liabilities~~ ~~in the Statements of Consolidated Financial Position as of December 31, 2018 and December 31, 2017, respectively.~~

~~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 the Statements of Consolidated Operations. 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.

~~The following table is a summary of reimbursements in our operations:~~

(In Millions)
Year Ended December 31,
2018 2017 2016
Reimbursements for:
Freight $ 160.1
$ 166.7
$ 106.8
Venture partners’ cost —
54.7
68.0
Total reimbursements $ 160.1
$ 221.4
$ 174.8

Where we have joint ownership of a mine, such as Hibbing and up to the point at which we purchased the remaining interest in Tilden, our contracts entitle us to receive management fees or royalties, which we earn as the pellets are produced.

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.~~overhauls. All other planned and unplanned repairs and maintenance costs are expensed when incurred.

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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~~historical 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 the performance 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 911 - 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 (loss) 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.

See NOTE 1012 - INCOME TAXES for further information.

Discontinued Operations

~~Asia Pacific Iron Ore Operations~~

~~In January 2018, we announced that we would accelerate the time frame for the planned closure of our Asia Pacific Iron Ore mining operations in Australia. In April~~During 2018, we committed to a course of action leading to the permanent closure of ~~our~~the Asia Pacific Iron Ore mining operations and ~~as planned, completed our final shipment in June 2018. Factors considered in this decision included increasingly discounted prices for lower-iron-content ore and the quality~~sold all of the ~~remaining iron ore reserves.~~

assets of our Asia Pacific Iron Ore business through a series of sales to third parties. As a result of our ~~planned~~ exit, management determined that our Asia Pacific Iron Ore ~~operating segment~~mining operations met the criteria to be classified as held for sale and a discontinued operation under ASC Topic 205, Presentation of Financial

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Statements. As such, all current and historical Asia Pacific Iron Ore operating ~~segment~~ results are classified within discontinued operations. ~~Refer to NOTE 13 - DISCONTINUED OPERATIONS for further discussion of the Asia Pacific Iron Ore segment discontinued operations.~~

~~Canadian Operations~~

As more fully described in NOTE 13 - DISCONTINUED OPERATIONS, in January 2015, we announced that the Bloom Lake Group commenced restructuring proceedings in Montreal, Quebec under the CCAA. At that time, we had suspended Bloom Lake operations and for several months had been exploring options to sell certain of our Canadian assets, among other initiatives. Effective January 27, 2015, following the commencement of CCAA proceedings for the Bloom Lake Group, we deconsolidated the Bloom Lake Group and certain other wholly-owned subsidiaries comprising substantially all of our Canadian operations. Additionally, on May 20, 2015, the Wabush Group commenced restructuring proceedings in Montreal, Quebec under the CCAA which resulted in the deconsolidation of the remaining Wabush Group entities that were not previously deconsolidated. The Wabush Group was no longer generating revenues and was not able to meet its obligations as they came due. As a result of this action, the CCAA protection granted to the Bloom Lake Group was extended to include the Wabush Group to facilitate the reorganization of each of their businesses and operations. Our Canadian exit represented a strategic shift in our business. For this reason, all Eastern Canadian Iron Ore and Ferroalloys costs to exit are classified as discontinued operations.

Foreign Currency

Our financial statements are prepared with the U.S. dollar as the reporting ~~currency. Historically,~~currency and the functional currency of all subsidiaries is the U.S. dollar, except for our ~~Australian subsidiaries was~~European Operations for which the ~~Australian dollar. Concurrent with~~functional currency is the ~~sale of assets to Mineral Resources Limited in~~Euro. 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.

~~In addition, as~~As a result of the liquidation ~~of substantially all~~ 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~~$228 million was reclassified and recognized as a gain in Income (loss) from discontinued operations, net of tax in the Statements of Consolidated ~~Operations. Refer to NOTE 13 - DISCONTINUED OPERATIONS~~Operations for ~~further information regarding our Australian subsidiaries.~~the year ended December 31, 2018.

The functional currency of all other subsidiaries is the U.S. dollar. To the extent that monetary assets and liabilities, including short-term intercompany loans, are recorded in a currency other than the functional currency, these amounts are remeasured each reporting period, with the resulting gain or loss being recorded in the Statements of Consolidated Operations. Transaction gains and losses resulting from remeasurement of intercompany loans are included in ~~Miscellaneous - net~~ ~~in our Statements of Consolidated Operations.~~

~~The following represents the net gain (loss) related to impact of transaction gains and losses from continuing operations resulting from remeasurement:~~

(In Millions)
2018 2017 2016
Remeasurement of intercompany loans $ (0.7 ) $ 16.6
$ (16.6 )
Other remeasurement (0.2 ) (2.7 ) (1.2 )
Total $ (0.9 ) $ 13.9
$ (17.8 )

Earnings Per Share

We present both basic and diluted ~~earnings per share~~EPS amounts for continuing operations and discontinued operations. Total basic ~~earnings per share~~EPS amounts are calculated by dividing Net income (loss) attributable to Cliffs shareholders, less the earnings allocated to our Series B Participating Redeemable Preferred Stock, by the weighted average number of common shares outstanding during the period presented.

Total diluted ~~earnings per share~~EPS amounts are calculated by dividing Net income (loss) attributable to Cliffs shareholders by the weighted average number of common shares, common share equivalents under stock plans using the treasury-stock method, common share equivalents of the Series B Participating Redeemable Preferred Stock using the if-converted method and the calculated common share equivalents in excess of the conversion rate related to our 1.50% 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.

Holders of the 2025 Convertible Senior Notes may convert their notes during any quarter between April 1, 2018 and July 15, 2024 where our share price exceeds 130% of the conversion price for 20 trading days during a 30 trading day period. Holders of the 2025 Convertible Senior Notes may also convert their notes during any quarter between April 1, 2018 and July 15, 2024 during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of 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 price on each such trading day. If our common shares rise in value above the conversion price, diluted EPS will be calculated based on the treasury-stock method with the number of dilutive shares being calculated based on the difference in the average share price and the conversion price.

See NOTE 188 - DEBT AND CREDIT FACILITIESand NOTE 20 - EARNINGS PER SHARE for further information.

Variable Interest Entities

We assess whether we have a variable interest in legal entities in which we have a financial relationship and, if so, whether or not those entities are VIEs. A VIE is an entity with insufficient equity at risk for the entity to finance its activities without additional subordinated financial support or in which equity investors lack the characteristics of a controlling financial interest. If an entity is determined to be a VIE, we evaluate whether we are the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and economics. We conclude that we are the primary beneficiary and consolidate the VIE if we have both (i) the power to direct the activities of the VIE that most significantly influence the VIE's economic performance and (ii) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. Refer to NOTE 219 - ~~NEW ACCOUNTING STANDARDS~~VARIABLE INTEREST ENTITIES for additional information.

Recent Accounting Pronouncements

Issued and Adopted

~~ASC Topic 606, Revenue from Contracts with Customers (Topic 606).~~ On ~~January 1, 2018, we adopted Topic 606~~March 2, 2020, the SEC issued a final rule that amended the disclosure requirements related to certain registered securities under SEC Regulation S-X, Rule 3-10, which required separate financial statements for subsidiary issuers and ~~applied it to all contracts that were not completed using the modified retrospective method. We recognized the cumulative effect~~guarantors of ~~initially applying Topic 606 as an adjustment of $34.0 million to the opening balance of~~ ~~Retained deficit~~.registered debt securities unless certain exceptions are met. The comparative period information has not been retrospectively revised and continues to be reported under the accounting standards in effect for those periods. On a prospective basis, we do not expect that the adoption of Topic 606 will have a material impact to our annual net income.

~~Under Topic 606, revenue is generally recognized upon delivery to our customers, which is earlier than under~~final rule replaces the previous guidance. As an example, for certain iron ore shipments where revenue was previously recognized upon title transfer when payment was received, we will now recognize revenue when control transfers, which is generally upon delivery. While we continuerequirement under Rule 3-10 to ~~retain title until we receive payment~~provide condensed consolidating financial information in ~~many cases, we determined upon review of our customer contracts that~~ the ~~preponderance of control indicators pass~~registrant’s financial statements with a requirement to ~~our customers' favor when we deliver our products; thus, we generally concluded that control transfers at that point. As a result~~provide alternative financial disclosures (which include summarized financial information of the parent and any issuers and guarantors, as well as other qualitative disclosures) in either the registrant’s Management's Discussion and Analysis of Financial Condition and Results of Operations or its financial statements, in addition to other simplifications. The final rule is effective for filings on or after January 4, 2021, and early adoption of Topic 606 and vessel deliveries not occurring during the winter months because of the closure of the Soo Locks 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 in 2018 and future years. 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 cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of Topic 606 were as follows:~~

(In Millions)
Balance at December 31, 2017 Adjustments due to Topic 606 Balance at January 1, 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 978.3
$ —
$ 978.3
Accounts receivable, net 106.7
76.6
183.3
Inventories 138.4
(51.4 ) 87.0
Supplies and other inventories 88.8
—
88.8
Derivative assets 37.9
11.6
49.5
Income tax receivable, current 13.3
—
13.3
Loans to and accounts receivables from the Canadian Entities 51.6
—
51.6
Current assets of discontinued operations 118.5
—
118.5
Other current assets 11.1
—
11.1
TOTAL CURRENT ASSETS 1,544.6
36.8
1,581.4
PROPERTY, PLANT AND EQUIPMENT, NET 1,033.8
—
1,033.8
OTHER ASSETS
Deposits for property, plant and equipment 17.8
—
17.8
Income tax receivable, non-current 235.3
—
235.3
Non-current assets of discontinued operations 20.3
—
20.3
Other non-current assets 101.6
—
101.6
TOTAL OTHER ASSETS 375.0
—
375.0
TOTAL ASSETS $ 2,953.4
$ 36.8
$ 2,990.2

LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 99.5
$ 1.4
$ 100.9
Accrued employment costs 52.7
—
52.7
State and local taxes payable 30.2
—
30.2
Accrued interest 31.4
—
31.4
Contingent claims 55.6
—
55.6
Partnership distribution payable 44.2
—
44.2
Current liabilities of discontinued operations 75.0
—
75.0
Other current liabilities 63.6
1.4
65.0
TOTAL CURRENT LIABILITIES 452.2
2.8
455.0
PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES 257.7
—
257.7
ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS 167.7
—
167.7
LONG-TERM DEBT 2,304.2
—
2,304.2
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS 52.2
—
52.2
OTHER LIABILITIES 163.5
—
163.5
TOTAL LIABILITIES 3,397.5
2.8
3,400.3
EQUITY
CLIFFS SHAREHOLDERS' EQUITY (DEFICIT) (444.3 ) 34.0
(410.3 )
NONCONTROLLING INTEREST 0.2
—
0.2
TOTAL EQUITY (DEFICIT) (444.1 ) 34.0
(410.1 )
TOTAL LIABILITIES AND EQUITY (DEFICIT) $ 2,953.4
$ 36.8
$ 2,990.2

~~The impact of adoption on our Statements of Consolidated Operations and Statements of Consolidated Financial Position~~ is ~~as follows:~~

($ in Millions)

