LETTER TO OUR SHAREHOLDERS

Outlook

Business conditions in the iron and steel industry are as bad as they have been in many decades andare expected to remain difficult through at least the first half of 2001. Given the harsh environment confronting our steel company partners and customers, there is significant uncertainty regarding Cliffs' pellet sales volume in 2001 and production levels at managed mines. We expect the financial results of our core iron ore business will be severely impacted by production curtailments.

If the generally anticipated increase in the international pellet