Year Ended
December 31, 2018
As Reported Balances without Adoption of Topic 606 Effect of Change
REVENUES FROM PRODUCT SALES AND SERVICES
Product $ 2,172.3
$ 2,108.1
$ 64.2
Freight and venture partners' cost reimbursements 160.1
156.2
3.9
2,332.4
2,264.3
68.1
COST OF GOODS SOLD AND OPERATING EXPENSES (1,522.8 ) (1,513.2 ) (9.6 )
SALES MARGIN 809.6
751.1
58.5
OTHER OPERATING INCOME (EXPENSE)
Selling, general and administrative expenses (116.8 ) (116.8 ) —
Miscellaneous - net (19.6 ) (19.6 ) —
(136.4 ) (136.4 ) —
OPERATING INCOME 673.2
614.7
58.5
OTHER INCOME (EXPENSE)
Interest expense, net (118.9 ) (118.9 ) —
Loss on extinguishment of debt (6.8 ) (6.8 ) —
Other non-operating income 17.2
17.2
—
(108.5 ) (108.5 ) —
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 564.7
506.2
58.5
INCOME TAX BENEFIT 475.2
487.5
(12.3 )
INCOME FROM CONTINUING OPERATIONS 1,039.9
993.7
46.2
INCOME FROM DISCONTINUED OPERATIONS, net of tax 88.2
88.2
—
NET INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS $ 1,128.1
$ 1,081.9
$ 46.2
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS - BASIC
Continuing operations $ 3.50
$ 3.34
$ 0.16
Discontinued operations 0.30
0.30
—
$ 3.80
$ 3.64
$ 0.16
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS - DILUTED
Continuing operations $ 3.42
$ 3.27
$ 0.15
Discontinued operations 0.29
0.29
—
$ 3.71
$ 3.56
$ 0.15
AVERAGE NUMBER OF SHARES (IN THOUSANDS)
Basic 297,176
297,176

Diluted 304,141
304,141

The increased revenue recognized under Topic 606 is due to higher tons shipped and a higher realized revenue rate in December 2018 versus December 2017. Under the previous accounting standard, December 2017 shipments would have been recognized as 2018 sales due to the fact that title and risk of loss does not transfer until payment is received from our customers.

(In Millions)
December 31, 2018
As Reported Balances without Adoption of Topic 606 Effect of Change
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 823.2
$ 823.2
$ —
Accounts receivable, net 226.7
108.7
118.0
Inventories 87.9
141.3
(53.4 )
Supplies and other inventories 93.2
93.2
—
Derivative assets 91.5
60.7
30.8
Income tax receivable, current 117.3
117.3
—
Current assets of discontinued operations 12.4
12.4
—
Other current assets 27.4
27.4
—
TOTAL CURRENT ASSETS 1,479.6
1,384.2
95.4
PROPERTY, PLANT AND EQUIPMENT, NET 1,286.0
1,286.0
—
OTHER ASSETS
Deposits for property, plant and equipment 83.0
83.0
—
Income tax receivable, non-current 121.3
121.3
—
Deferred income taxes 464.8
477.1
(12.3 )
Other non-current assets 94.9
94.9
—
TOTAL OTHER ASSETS 764.0
776.3
(12.3 )
TOTAL ASSETS $ 3,529.6
$ 3,446.5
$ 83.1

LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 186.8
$ 184.9
$ 1.9
Accrued employment costs 74.0
74.0
—
State and local taxes payable 35.5
35.5
—
Accrued interest 38.4
38.4
—
Partnership distribution payable 43.5
43.5
—
Current liabilities of discontinued operations 6.7
6.7
—
Other current liabilities 83.3
83.7
(0.4 )
TOTAL CURRENT LIABILITIES 468.2
466.7
1.5
PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES 248.7
248.7
—
ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS 172.0
172.0
—
LONG-TERM DEBT 2,092.9
2,092.9
—
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS 8.3
8.3
—
OTHER LIABILITIES 115.3
115.3
—
TOTAL LIABILITIES 3,105.4
3,103.9
1.5
EQUITY
CLIFFS SHAREHOLDERS' EQUITY 424.2
342.6
81.6
TOTAL LIABILITIES AND EQUITY $ 3,529.6
$ 3,446.5
$ 83.1

~~The adoption of Topic 606 did not have an impact on net cash flows in our Statements of Consolidated Cash Flows.~~

~~ASU 2017-07, Retirement Benefits - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. On January 1, 2018, we adopted the amendments to~~ ~~ASC Topic 715, Compensation - Retirement Benefits~~ ~~regarding the presentation of net periodic pension and postretirement benefit costs. We~~

retrospectively adopted the presentation of service cost separate from the other components of net periodic costs. The interest cost, expected return on assets, amortization of prior service costs, net remeasurement, and other costs have been reclassified from ~~Cost of goods sold and operating expenses,Selling, general and administrative expenses~~ ~~and~~ ~~Miscellaneous - net~~ to ~~Other non-operating income.~~ We elected to apply the practical expedient, which allows us to reclassify amounts disclosed previously in our pension and other postretirement benefits footnote as the basis for applying retrospective presentation for comparative periods. On a prospective basis, only service costs will be included in amounts capitalized in inventory or property, plant, and equipment.

The effect of the retrospective presentation change related to the net periodic cost of our defined benefit pension and other postretirement employee benefits plans on our Statements of Consolidated Operations was as follows:

(In Millions)
Year Ended December 31, 2017 Year Ended December 31, 2016
As Adjusted Without Adoption of ASU 2017-07 Effect of Change As Adjusted Without Adoption of ASU 2017-07 Effect of Change
Cost of goods sold and operating expenses $ (1,398.4 ) $ (1,400.7 ) $ 2.3
$ (1,274.4 ) $ (1,278.7 ) $ 4.3
Selling, general and administrative expenses $ (102.9 ) $ (95.1 ) $ (7.8 ) $ (115.8 ) $ (106.3 ) $ (9.5 )
Miscellaneous - net $ 25.5
$ 27.0
$ (1.5 ) $ (33.6 ) $ (32.0 ) $ (1.6 )
Operating income $ 390.2
$ 397.2
$ (7.0 ) $ 130.7
$ 137.5
$ (6.8 )
Other non-operating income $ 10.2
$ 3.2
$ 7.0
$ 7.3
$ 0.5
$ 6.8
Net income $ 363.1
$ 363.1
$ —
$ 199.3
$ 199.3
$ —

~~In August 2018, the FASB issued~~ ~~ASU No. 2018-14, Defined Benefit Plans (Topic 715-20) - Changes to the Disclosure Requirements for Defined Benefit Plans. Certain of the existing required disclosures were modified for clarification or removed and additional disclosures were added.~~permitted. We elected to early adopt ~~ASU No. 2018-14~~this disclosure update for the ~~year~~period ended ~~December~~March 31, ~~2018. The effect~~2020. As a result, we have excluded the footnote disclosures required under the previous Rule 3-10, and applied the final rule by including the summarized financial information and qualitative disclosures in Part II -

Table of ~~the adoption is an overall reduction in our annual disclosures related to defined benefit plans. The adoption~~ Contents

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of this ~~standard required retrospective adoption, but did not impact prior-period financial results.~~Annual Report on Form 10-K and Exhibit 22, filed herewith.

~~In August 2018, the FASB issued~~ ~~ASU No. 2018-13,Fair Value Measurement (Topic 820) - Changes to the Disclosure Requirements for Fair Value Measurement~~. The new standard removes or modifies certain existing disclosure requirements and adds additional disclosure requirements related to fair value measurement. We elected to early adopt ASU No. 2018-13 for the year ended December 31, 2018. The affect of the adoption is an overall reduction in our quarterly and annual disclosures related to fair value measurement.

~~Issued and Not Effective~~

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 ~~will be~~are classified as either operating or finance ~~leases in the Statements of Consolidated Operations.~~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. ~~We have compiled an inventory~~Adoption of ~~our existing leases and have finalized our implementation plan. Based on our analysis,~~ the updated standard ~~will~~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, 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. Upon adoption, the updated standard did not have a material effect on our consolidated financial statements.

Issued and Not Effective

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This update requires certain convertible instruments to be accounted for as a single liability measured at its amortized cost. Additionally, the update requires the use of the "if-converted" method, removing the treasury stock method, when calculating diluted shares. The two methods of adoption are the full and modified retrospective approaches. We expect to utilize the modified retrospective approach. Using this approach, the guidance shall be applied to transactions outstanding as of the beginning of the fiscal year in which the amendment is adopted. The final rule is effective for fiscal years beginning after December 15, 2021. Early adoption is permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are continuing to evaluate the impact of this update to our consolidated financial statements and would expect to adopt at the required adoption date of January 1, 2022.

NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION

Allowance for Credit Losses

The following is a roll-forward of our allowance for credit losses associated with Accounts receivable, net:


	(In Millions)
	2020		2019
Allowance for credit losses as of January 1	$	0	$	0
Increase in allowance	(5)		0
Allowance for credit losses as of December 31	$	(5)	$	0

Inventories

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


	(In Millions)
	Year Ended December 31,
	2020		2019
Product inventories
Finished and semi-finished goods	$	2,125	$	114
Work-in-process	0		69
Raw materials	1,431		9
Total product inventories	3,556		192
Manufacturing supplies and critical spares	272		125
Inventories	$	3,828	$	317

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The excess of current cost over LIFO cost of iron ore inventories was $104 million and $101 million at December 31, 2020 and 2019, respectively. As of December 31, 2020, the product inventory balance for iron ore inventories decreased, resulting in the liquidation of a LIFO layer. The effect of the inventory reduction was an increase in Cost of goods sold of $30 million in the Statements of Consolidated Operations for the year ended December 31, 2020. As of December 31, 2019, the product inventory balance for iron ore inventories increased, resulting in a LIFO increment in 2019. The effect of the inventory build was an increase in Inventories of $34 million in the Statements of Consolidated Financial Position for the year ended December 31, 2019.

The allowance for obsolete and surplus items in supplies and other inventories was $13 million at both December 31, 2020 and 2019.

Cash Flow Information

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


	(In Millions)
	Year Ended December 31,
	2020		2019		2018
Capital additions	$	483	$	690	$	395
Less:
Non-cash accruals	(86)		15		94
Right-of-use assets - finance leases	44		29		8
Grants	0		(10)		(3)
Cash paid for capital expenditures including deposits	$	525	$	656	$	296

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


	(In Millions)
	2020		2019		2018
Taxes paid on income	$	5	$	0	$	3
Income tax refunds	(120)		(118)		(11)
Interest paid on debt obligations net of capitalized interest1	170		98		106

1 Capitalized interest was $53 million, $25 million and $7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Non-Cash Investing and Financing Activities


	(In Millions)
	2020		2019		2018
Fair value of common shares issued as part of consideration in connection with AM USA Transaction	$	990	$	0	$	0
Fair value of Series B Participating Redeemable Preferred Stock issued as part of consideration in connection with AM USA Transaction	738		0		0
Fair value of settlement of a pre-existing relationship as part of consideration in connection with AM USA Transaction	237		0		0
Fair value of common shares issued as consideration in connection with AK Steel Merger	618		0		0
Fair value of equity awards assumed in connection with AK Steel Merger	4		0		0

Discontinued Operations

We had income from discontinued operations, net of tax of $88 million for the year ended December 31, 2018. During 2018, we sold all of the assets of our Asia Pacific Iron Ore mining operations, which had operating losses of $105 million for the year ended December 31, 2018. Additionally, as a result of the liquidation of the net assets of our Australian subsidiaries, the historical changes in foreign currency translation recorded in Accumulated other comprehensive loss totaling $228 million was reclassified and recognized as a gain in Income (loss) from discontinued operations, net of tax.

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NOTE 3 - ACQUISITIONS

In 2020, we acquired two major steelmakers, AK Steel and ArcelorMittal USA, vertically integrating our legacy iron ore business with steel production. Our fully-integrated portfolio includes custom-made pellets and HBI; flat-rolled carbon steel, stainless, electrical, plate, tinplate and long steel products; as well as carbon and stainless steel tubing, hot and cold stamping and tooling. The AK Steel Merger combined Cliffs, a producer of iron ore pellets, with AK Steel, a producer of flat-rolled carbon, stainless and electrical steel products, to create a vertically integrated producer of value-added iron ore and steel products. The AM USA Transaction transformed us into a fully-integrated steel enterprise with the size and scale to achieve improved through-the-cycle margins.

We now have a presence across the entire steel manufacturing process, from mining to pelletizing to the development and production of finished high value steel products. The combination is expected to create significant opportunities to generate additional value from market trends across the entire steel value chain and enable more consistent, predictable performance through normal market cycles.

Acquisition of ArcelorMittal USA

Overview

On December 9, 2020, pursuant to the terms of the AM USA Transaction Agreement, we purchased ArcelorMittal USA from ArcelorMittal. In connection with the closing of the AM USA Transaction, as contemplated by the terms of the AM USA Transaction Agreement, ArcelorMittal’s former joint venture partner in Kote and Tek exercised its put right pursuant to the terms of the Kote and Tek joint venture agreements. As a result, we purchased all of such joint venture partner’s interests in Kote and Tek. Following the closing of the AM USA Transaction, we own 100% of the interests in Kote and Tek.

Following the acquisition, the operating results of ArcelorMittal USA are included in our consolidated financial statements. For the period subsequent to the acquisition (December 9, 2020 through December 31, 2020), ArcelorMittal USA generated Revenues of $446 million and a loss of $40 million included within Net income (loss) attributable to Cliffs shareholders, which included $21 million related to amortization of the fair value inventory step-up.

Additionally, we incurred acquisition-related costs excluding severance costs of $26 million for the year endedDecember 31, 2020, which were recorded in Acquisition-related costs on the Statements of Consolidated Operations.

The AM USA Transaction was accounted for under the acquisition method of accounting for business combinations.

The fair value of the total purchase consideration was determined as follows:


	(In Millions)
Fair value of Cliffs common shares issued	$	990
Fair value of Series B Participating Redeemable Preferred Stock issued	738
Fair value of settlement of a pre-existing relationship	237
Cash consideration (subject to customary working capital adjustments)	631
Total purchase consideration	$	2,596

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The fair value of Cliffs common shares issued is calculated as follows:


Number of Cliffs common shares issued	78,186,671
Closing price of Cliffs common share as of December 9, 2020	$	12.66
Fair value of Cliffs common shares issued (in millions)	$	990

The fair value of Cliffs Series B Participating Redeemable Preferred Stock issued is calculated as follows:


Number of Cliffs Series B Participating Redeemable Preferred Stock issued	583,273
Redemption price as of December 9, 2020	$	1,266
Fair value of Cliffs Series B Participating Redeemable Preferred Stock issued (in millions)	$	738

The fair value of the estimated cash consideration is comprised of the following:


	(In Millions)
Cash consideration pursuant to the AM USA Transaction Agreement	$	505
Cash consideration for purchase of the remaining JV partners' interest of Kote and Tek	182
Estimated total cash consideration receivable	(56)
Total estimated cash consideration	$	631

The cash portion of the purchase price is subject to customary working capital adjustments.

The fair value of the settlement of a pre-existing relationship is comprised of the following:


	(In Millions)
Accounts receivable	$	97
Freestanding derivative asset from customer supply agreement	140
Total fair value of settlement of a pre-existing relationship	$	237

Valuation Assumption and Preliminary Purchase Price Allocation

We estimated fair values at December 9, 2020 for the preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in connection with the AM USA Transaction. During the measurement period, we will continue to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed, which may differ materially from these preliminary estimates. If we determine any measurement period adjustments are material, we will apply those adjustments, including any related impacts to net income, in the reporting period in which the adjustments are determined. We are in the process of conducting a valuation of the assets acquired and liabilities assumed related to the AM USA Transaction, most notably, inventories, personal and real property, mineral reserves, leases, investments, deferred taxes, asset retirement obligations, pension and OPEB liabilities, and the final allocation will be made when completed, including the result of any identified goodwill. Accordingly, the provisional measurements noted below are preliminary and subject to modification in the future.

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The preliminary purchase price allocation to assets acquired and liabilities assumed in the AM USA Transaction was:


	(In Millions)
Cash and cash equivalents	$	35
Accounts receivable, net	349
Inventories	2,115
Income tax receivable, current	12
Other current assets	22
Property, plant and equipment	4,017
Other non-current assets	158
Accounts payable	(758)
Accrued employment costs	(271)
State and local taxes	(76)
Pension and OPEB liabilities, current	(109)
Other current liabilities	(322)
Pension and OPEB liabilities, non-current	(3,195)
Other non-current liabilities	(598)
Noncontrolling interest	(13)
Net identifiable assets acquired	1,366
Goodwill	1,230
Total net assets acquired	$	2,596

The goodwill resulting from the acquisition of ArcelorMittal USA primarily represents the growth opportunities in the automotive, construction, appliances, infrastructure and machinery and equipment markets, as well as any synergistic benefits to be realized from the AM USA Transaction and was assigned to our flat steel operations within our Steelmaking segment. Goodwill is expected to be deductible for U.S. federal income tax purposes.

Acquisition of AK Steel

Overview

On March 13, 2020, pursuant to the AK Steel Merger Agreement, we completed the acquisition of AK Steel, in which we were the acquirer. As a result of the AK Steel Merger, each share of AK Steel common stock issued and outstanding immediately prior to the effective time of the AK Steel Merger (other than excluded shares) was converted into the right to receive 0.400 Cliffs common shares and, if applicable, cash in lieu of any fractional Cliffs common shares.

Following the acquisition, the operating results of AK Steel are included in our consolidated financial statements. For the period subsequent to the acquisition (March 13, 2020 through December 31, 2020), AK Steel generated Revenues of $3,573 million and a loss of $302 million included within Net income (loss) attributable to Cliffs shareholders, which included $74 million and $35 million related to amortization of the fair value inventory step-up and severance costs, respectively.

Refer to NOTE 8 - DEBT AND CREDIT FACILITIES for information regarding debt transactions executed in connection with the AK Steel Merger.

The AK Steel Merger was accounted for under the acquisition method of accounting for business combinations. The acquisition date fair value of the consideration transferred totaled $1,535 million. The following tables summarize the consideration paid for AK Steel and the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.

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The fair value of the total purchase consideration was determined as follows:


	(In Millions)
Fair value of AK Steel debt	$	914
Fair value of Cliffs common shares issued for AK Steel outstanding common stock	618
Other	3
Total purchase consideration	$	1,535

The fair value of Cliffs common shares issued for outstanding shares of AK Steel common stock and with respect to Cliffs common shares underlying converted AK Steel equity awards that vested upon completion of the AK Steel Merger is calculated as follows:


	(In Millions, Except Per Share Amounts)
Number of shares of AK Steel common stock issued and outstanding	317
Exchange ratio	0.400
Shares of Cliffs common shares issued to AK Steel stockholders	127
Price per share of Cliffs common shares	$	4.87
Fair value of Cliffs common shares issued for outstanding AK Steel common stock	$	618

The fair value of AK Steel's debt included in the consideration is calculated as follows:


	(In Millions)
Credit Facility	$	590
7.50% Senior Secured Notes due July 2023	324
Fair value of debt included in consideration	$	914

Valuation Assumption and Preliminary Purchase Price Allocation

We estimated fair values at March 13, 2020 for the preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in connection with the AK Steel Merger. During the measurement period, we will continue to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed, which may differ materially from these preliminary estimates. If we determine any measurement period adjustments are material, we will apply those adjustments, including any related impacts to net income, in the reporting period in which the adjustments are determined. We are in the process of conducting a valuation of the assets acquired and liabilities assumed related to the AK Steel Merger, most notably, personal and real property, leases, deferred taxes, asset retirement obligations and intangible assets and liabilities, and the final allocation will be made when completed, including the result of any identified goodwill. Accordingly, the provisional measurements noted below are preliminary and subject to modification in the future.

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The preliminary purchase price allocation to assets acquired and liabilities assumed in the AK Steel Merger was:


	(In Millions)
	Initial Allocation of Consideration		Measurement Period Adjustments		Updated Allocation
Cash and cash equivalents	$	38	$	1	$	39
Accounts receivable, net	666		(2)		664
Inventories	1,563		(243)		1,320
Income tax receivable, current	3		0		3
Other current assets	65		(16)		49
Property, plant and equipment	2,184		128		2,312
Deferred income taxes	0		30		30
Other non-current assets	475		(3)		472
Accounts payable	(636)		(8)		(644)
Accrued employment costs	(94)		1		(93)
State and local taxes	(35)		4		(31)
Pension and OPEB liabilities, current	(75)		(3)		(78)
Other current liabilities	(201)		5		(196)
Long-term debt	(1,179)		0		(1,179)
Pension and OPEB liabilities, non-current	(873)		2		(871)
Other non-current liabilities	(507)		72		(435)
Noncontrolling interest	0		(1)		(1)
Net identifiable assets acquired	1,394		(33)		1,361
Goodwill	141		33		174
Total net assets acquired	$	1,535	$	0	$	1,535

During the period subsequent to the AK Steel Merger, we made certain measurement period adjustments to the acquired assets and liabilities assumed due to clarification of information utilized to determine fair value during the measurement period. The Inventories measurement period adjustments of $243 million resulted in a favorable impact of $8 million to Cost of goods sold for the year ended December 31, 2020.

The goodwill resulting from the acquisition of AK Steel was assigned to our downstream Tubular and Tooling and Stamping operating segments. Goodwill is calculated as the excess of the purchase price over the net identifiable assets recognized and primarily represents the growth opportunities in light weighting solutions to automotive customers, as well as any synergistic benefits to be realized. Goodwill from the AK Steel Merger is not expected be deductible for income tax purposes.

The preliminary purchase price allocated to identifiable intangible assets and liabilities acquired was:


	(In Millions)		Weighted Average Life (In Years)
Intangible assets:
Customer relationships	$	77	18
Developed technology	60		17
Trade names and trademarks	11		10
Total identifiable intangible assets	$	148	17
Intangible liabilities:
Above-market supply contracts	$	(71)	12

The above-market supply contracts relate to the long-term coke and energy supply agreements with SunCoke Energy, which includes SunCoke Middletown, a consolidated VIE. Refer to NOTE 19 - VARIABLE INTEREST ENTITIES for further information.

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Pro Forma Results

The following table provides unaudited pro forma financial information, prepared in accordance with Topic 805, for the years ended December 31, 2020 and 2019, as if ArcelorMittal USA and AK Steel had been acquired as of January 1, 2019:


	(In Millions)
	Year Ended December 31,
	2020		2019
Revenues	$	12,837	$	17,163
Net income (loss) attributable to Cliffs shareholders	(520)		(11)

The unaudited pro forma financial information has been calculated after applying our accounting policies and adjusting the historical results with pro forma adjustments, net of tax, that assume the Acquisitions occurred on January 1, 2019. Significant pro forma adjustments include the following:

1.The elimination of intercompany revenues between Cliffs and ArcelorMittal USA and AK Steel of $844 million and $1,499 million for the years ended December 31, 2020 and 2019, respectively.

2.The 2020 pro forma net loss was adjusted to exclude $96 million of non-recurring inventory acquisition accounting adjustments incurred during the year ended December 31, 2020. The 2019 pro forma net loss was adjusted to include $362 million of non-recurring inventory acquisition accounting adjustments for the year ended December 31, 2019.

3.The elimination of non-recurring transaction costs incurred by Cliffs, AK Steel and ArcelorMittal USA in connection with the Acquisitions were $93 million for the year ended December 31, 2020. The 2019 pro forma net loss was adjusted to include $93 million of non-recurring transaction cost adjustments for the year ended December 31, 2019.

4.The 2020 pro forma net loss was adjusted to exclude restructuring costs of $1,820 million of non-recurring costs incurred by ArcelorMittal USA prior to the AM USA Transaction.

5.The 2020 and 2019 pro forma net losses were adjusted to exclude $140 million and $129 million for the years ended December 31, 2020 and 2019, respectively, for the impact of reversal of the fees charged for management, financial and legal services under the Industrial Franchise Agreement with the former parent.

6.Total other pro forma adjustments included reduced expenses of $32 million for the year ended December 31, 2020, primarily due to decreased depreciation expense and pension and OPEB expense, offset partially by increased interest and amortization expense.

7.Total other pro forma adjustments included an expense of $76 million for the year ended December 31, 2019, primarily due to increased interest, amortization and pension and OPEB expense, offset partially by decreased depreciation expense.

8.The income tax impact of pro forma transaction adjustments that affect Net income (loss) attributable to Cliffs shareholders at a statutory rate of 24.3% resulted in an increased benefit to Income tax benefit (expense) of $170 million and $117 million for the years ended December 31, 2020 and 2019, respectively.

The unaudited pro forma financial information does not reflect the potential realization of synergies or cost savings, nor does it reflect other costs relating to the integration of the acquired companies. This unaudited pro forma financial information should not be considered indicative of the results that would have actually occurred if the Acquisitions had been consummated on January 1, 2019, nor are they indicative of future results.

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NOTE 4 - REVENUES

We generate our revenue through product sales, in which shipping terms generally indicate when we have fulfilled our performance obligations and transferred control of products to our customer. Our revenue transactions consist of a single performance obligation to transfer promised goods. Our contracts with customers usually define the mechanism for determining the sales price, which is generally fixed upon transfer of control, but the contracts generally do not impose a specific quantity on either party. Quantities to be delivered to the customer are generally determined at a point near the date of delivery through purchase orders or other written instructions we receive from the customer. Spot market sales are made through purchase orders or other written instructions. We consider our performance obligation to be complete and recognize revenue when control transfers in accordance with shipping terms.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring product. We reduce the amount of revenue recognized for estimated returns and other customer credits, such as discounts and volume rebates, based on the expected value to be realized. Payment terms are consistent with terms standard to the markets we serve. Sales taxes collected from customers are excluded from revenues.

Prior to the AM USA Transaction, we had a supply agreement with ArcelorMittal USA, which included supplemental revenue or refunds based on the HRC price in the year the iron ore was consumed in ArcelorMittal USA's blast furnaces. As control transferred prior to consumption, the supplemental revenue was recorded in accordance with Topic 815. All sales occurring subsequent to the AM USA Transaction are intercompany and eliminated in consolidation. Included within Revenues related to Topic 815 for the supplemental revenue portion of the supply agreement is derivative revenue of $122 million, $78 million and $426 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The following table represents our Revenues by market:


	(In Millions)
	Year Ended December 31,
	2020		2019		2018
Steelmaking:
Automotive	$	2,062	$	0	$	0
Infrastructure and manufacturing	784		0		0
Distributors and converters	696		0		0
Steel producers1	1,423		1,990		2,332
Total steelmaking	4,965		1,990		2,332
Other Businesses:
Automotive	329		0		0
Infrastructure and manufacturing	34		0		0
Distributors and converters	26		0		0
Total Other Businesses	389		0		0
Total revenues	$	5,354	$	1,990	$	2,332

1 Includes Realization of deferred revenue of $35 million for the year ended December 31, 2020.

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The following table represents our consolidated Revenues by product line:


	(Dollars In Millions, Sales Volumes in Thousands)
	Year Ended December 31,
	2020			2019			2018
	Revenue		Volume1	Revenue		Volume1	Revenue		Volume1
Steelmaking:
Hot-rolled steel	$	386	633	$	0	0	$	0	0
Cold-rolled steel	490		682	0		0	0		0
Coated steel	1,747		1,911	0		0	0		0
Stainless and electrical steel	868		416	0		0	0		0
Other steel products	92		141	0		0	0		0
Iron products2	1,335		11,707	1,990		18,583	2,332		20,563
Other	47		N/A	0		—	0		—
Total steelmaking	4,965			1,990			2,332
Other Businesses:
Other	389		N/A	0		N/A	0		N/A
Total revenues	$	5,354		$	1,990		$	2,332

1 Carbon steel products, stainless and electrical steel and plate steel volumes are stated in net tons. Iron product volumes are stated in long tons.
2 Includes Realization of deferred revenue of $35 million for the year ended December 31, 2020.

Deferred Revenue

The table below summarizes our deferred revenue balances:


	(In Millions)
	Deferred Revenue (Current)				Deferred Revenue (Long-Term)
	2020		2019		2020		2019
Opening balance as of January 1	$	22	$	21	$	26	$	39
Net increase (decrease)	(15)		1		(26)		(13)
Closing balance as of December 31	$	7	$	22	$	0	$	26

Prior to the AK Steel Merger, our iron ore pellet sales agreement with Severstal Dearborn, LLC, subsequently assumed by AK Steel, required supplemental payments to be paid by the customer during the period from 2009 through 2013. Installment amounts received under this arrangement in excess of sales were classified as deferred revenue in the Statements of Consolidated Financial Position upon receipt of payment and the revenue was recognized over the term of the supply agreement, which had extended until 2022, in equal annual installments. As a result of the termination of that iron ore pellet sales agreement, we realized $35 million of deferred revenue, which was recognized within Realization of deferred revenue in the Statements of Consolidated Operations during the year ended December 31, 2020.

We have certain other sales agreements that require customers to pay in advance. Payments received pursuant to these agreements prior to revenue being recognized are recorded as deferred revenue in Other current liabilities.

NOTE 35 - SEGMENT REPORTING

~~In alignment with our strategic goals, our Company’s continuing operations~~We are vertically integrated from the mining of iron ore and coal; to production of metallics and coke; through iron making, steelmaking, rolling, finishing; and to downstream tubing, stamping and tooling. We are organized ~~and managed in two business units according to~~into 4 operating segments based on our differentiated ~~products. The former 'U.S. Iron Ore' segment is now 'Mining~~products - Steelmaking, Tubular, Tooling and ~~Pelletizing.'~~Stamping, and European Operations. Our previous Mining and Pelletizing segment is ~~a major supplier of~~included within the Steelmaking operating segment as iron ore pellets toare a primary raw material for our steel products. We have 1 reportable segment - Steelmaking. The operating segment results of our Tubular, Tooling and Stamping, and European Operations that do not constitute reportable segments are combined and disclosed in the Other Businesses category. Our Steelmaking

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segment is the largest flat-rolled steel producer supported by being the largest iron ore pellet producer in North ~~American~~America, primarily serving the automotive, infrastructure and manufacturing, and distributors and converters markets. Our Other Businesses primarily include the operating segments that provide customer solutions with carbon and stainless steel ~~industry from our mines~~tubing products, advanced-engineered solutions, tool design and ~~pellet plants located~~build, hot- and cold-stamped steel components, and complex assemblies. All intersegment transactions were eliminated in Michigan and Minnesota. In addition, the Toledo HBI business will be categorized under the segment 'Metallics.' In our Metallics segment, we are currently constructing an HBI production plant in Toledo, Ohio. We expect to complete construction and begin production in 2020.consolidation.

We evaluate performance ~~based~~ on ~~sales margin, defined as revenues less cost of goods sold and~~an operating ~~expenses identifiable to each segment. Additionally, we evaluate performance on a~~ segment basis, as well as a consolidated basis, based on Adjusted EBITDA, which is a non-GAAP measure. This measure is 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 steel industry. In addition, management believes Adjusted ~~EBITDA. These measures allow management~~EBITDA is a useful measure to assess the earnings power of the business without the impact of capital structure and ~~investors~~can be used to

~~focus on~~ assess our ability to service ~~our~~ debt and fund future capital expenditures in the business.

Our results by segment are as well as illustrate how the business is performing. Additionally, EBITDA and Adjusted EBITDA assist management and investors in their analysis and forecasting as these measures approximate the cash flows associated with operational earnings.follows:


	(In Millions)
	Year Ended December 31,
	2020		2019		2018
Revenues:
Steelmaking1	$	4,965	$	1,990	$	2,332
Other Businesses	389		0		0
Total revenues	$	5,354	$	1,990	$	2,332

Adjusted EBITDA:
Steelmaking	$	433	$	636	$	872
Other Businesses	47		0		0
Corporate and eliminations	(127)		(111)		(106)
Total Adjusted EBITDA	$	353	$	525	$	766

1 Includes Realization of deferred revenue of $35 million for the year ended December 31, 2020.

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The following ~~tables present a summary of our reportable segments, including~~table provides a reconciliation of ~~segment sales margin~~our consolidated Net income (loss) to ~~Income from continuing operations before income taxes~~total Adjusted EBITDA:


	(In Millions)
	Year Ended December 31,
	2020		2019		2018
Net income (loss)	$	(81)	$	293	$	1,128
Less:
Interest expense, net	(238)		(101)		(121)
Income tax benefit (expense)	111		(18)		460
Depreciation, depletion and amortization	(308)		(85)		(89)
	354		497		878
Less:
EBITDA from noncontrolling interests1	56		0		0
Gain (loss) on extinguishment of debt	130		(18)		(7)
Severance costs	(38)		(2)		0
Acquisition-related costs excluding severance costs	(52)		(7)		0
Amortization of inventory step-up	(96)		0		0
Impact of discontinued operations	1		(1)		121
Foreign exchange remeasurement	0		0		(1)
Impairment of other long-lived assets	0		0		(1)
Total Adjusted EBITDA	$	353	$	525	$	766

1 EBITDA of noncontrolling interests includes $41 million for income and $15 million for depreciation, depletion and amortization for the year ended December 31, 2020.

The following table summarizes our depreciation, depletion and ~~a reconciliation~~amortization and capital additions by segment:


	(In Millions)
	Year Ended December 31,
	2020		2019		2018
Depreciation, depletion and amortization:
Steelmaking	$	276	$	80	$	68
Other Businesses	27		0		0
Corporate	5		5		6
Total depreciation, depletion and amortization	$	308	$	85	$	74

Capital additions1:
Steelmaking	$	436	$	687	$	393
Other Businesses	45		0		0
Corporate	2		3		2
Total capital additions	$	483	$	690	$	395

1 Refer to NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION for additional information.

Table of ~~Net income~~ ~~to EBITDA and Adjusted EBITDA:~~

Contents

2018 2017 2016
Revenues from product sales and services:
Mining and Pelletizing $ 2,332.4
$ 1,866.0
$ 1,554.5

Sales margin:
Mining and Pelletizing $ 809.6
$ 467.6
$ 280.1
Other operating expense (136.4 ) (77.4 ) (149.4 )
Other expense (108.5 ) (282.0 ) (20.3 )
Income from continuing operations before income taxes $ 564.7
$ 108.2
$ 110.4

(In Millions)
2018 2017 2016
Net income $ 1,128.1
$ 363.1
$ 199.3
Less:
Interest expense, net (121.3 )
(132.0 )
(200.5 )
Income tax benefit 460.3

252.4

12.2
Depreciation, depletion and amortization (89.0 )
(87.7 )
(115.4 )
Total EBITDA $ 878.1
$ 330.4
$ 503.0
Less:
Gain (loss) on extinguishment/restructuring of debt $ (6.8 ) $ (165.4 ) $ 166.3
Impact of discontinued operations 120.6
22.0
108.4
Foreign exchange remeasurement (0.9 ) 13.9
(17.8 )
Impairment of long-lived assets (1.1 )
—

—
Total Adjusted EBITDA $ 766.3
$ 459.9
$ 246.1

EBITDA:
Mining and Pelletizing $ 852.9

$ 534.9

$ 342.4
Metallics (3.3 ) (0.4 ) —
Corporate and Other¹
28.5

(204.1 )
160.6
Total EBITDA $ 878.1
$ 330.4
$ 503.0

Adjusted EBITDA:
Mining and Pelletizing $ 875.3
$ 559.4
$ 359.6
Metallics (3.3 ) (0.4 ) —
Corporate (105.7 ) (99.1 ) (113.5 )
Total Adjusted EBITDA $ 766.3
$ 459.9
$ 246.1

¹ Corporate and Other includes activity from discontinued operations.

(In Millions)
2018 2017 2016
Depreciation, depletion and amortization:
Mining and Pelletizing $ 68.2
$ 66.6
$ 84.0
Corporate 5.6
6.8
6.3
Total depreciation, depletion and amortization $ 73.8
$ 73.4
$ 90.3

Capital additions¹:

Mining and Pelletizing $ 145.0
$ 136.8
$ 62.2
Metallics 248.1
13.7
—
Corporate and Other 1.6
2.7
6.1
Total capital additions $ 394.7
$ 153.2
$ 68.3

¹Includes capital lease additions and non-cash accruals. Refer to NOTE 16 - CASH FLOW INFORMATION.

~~A summary of~~The following summarizes our assets by ~~segment is as follows:~~segment:


								(In Millions)
	(In Millions)							December 31,
	December 31, 2018		December 31, 2017		December 31, 2016			2020		2019
Assets:							Assets:
Mining and Pelletizing	$	1,694.1	$	1,500.6	$	1,372.5
Metallics	265.9		13.4		—
Steelmaking							Steelmaking	$	15,849	$	2,557
Other Businesses							Other Businesses	239		0
Total segment assets	1,960.0		1,514.0		1,372.5		Total segment assets	16,088		2,557
Corporate	1,557.2		1,300.6		396.3		Corporate	683		947
Assets of discontinued operations	12.4		138.8		155.1
Total assets	$	3,529.6	$	2,953.4	$	1,923.9	Total assets	$	16,771	$	3,504

Included in the consolidated financial statements are the following amounts relating to geographic ~~location:~~location based on product destination:


	(In Millions)
	2020		2019		2018
Revenues:
United States	$	4,580	$	1,505	$	1,847
Canada	602		448		395
Other countries	172		37		90
Total revenues	$	5,354	$	1,990	$	2,332
Property, plant and equipment, net:
United States	$	8,647	$	1,929	$	1,286
Canada	91		0		0
Other countries	5		0		0
Total property, plant and equipment, net	$	8,743	$	1,929	$	1,286


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐



Abbreviation or acronym			Term
2012 Amended Equity Plan			Cliffs Natural Resources Inc. 2012 Incentive Equity Plan, as amended or amended and restated from time to time
A&R 2015 Equity Plan			Cliffs Natural Resources Inc. Amended and Restated 2015 Equity and Incentive Compensation Plan
ABL ~~Facility~~Amendment			~~Amended~~Second Amendment to Asset-Based Revolving Credit Agreement, dated as of December 9, 2020, among Cleveland-Cliffs Inc., the lenders party thereto from time to time and ~~Restated Syndicated Facility Agreement by and among~~ Bank of America, N.A., as Administrative Agent and Australian Security Trustee, the Lenders that are parties hereto, as the Lenders, Cleveland-Cliffs Inc., as Parent and a Borrower, and the Subsidiaries of Parent party hereto, as Borrowersadministrative agent
ABL Facility			Asset-Based Revolving Credit Agreement, dated as of March ~~30, 2015,~~13, 2020, among Cleveland-Cliffs Inc., the lenders party thereto from time to time and ~~Amended and Restated~~Bank of America, N.A., as administrative agent, as amended as of ~~February 28, 2018~~March 27, 2020, and December 9, 2020, and as may be further amended from time to time
Acquisitions			The AK Steel Merger and AM USA Transaction, together
Adjusted EBITDA			EBITDA, excluding certain items such as ~~extinguishment/restructuring~~EBITDA of noncontrolling interests, extinguishment of debt, severance, acquisition-related costs, amortization of inventory step-up, impacts of discontinued operations ~~foreign currency exchange remeasurement, impairment of other long-lived assets~~ and intersegment corporate allocations of ~~SG&A~~selling, general and administrative costs
AG			Autogenous ~~Grinding~~grinding
AHSS			Advanced high-strength steel
AK Coal			AK Coal Resources, Inc., an indirect, wholly owned subsidiary of AK Steel, and related coal mining assets
AK Steel			AK Steel Holding Corporation (n/k/a Cleveland-Cliffs Steel Holding Corporation) and its consolidated subsidiaries, including AK Steel Corporation ~~(including~~(n/k/a Cleveland-Cliffs Steel Corporation), its ~~facilities in Ashland, Kentucky, Middletown, Ohio and Dearborn, Michigan)~~direct, wholly owned subsidiary, collectively, unless stated otherwise or the context indicates otherwise
~~Algoma~~AK Steel Merger			~~Algoma~~The merger of Merger Sub with and into AK Steel, ~~Inc. (previously, Essar~~with AK Steel ~~Algoma~~surviving the merger as a wholly owned subsidiary of Cleveland-Cliffs Inc.), subject to the terms and conditions set forth in the Merger Agreement, consummated on March 13, 2020
~~Amended 2015 Equity~~AK Steel Merger Agreement			Agreement and Plan	~~Cliffs Natural Resources~~ of Merger, dated as of December 2, 2019, among Cleveland-Cliffs Inc. ~~2015 Equity~~, AK Steel and ~~Incentive Compensation Plan, as amended~~Merger Sub
~~APBO~~AM USA Transaction			~~Accumulated Postretirement Benefit Obligation~~The acquisition of ArcelorMittal USA, consummated on December 9, 2020, and the entry into the ABL Amendment, together
~~ArcelorMittal~~AM USA Transaction Agreement			Transaction Agreement, dated as of September 28, 2020, by and between Cleveland-Cliffs Inc. and ArcelorMittal ~~(as~~S.A.
AMT			Alternative minimum tax
AOCI			Accumulated other comprehensive income (loss)
APBO			Accumulated postretirement benefit obligation
ArcelorMittal			ArcelorMittal S.A., a company organized under the laws of Luxembourg and the former ultimate parent company of ArcelorMittal ~~Mines Canada, ArcelorMittal~~ USA ~~and ArcelorMittal Dofasco GP, as well as, many other subsidiaries)~~
ArcelorMittal USA			Substantially all of the operations of the former ArcelorMittal USA LLC, ~~(including many of~~ its ~~United States affiliates,~~ subsidiaries and ~~representatives. References to ArcelorMittal USA comprise all such relationships unless a specific ArcelorMittal USA entity is referenced)~~certain affiliates, and Kote and Tek, collectively
~~ALJ~~ASC			~~Administrative Law Judge~~
~~AMT~~	~~Alternative Minimum Tax~~
~~ASC~~	Accounting Standards Codification
~~ASU~~ASTM			American Society for Testing and Materials
ASU			Accounting Standards ~~Updates~~Update
~~Atlantic Basin pellet premium~~BART			~~Platts Atlantic Blast Furnace 65% Fe pellet premium~~Best available retrofit technology
~~Bloom Lake~~BNSF			~~The Bloom Lake Iron Ore Mine Limited Partnership~~
~~Bloom Lake Group~~	~~Bloom Lake General Partner Limited and certain of its affiliates, including Cliffs Quebec Iron Mining ULC~~
~~BNSF~~	Burlington Northern Santa Fe, LLC
~~Canadian Entities~~Board			~~Bloom Lake Group, Wabush Group and certain other wholly-owned subsidiaries~~The Board of Directors of Cleveland-Cliffs Inc.
~~CCAA~~CARES Act			~~Companies' Creditors Arrangement~~Coronavirus Aid, Relief, and Economic Security Act ~~(Canada)~~
~~CERCLA~~CECL			Current expected credit losses
CERCLA			Comprehensive Environmental Response, Compensation and Liability Act of 1980
CFR			Cost and freight
~~CLCC~~		~~Cliffs Logan County Coal LLC~~
Clean Water Act		Federal Water Pollution Control Act
CN			Canadian National Railway Company
CO₂		~~Carbon Dioxide~~
Compensation Committee		Compensation and Organization Committee of the Board ~~of Directors~~
~~CPP~~COVID-19			~~Clean Power Plan~~A novel strain of coronavirus that the World Health Organization declared a global pandemic in March 2020
Directors’ Plan			Cliffs Natural Resources Inc. Amended and Restated 2014 Nonemployee Directors’ Compensation Plan
Dodd-Frank Act			Dodd-Frank Wall Street Reform and Consumer Protection Act
~~DR-grade~~DOE			~~Direct Reduction-grade~~U.S. Department of Energy
~~EAF~~DR-grade			~~Electric Arc Furnace~~Direct reduction-grade
~~EBITDA~~EAF			Electric arc furnace
EBITDA			Earnings before interest, taxes, depreciation and amortization
~~Empire~~EDC Revolving Facility			Credit Facility Agreement, dated November 9, 2020, among Export Development Canada and Cleveland-Cliffs Inc.'s indirect, wholly owned subsidiaries, Fleetwood Metal Industries Inc. and The Electromac Group Inc.
EGLE			Michigan Department of Environment, Great Lakes and Energy


Abbreviation or acronym						Term
Empire						Iron ore mining property owned by Empire Iron Mining Partnership, an indirect, wholly owned subsidiary of Cliffs
EPA						U.S. Environmental Protection Agency
EPS						Earnings per share
~~ERM~~ERISA						~~Enterprise Risk Management~~Employee Retirement Income Security Act of 1974, as amended
Exchange Act						Securities Exchange Act of 1934, as amended
FASB						Financial Accounting Standards Board
Fe						Iron
~~FERC~~FeT						~~Federal Energy Regulatory Commission~~Total iron
~~FeT~~FILO						~~Total Iron~~First-in, last-out
FIP						Federal ~~Implementation Plan~~implementation plan
FMSH Act						~~U.S.~~ Federal Mine Safety and Health Act of 1977, as amended


Former ABL Facility		Amended and Restated Syndicated Facility Agreement, dated as of March 30, 2015, among Cleveland-Cliffs Inc., the subsidiary borrowers party thereto, the lenders party thereto and Bank of America, N.A., as administrative agent, as amended and restated as of February 28, 2018, and as further amended, which was terminated on March 13, 2020 in connection with entering into the ABL Facility
~~Abbreviation or acronym~~GAAP		~~Term~~
~~GAAP~~	Accounting principles generally accepted in the United States
GHG		Greenhouse gas
~~HBI~~GOES		~~Hot Briquetted Iron~~Grain oriented electrical steel
~~Hibbing~~H/EV		Hybrid/electric vehicle
HBI		Hot briquetted iron
Hibbing		Iron ore mining property owned by Hibbing Taconite Company, an unincorporated joint venture between subsidiaries of Cliffs and U.S. Steel
~~IRC~~HRC		Hot-rolled coil steel
IRB		Industrial Revenue Bond
IRC		U.S. Internal Revenue Code of 1986, as amended
~~IRS~~IT		~~Internal Revenue Service~~Information technology
~~Koolyanobbing~~Kote and Tek		~~Collective term for~~I/N Kote L.P. (n/k/a Cleveland-Cliffs Kote L.P.) and I/N Tek L.P. (n/k/a Cleveland-Cliffs Tek L.P.), former joint ventures between subsidiaries of the ~~operating deposits at Koolyanobbing, Mount Jackson~~former ArcelorMittal USA LLC and ~~Windarling~~Nippon Steel Corporation
LIBOR		London Interbank Offered Rate
LIFO		Last-in, first-out
Long ton		2,240 pounds
LS&I		Lake Superior & Ishpeming Railroad Company
~~LTVSMC~~Merger Sub		~~LTV~~Pepper Merger Sub Inc., a direct, wholly owned subsidiary of Cliffs prior to the AK Steel ~~Mining Company~~Merger
Metric ton		2,205 pounds
~~MMBtu~~Minorca		Iron ore mining property owned by Cleveland-Cliffs Minorca Mine Inc. (f/k/a ArcelorMittal Minorca Mine Inc.), an indirect, wholly owned subsidiary of Cliffs acquired in connection with the AM USA Transaction
MMBtu		Million British Thermal Units
MPCA		Minnesota Pollution Control Agency
~~MPSC~~MSHA		~~Michigan Public Service Commission~~
~~MPUC~~	~~Minnesota Public Utilities Commission~~
~~MSHA~~	U.S. Mine Safety and Health Administration
~~Monitor~~Net ton		~~FTI Consulting Canada Inc.~~2,000 pounds
~~NAAQS~~NOL		~~National Ambient Air Quality Standards~~Net operating loss
~~Net ton~~NOVs		~~2,000 pounds~~Notices of violations
NO₂x		Nitrogen ~~dioxide~~oxide
NO_x NOES		~~Nitrogen oxide~~Non-oriented electrical steel
Northshore		Iron ore mining property owned by Northshore Mining Company, a direct, wholly owned subsidiary of Cliffs
NPDES		National Pollutant Discharge Elimination System, authorized by the ~~U.S.~~ Clean Water Act
NYSE		New York Stock Exchange
OPEB		Other postretirement ~~employment~~ benefits
~~OPEB cap~~OSHA		~~Medical premium maximums~~Occupational Safety and Health Administration
PBO		Projected benefit obligation
~~Pinnacle~~PHS		~~Pinnacle Mining Company, LLC~~Press-hardened steel
Platts 62% ~~Price~~price		Platts IODEX 62% Fe Fines CFR North China
~~Preferred Share~~PPI		~~7.00% Series A Mandatory Convertible Preferred Stock, Class A, without par value~~Producer Price Indices
Precision Partners		PPHC Holdings, LLC, an indirect, wholly owned subsidiary of AK Steel, and its subsidiaries, collectively, unless stated otherwise or the context indicates otherwise
RCRA		Resource Conservation and Recovery Act
RI/FS		Remedial Investigation/Feasibility Study


Abbreviation or acronym		Term
ROM		Run-of-mine coal
S&P		Standard & Poor's ~~Rating Services, a division of Standard & Poor's Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc., and its successors~~
SEC		U.S. Securities and Exchange Commission
~~SG&A~~Section 232		~~Selling, general and administrative~~Section 232 of the Trade Expansion Act of 1962
Securities Act		Securities Act of 1933, as amended
~~Seneca~~SIP		~~Seneca Coal Resources, LLC~~
~~Silver Bay Power~~	~~Silver Bay Power Company~~
~~SIP~~	State Implementation Plan
SO₂ STRIPS		~~Sulfur dioxide~~
~~STRIPS~~	Separate Trading of Registered Interest and Principal of Securities
~~Tilden~~SunCoke Middletown		Middletown Coke Company, LLC, a subsidiary of SunCoke Energy, Inc.
Tilden		Iron ore mining property owned by Tilden Mining Company L.C., an indirect, wholly owned subsidiary of Cliffs
TMDL		Total ~~Maximum Daily Load~~maximum daily load
Topic ~~606~~805		ASC Topic ~~606, Revenue from Contracts with Customers~~805, Business Combinations
Topic 815		ASC Topic 815, Derivatives and Hedging
~~TRIR~~TSR		Total ~~Recordable Incident Rate~~shareholder return
~~TSR~~Tubular Components		~~Total Shareholder Return~~Cleveland-Cliffs Tubular Components LLC (f/k/a AK Tube LLC), an indirect, wholly owned subsidiary of AK Steel
United Taconite		Iron ore mining property owned by United Taconite LLC, an indirect, wholly owned subsidiary of Cliffs
U.S.		United States of America
U.S. Steel		U.S. Steel Corporation and ~~all~~its subsidiaries, collectively, unless stated otherwise or the context indicates otherwise
~~USW~~USMCA		United ~~Steelworkers~~States-Mexico-Canada Agreement
~~VEBA~~USW		~~Voluntary Employee Benefit Association trusts~~United Steelworkers
~~VWAP~~VEBA		~~Volume Weighted Average Price~~Voluntary employee benefit association trusts
VIE		Variable interest entity


			☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



~~Abbreviation or acronym~~		~~Term~~
~~Wabush~~		~~Wabush Mines Joint Venture~~
~~Wabush Group~~		Wabush Iron Co. Limited and Wabush Resources Inc., and certain of their affiliates, including Wabush Mines (an unincorporated joint venture of Wabush Iron Co. Limited and Wabush Resources Inc.), Arnaud Railway Company and Wabush Lake Railway Company
~~WEPC~~		~~Wisconsin Electric Power Company~~
~~2012 Equity Plan~~		~~Cliffs Natural Resources Inc. Amended and Restated 2012 Incentive Equity Plan~~
~~2015 Equity Plan~~		~~Cliffs Natural Resources Inc. 2015 Equity and Incentive Compensation Plan~~


Market	2020
Automotive	45	%
Infrastructure and manufacturing	15	%
Distributors and converters	13	%
Steel producers	27	%



U.S. Pellet
Annual Rated Capacity Tonnage
	Current Estimated Capacity (Long Tons in Millions)¹	Percent of Total U.S. Capacity
All Cliffs’ managed mines	27.4	54.8	%
Other U.S. mines
U.S. Steel’s Minnesota ore operations
Minnesota Taconite	14.3	28.6
Keewatin Taconite	5.4	10.8
Total U.S. Steel	19.7	39.4
ArcelorMittal USA Minorca mine	2.9	5.8
Total other U.S. mines	22.6	45.2
Total U.S. mines	50.0	100.0	%

¹Empire mine was excluded from the estimated capacity calculation as it is indefinitely idled.



	Percentage Product Revenue
Customer¹	2018	2017	2016
ArcelorMittal	57%	48%	51%
AK Steel	25%	29%	27%
Algoma²	13%	11%	5%

¹ Includes subsidiaries.
² On October 5, 2015, we terminated the long-term agreement with Algoma; however, we entered into certain short-term contracts with Algoma throughout 2016. On May 16, 2016, we reinstated our agreement with Algoma, which took effect in January 2017.



Mine	Cliffs Ownership	Infrastructure	Mineralization	Operating Since	Current Annual Capacity^1,2	2018 Production^1,2	Mineral Owned	Rights Leased
Empire^3,4	100%	Mine, Concentrator, Pelletizer	Magnetite	1963	*	—	53%	47%
Tilden⁴	100%	Mine, Concentrator, Pelletizer, Railroad	Hematite & Magnetite	1974	8.0	7.7	100%	—%
Northshore	100%	Mine, Concentrator, Pelletizer, Railroad	Magnetite	1990	6.0	5.6	—%	100%
United Taconite	100%	Mine, Concentrator, Pelletizer	Magnetite	1965	5.4	5.2	—%	100%
Hibbing	23%	Mine, Concentrator, Pelletizer	Magnetite	1976	8.0	7.8	3%	97%

¹ Reported on a wet basis in millions of long tons, equivalent to 2,240 pounds.
² Figures reported on 100% basis.
³ Empire was indefinitely idled beginning August 2016.
⁴ During 2017, our ownership interest in Tilden and Empire increased to 100%.
* Historically, Empire had an annual capacity of 5.5 million long tons; currently indefinitely idled.



~~Mining and Pelletizing~~
Property	Date of Latest Economic Reserve Analysis
~~Tilden~~Iron ore mines:		~~2015~~
~~Northshore~~Hibbing		~~2018~~2015
~~United Taconite~~Minorca		~~2016~~2019
~~Hibbing~~Northshore		~~2015~~2020
Tilden		2019
United Taconite		2019
Coal mines:
Princeton		2019


Iron Ore Mineral Reserves
as of December 31, 2020
(In Millions of Long Tons)
	Proven		Probable		Proven & Probable
Property	Tonnage	% Grade	Tonnage	% Grade	Tonnage	% Grade3	Process Recovery4
Hibbing1	76	19.7	25	19.6	101	19.7	27%
Minorca	113	23.6	7	25.3	120	23.7	31%
Northshore	318	25.3	519	24.1	837	24.6	29%
Tilden2	168	35.2	418	34.8	586	34.8	34%
United Taconite	158	23.1	631	22.1	789	22.3	31%
Total	833		1,600		2,433

1 The Hibbing mine is reported on a 100% basis, of which, our ownership is 85.3%.
2 Tilden hematite reported grade is percent FeT; all other properties are percent magnetic iron.
3 Cutoff for Tilden hematite is 25% FeT. Cutoff grades for magnetic ore are 20% for Tilden, 19% for Northshore, 16% for Minorca, 17% for United Taconite and 15% for Hibbing.
4 Process recovery includes all factors for converting crude ore tonnage, shown above, to a dry saleable product.



Mining and Pelletizing Mineral Reserves
as of December 31, 2018
(In Millions of Long Tons)
			Proven		Probable		Proven & Probable		Saleable Product^2,3		Previous Year
Property	Cliffs Share		Tonnage	% Grade	Tonnage	% Grade	Tonnage	% Grade⁵	Process Recovery⁴	Tonnage	Proven & Probable Crude Ore	Saleable Product
Tilden¹	100	%	241.7	34.6	82.7	33.9	324.4	34.4	38%	122.1	346.3	129.2
Northshore	100	%	299.5	25.3	535.6	23.7	835.1	24.3	32%	270.1	793.2	255.9
United Taconite	100	%	398.9	22.5	415.5	21.9	814.4	22.2	32%	259.5	829.1	264.6
Hibbing	23	%	125.1	19.7	24.7	19.6	149.8	19.7	27%	39.7	178.7	47.2
Totals			1,065.2		1,058.5		2,123.7			691.4	2,147.3	696.9

¹ Tilden hematite reported grade is percent FeT; all other properties are percent magnetic iron.
² Saleable product is a standard pellet containing 60% to 66% Fe calculated from both proven and probable mineral reserves.
³ Saleable product is reported on a dry basis; shipped products typically contain 1% to 4% moisture.
⁴ Process recovery includes all factors for converting crude ore tonnage to saleable product.
⁵Cutoff grades are 15% magnetic iron for Hibbing, 17% for United Taconite, 19% for Northshore and 20% for Tilden. Cutoff for Tilden hematite is 25% FeT.


I.	I. ECONOMIC AND MARKET RISKS


~~II.~~	~~REGULATORY RISKS~~


~~III.~~	III. FINANCIAL RISKS



		2013	2014	2015	2016	2017	2018
Cleveland-Cliffs Inc.	Return %	—	(71.56)	(77.87)	432.28	(14.27)	6.66
	Cum $	100.00	28.44	6.29	33.50	28.72	30.63
S&P 500 Index - Total Returns	Return %	—	13.65	1.38	11.93	21.80	(4.39)
	Cum $	100.00	113.65	115.22	128.96	157.08	150.18
S&P Total Market Index	Return %	—	(25.63)	(50.76)	105.09	20.61	(26.76)
	Cum $	100.00	74.37	36.62	75.10	90.58	66.34
S&P Metals and Mining	Return %	—	12.43	0.46	12.62	21.13	(5.30)
	Cum $	100.00	112.43	112.95	127.20	154.08	145.91



Summary of Financial and Other Statistical Data - Cleveland-Cliffs Inc. and Subsidiaries
	2018 (a)		2017 (b)		2016 (c)		2015 (d)			2014 (e)
Financial data (in millions, except per share amounts)
Revenue from product sales and services	$	2,332.4	$	1,866.0	$	1,554.5	$	1,525.4		$	2,506.5
Income from continuing operations	$	1,039.9	$	360.6	$	122.6	$	134.3		$	607.5
Income (loss) from discontinued operations, net of tax *	$	88.2	$	2.5	$	76.7	$	(882.7	)	$	(8,919.1	)
Earnings (loss) per common share attributable to Cliffs common shareholders - basic
Continuing operations	$	3.50	$	1.27	$	0.49	$	0.57		$	3.46
Discontinued operations *	0.30		0.01		0.39		(5.71		)	(50.98		)
Earnings (loss) per common share attributable to Cliffs common shareholders - basic	$	3.80	$	1.28	$	0.88	$	(5.14	)	$	(47.52	)
Earnings (loss) per common share attributable to Cliffs common shareholders - diluted
Continuing operations	$	3.42	$	1.25	$	0.49	$	0.57		$	3.46
Discontinued operations *	0.29		0.01		0.38		(5.70		)	(50.98		)
Earnings (loss) per common share attributable to Cliffs common shareholders - diluted	$	3.71	$	1.26	$	0.87	$	(5.13	)	$	(47.52	)

Total assets	$	3,529.6	$	2,953.4	$	1,923.9	$	2,135.5		$	3,147.2
Long-term debt obligations (including capital leases)	$	2,104.5	$	2,311.8	$	2,178.6	$	2,704.1		$	2,834.6

Cash dividends declared to preferred shareholders
- Per depositary share	$	—	$	—	$	—	$	1.32		$	1.76
- Total	$	—	$	—	$	—	$	38.4		$	51.2
Cash dividends declared to common shareholders
- Per share	$	0.05	$	—	$	—	$	—		$	0.60
- Total	$	15.0	$	—	$	—	$	—		$	92.5
Note: This information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Financial Statements and Supplementary Data.
(*) Refer to NOTE 13 - DISCONTINUED OPERATIONS, for information regarding discontinued operations.
(a) 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 has not been retrospectively revised and continues to be reported under the accounting standards in effect for those periods. Refer to NOTE 2 - NEW ACCOUNTING STANDARDS for information regarding the adoption of Topic 606. Additionally, refer to NOTE 10 - INCOME TAXES for information regarding the reversal of certain deferred tax valuation allowances.
(b) Refer to NOTE 6 - DEBT AND CREDIT FACILITIES for information regarding debt issuances and extinguishments, NOTE 14 - CAPITAL STOCK for information regarding a common share issuance and NOTE 10 - INCOME TAXES for information regarding the financial impact of Public Law 115–97, commonly known as the “Tax Cuts and Jobs Act”.
(c) During 2016, we recorded a net gain of $166.3 million related to debt restructuring activities that occurred throughout the year, including the issuance of $218.5 million aggregate principal of 8.00% 2020 1.5 Lien Notes in exchange for $512.2 million of our existing senior notes, the issuance of an aggregate of 8.2 million common shares in exchange for $56.9 million aggregate principal amount of our existing senior notes and a loss on the redemption of the full $283.6 million outstanding of our 3.95% 2018 Senior Notes at a total redemption price of $301.0 million. We also issued 44.4 million common shares in an underwritten public offering. We received net proceeds of $287.6 million at a public offering price of $6.75 per common share.
(d) During 2015, our Eastern Canada Iron Ore segment commenced restructuring proceedings in Montreal, Quebec under the CCAA. As a result of these proceedings, the Canadian entities were deconsolidated and all financial results were classified within discontinued operations. During 2015, our North American Coal operating segment continued to meet the criteria to be classified as held for sale under ASC Topic 205, Presentation of Financial Statements, until the operations were sold during the fourth quarter, and as a result, all financial results were classified within discontinued operations. Refer to NOTE 13 - DISCONTINUED OPERATIONS, for information regarding discontinued operations.
(e) During 2014, we recorded an impairment of other long-lived assets of $11.2 million related to our continuing operations. We also recorded goodwill and other long-lived asset impairment charges related to our discontinued operations of $9,018.7 million. The impairment charges were primarily a result of changes in life-of-mine cash flows due to declining pricing for both global iron ore and low-volatile metallurgical coal, along with changes in strategic focus of the divestiture of the Eastern Canadian Iron Ore, Asia Pacific Iron Ore, North American Coal and Ferroalloys operations. The CLCC assets were sold in the fourth quarter of 2014 on December 31, 2014, resulting in a loss on sale of $419.6 million. Refer to NOTE 13 - DISCONTINUED OPERATIONS, for information regarding discontinued operations. For the year ended December 31, 2014, we had a loss attributable to noncontrolling interest of $1,087.4 million, of which, $1,114.3 million related to discontinued operations.



Item 7.			Management's Discussion and Analysis of Financial Condition and Results of Operations



	(In Millions)
							Changes due to:
	Year Ended December 31,						Revenue and cost rate			Sales volume			Freight and reimbursement			Total change
	2018			2017			Revenue and cost rate			Sales volume			Freight and reimbursement			Total change
Revenues from product sales and services	$	2,332.4		$	1,866.0		$	364.3		$	163.5		$	(61.4	)	$	466.4
Cost of goods sold and operating expenses	(1,522.8		)	(1,398.4		)	(68.4		)	(117.4		)	61.4			(124.4		)
Sales margin	$	809.6		$	467.6		$	295.9		$	46.1		$	—		$	342.0



	Year Ended December 31,
Per Long Sales Ton Information	2018		2017		Difference			Percent change
Realized product revenue rate¹	$	105.64	$	88.03	$	17.61		20.0	%
Cash cost of goods sold and operating expense rate^1,2	62.95		59.43		3.52			5.9	%
Depreciation, depletion & amortization	3.32		3.56		(0.24		)	(6.7	)%
Total cost of goods sold and operating expense rate	66.27		62.99		3.28			5.2	%
Sales margin	$	39.37	$	25.04	$	14.33		57.2	%

Sales tons³(In thousands)	20,563		18,683
Production tons³(In thousands)
Total	26,336		25,542
Cliffs’ share of total	20,329		18,776

¹ Excludes revenues and expenses related to domestic freight, which are offsetting and have no impact on sales margin. Revenues and expenses also exclude venture partner cost reimbursements.
² Cash cost of goods sold and operating expense rate is a non-GAAP financial measure. Refer to "Non-GAAP Reconciliation" for reconciliation in dollars back to our consolidated financial statements.
³ Tons are long tons.


◦	~~Changes in customer and contract mix, which positively affected the realized revenue rate by $3 per long ton or $70 million.~~


▪	~~An increase in index freight rates, a component in most of our contract pricing formulas, which negatively affected the realized revenue rate by $3 per long ton or $53 million; and~~


▪	~~Lower full-year Platts 62% Price, compared to the prior-year, which negatively affected the realized revenue rate by $1 per long ton or $30 million.~~


	(Dollars In Millions, Sales Volumes In Thousands)
	Year Ended December 31,
	2020			2019
	Revenue		Volume1	Revenue		Volume1
Hot-rolled steel	$	386	633	$	—	—
Cold-rolled steel	490		682	—		—
Coated steel	1,747		1,911	—		—
Stainless and electrical steel	868		416	—		—
Other steel products	92		141	—		—
Iron products2	1,335		11,707	1,990		18,583
Other	47		N/A	—		—
Total	$	4,965		$	1,990
1 Carbon steel products, stainless and electrical steel and plate steel volumes are stated in net tons. Iron product volumes are stated in long tons.
2 Includes Realization of deferred revenue of $35 million for the year ended December 31, 2020.



	(In Millions)
							Change due to
	Year Ended December 31,						Revenue and cost rate			Sales volume			Idle cost/production volume variance		Freight and reimburse-ment			Total change
	2017			2016			Revenue and cost rate			Sales volume			Idle cost/production volume variance		Freight and reimburse-ment			Total change
Revenues from product sales and services	$	1,866.0		$	1,554.5		$	228.2		$	36.7		$	—	$	46.6		$	311.5
Cost of goods sold and operating expenses	(1,398.4		)	(1,274.4		)	(113.7		)	(18.4		)	54.7		(46.6		)	(124.0		)
Sales margin	$	467.6		$	280.1		$	114.5		$	18.3		$	54.7	$	—		$	187.5



	Payments Due by Period(In Millions)
	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 Years
Long-term debt	$	2,212.0	$	—	$	124.0	$	—	$	2,088.0
Interest on debt¹	964.6		110.6		218.3		209.2		426.5
Operating lease obligations	19.6		4.0		5.8		3.8		6.0
Capital lease obligations	18.5		4.2		7.8		5.4		1.1
Partnership distribution payable	44.2		44.2		—		—		—
Purchase obligations:
Open purchase orders	89.5		89.5		—		—		—
HBI production plant²	650.0		425.0		225.0		—		—
Minimum "take or pay" purchase commitments³	711.8		85.8		152.7		108.4		364.9
Total purchase obligations	1,451.3		600.3		377.7		108.4		364.9
Other long-term liabilities:
Pension funding minimums	365.1		15.9		79.2		118.8		151.2
OPEB claim payments	93.3		3.5		6.8		6.6		76.4
Environmental and mine closure obligations	174.9		2.9		46.9		4.3		120.8
Total other long-term liabilities	633.3		22.3		132.9		129.7		348.4
Total	$	5,343.5	$	785.6	$	866.5	$	456.5	$	3,234.9

¹Refer to NOTE 6 - DEBT AND CREDIT FACILITIES for additional information regarding our debt and related interest rates.
² Includes purchase obligations and contracted amounts of approximately $400 million.
³ Includes minimum railroad transportation obligations, minimum electric power demand charges, minimum coal, diesel and natural gas obligations and minimum port facility obligations.



	Pension and Other Benefits
	2018		2017
Plan discount rates:
Iron Hourly Pension Plan	4.31	%	3.60	%
Salaried Pension Plan	4.21		3.52
Ore Mining Pension Plan	4.33		3.61
SERP	4.22		3.50
Hourly OPEB Plan	4.29		3.60
Salaried OPEB Plan	4.27		3.57
Rate of compensation increase - Salaried	3.00		3.00
Rate of compensation increase - Hourly	2.00		2.00
Pension plan expected return on plan assets	8.25		8.25
OPEB plan expected return on plan assets	7.00		7.00
Health care cost trend rate assumed for next year	6.75		7.00
Ultimate health care cost trend rate	5.00		5.00
Year that the ultimate rate is reached	2026		2026



Item 7A.			Quantitative and Qualitative Disclosures About Market Risk



	(In Millions)
						Cliffs Shareholders
	Number of Depositary Shares		Depositary Shares			Number of Common Shares Outstanding		Common Shares		Capital in Excess of Par Value of Shares			Retained Earnings			Common Shares in Treasury			Accumulated Other Comprehensive Loss			Non- Controlling Interest			Total
January 1, 2016	29.3		$	731.3		153.5		$	19.8	$	2,298.9		$	(4,748.4	)	$	(265.0	)	$	(18.0	)	$	169.8		$	(1,811.6	)
Comprehensive income (loss)
Net income	—		—			—		—		—			174.1			—			—			25.2			199.3
Other comprehensive loss	—		—			—		—		—			—			—			(3.3		)	(0.5		)	(3.8		)
Total comprehensive income																						24.7			195.5
Preferred Share conversion	(29.3	)	(731.3		)	26.5		3.5		727.8			—			—			—			—			—
Equity offering	—		—			44.4		5.5		281.9			—			—			—			—			287.4
Debt exchanges	—		—			8.2		1.0		44.2			—			—			—			—			45.2
Distributions to noncontrolling interest	—		—			—		—		—			—			—			—			(3.2		)	(3.2		)
Distributions of partnership equity	—		—			—		—		—			—			—			—			(57.5		)	(57.5		)
Stock and other incentive plans	—		—			0.5		—		(5.8		)	—			19.5			—			—			13.7
December 31, 2016	—		$	—		233.1		$	29.8	$	3,347.0		$	(4,574.3	)	$	(245.5	)	$	(21.3	)	$	133.8		$	(1,330.5	)
Comprehensive income (loss)
Net income (loss)	—		—			—		—		—			367.0			—			—			(3.9		)	363.1
Other comprehensive income (loss)	—		—			—		—		—			—			—			(4.0		)	1.1			(2.9		)
Total comprehensive income (loss)																						(2.8		)	360.2
Issuance of convertible debt	—		—			—		—		83.4			—			—			—			—			83.4
Equity offering	—		—			63.3		7.9		653.4			—			—			—			—			661.3
Acquisition of noncontrolling interest	—		—			—		—		(70.2		)	—			—			(18.9		)	(15.9		)	(105.0		)
Distribution of partnership equity	—		—			—		—		(17.3		)	—			—			5.2			(116.7		)	(128.8		)
Capital contributions by noncontrolling interest to subsidiary	—		—			—		—		—			—			—			—			1.8			1.8
Stock and other incentive plans	—		—			1.0		—		(62.4		)	—			75.9			—			—			13.5
December 31, 2017	—		$	—		297.4		$	37.7	$	3,933.9		$	(4,207.3	)	$	(169.6	)	$	(39.0	)	$	0.2		$	(444.1	)
Adoption of accounting standard	—		—			—		—		—			34.0			—			—			—			34.0
Comprehensive income (loss)
Net income	—		—			—		—		—			1,128.1			—			—			—			1,128.1
Other comprehensive loss	—		—			—		—		—			—			—			(244.9		)	—			(244.9		)
Total comprehensive income																						—			883.2
Distributions to noncontrolling interest	—		—			—		—		—			—			—			—			(0.2		)	(0.2		)
Stock and other incentive plans	—		—			0.6		—		(17.2		)	—			31.0			—			—			13.8
Common stock repurchases	—		—			(5.4	)	—		—			—			(47.5		)	—			—			(47.5		)
Common stock dividends ($0.05 per share)	—		—			—		—		—			(15.0		)	—			—			—			(15.0		)
December 31, 2018	—		$	—		292.6		$	37.7	$	3,916.7		$	(3,060.2	)	$	(186.1	)	$	(283.9	)	$	—		$	424.2


Investee						Equity Ownership Percentage
Combined Metals of Chicago, LLC						40.0%
Spartan Steel Coating, LLC						48.0%



	(In Millions)
	Deferred Revenue (Current)¹					Deferred Revenue (Long-Term)
	Year Ended December 31,					Year Ended December 31,
	2018			2017		2018			2017
Opening balance as of January 1	$	23.8		$	16.2	$	51.4		$	64.3
Closing balance as of December 31	21.0			22.4		38.5			51.4
Increase (Decrease)	$	(2.8	)	$	6.2	$	(12.9	)	$	(12.9	)

¹ The opening balance for the year ended December 31, 2018 includes a $1.4 million adjustment from the December 31, 2017 balance due to the adoption of Topic 606.



	(In Millions)
	Balance at December 31, 2017			Adjustments due to Topic 606			Balance at January 1, 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	978.3		$	—		$	978.3
Accounts receivable, net	106.7			76.6			183.3
Inventories	138.4			(51.4		)	87.0
Supplies and other inventories	88.8			—			88.8
Derivative assets	37.9			11.6			49.5
Income tax receivable, current	13.3			—			13.3
Loans to and accounts receivables from the Canadian Entities	51.6			—			51.6
Current assets of discontinued operations	118.5			—			118.5
Other current assets	11.1			—			11.1
TOTAL CURRENT ASSETS	1,544.6			36.8			1,581.4
PROPERTY, PLANT AND EQUIPMENT, NET	1,033.8			—			1,033.8
OTHER ASSETS
Deposits for property, plant and equipment	17.8			—			17.8
Income tax receivable, non-current	235.3			—			235.3
Non-current assets of discontinued operations	20.3			—			20.3
Other non-current assets	101.6			—			101.6
TOTAL OTHER ASSETS	375.0			—			375.0
TOTAL ASSETS	$	2,953.4		$	36.8		$	2,990.2

LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	99.5		$	1.4		$	100.9
Accrued employment costs	52.7			—			52.7
State and local taxes payable	30.2			—			30.2
Accrued interest	31.4			—			31.4
Contingent claims	55.6			—			55.6
Partnership distribution payable	44.2			—			44.2
Current liabilities of discontinued operations	75.0			—			75.0
Other current liabilities	63.6			1.4			65.0
TOTAL CURRENT LIABILITIES	452.2			2.8			455.0
PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES	257.7			—			257.7
ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS	167.7			—			167.7
LONG-TERM DEBT	2,304.2			—			2,304.2
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS	52.2			—			52.2
OTHER LIABILITIES	163.5			—			163.5
TOTAL LIABILITIES	3,397.5			2.8			3,400.3
EQUITY
CLIFFS SHAREHOLDERS' EQUITY (DEFICIT)	(444.3		)	34.0			(410.3		)
NONCONTROLLING INTEREST	0.2			—			0.2
TOTAL EQUITY (DEFICIT)	(444.1		)	34.0			(410.1		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	2,953.4		$	36.8		$	2,990.2



	($ in Millions)
	Year Ended December 31, 2018
	As Reported			Balances without Adoption of Topic 606			Effect of Change
REVENUES FROM PRODUCT SALES AND SERVICES
Product	$	2,172.3		$	2,108.1		$	64.2
Freight and venture partners' cost reimbursements	160.1			156.2			3.9
	2,332.4			2,264.3			68.1
COST OF GOODS SOLD AND OPERATING EXPENSES	(1,522.8		)	(1,513.2		)	(9.6		)
SALES MARGIN	809.6			751.1			58.5
OTHER OPERATING INCOME (EXPENSE)
Selling, general and administrative expenses	(116.8		)	(116.8		)	—
Miscellaneous - net	(19.6		)	(19.6		)	—
	(136.4		)	(136.4		)	—
OPERATING INCOME	673.2			614.7			58.5
OTHER INCOME (EXPENSE)
Interest expense, net	(118.9		)	(118.9		)	—
Loss on extinguishment of debt	(6.8		)	(6.8		)	—
Other non-operating income	17.2			17.2			—
	(108.5		)	(108.5		)	—
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	564.7			506.2			58.5
INCOME TAX BENEFIT	475.2			487.5			(12.3		)
INCOME FROM CONTINUING OPERATIONS	1,039.9			993.7			46.2
INCOME FROM DISCONTINUED OPERATIONS, net of tax	88.2			88.2			—
NET INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS	$	1,128.1		$	1,081.9		$	46.2
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS - BASIC
Continuing operations	$	3.50		$	3.34		$	0.16
Discontinued operations	0.30			0.30			—
	$	3.80		$	3.64		$	0.16
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS - DILUTED
Continuing operations	$	3.42		$	3.27		$	0.15
Discontinued operations	0.29			0.29			—
	$	3.71		$	3.56		$	0.15
AVERAGE NUMBER OF SHARES (IN THOUSANDS)
Basic	297,176			297,176
Diluted	304,141			304,141



	(In Millions)
	Year Ended December 31, 2017									Year Ended December 31, 2016
	As Adjusted			Without Adoption of ASU 2017-07			Effect of Change			As Adjusted			Without Adoption of ASU 2017-07			Effect of Change
Cost of goods sold and operating expenses	$	(1,398.4	)	$	(1,400.7	)	$	2.3		$	(1,274.4	)	$	(1,278.7	)	$	4.3
Selling, general and administrative expenses	$	(102.9	)	$	(95.1	)	$	(7.8	)	$	(115.8	)	$	(106.3	)	$	(9.5	)
Miscellaneous - net	$	25.5		$	27.0		$	(1.5	)	$	(33.6	)	$	(32.0	)	$	(1.6	)
Operating income	$	390.2		$	397.2		$	(7.0	)	$	130.7		$	137.5		$	(6.8	)
Other non-operating income	$	10.2		$	3.2		$	7.0		$	7.3		$	0.5		$	6.8
Net income	$	363.1		$	363.1		$	—		$	199.3		$	199.3		$	—


		(In Millions)
	Classification1	Gross Amount		Accumulated Amortization		Net Amount
As of December 31, 2020
Intangible assets:
Customer relationships	Other non-current assets	$	77	$	(3)	$	74
Technology	Other non-current assets	60		(3)		57
Trade names and trademarks	Other non-current assets	11		(1)		10
Mining permits	Other non-current assets	72		(25)		47
Total intangible assets		$	220	$	(32)	$	188
Intangible liabilities:
Above-market supply contracts	Other non-current liabilities	$	(71)	$	7	$	(64)

As of December 31, 2019
Intangible assets:
Mining permits	Other non-current assets	$	72	$	(24)	$	48
1 Amortization of intangible liabilities related to above-market supply contracts and intangible assets related to mining permits is recognized in Cost of goods sold. Amortization of all other intangible assets is recognized in Selling, general and administrative expenses.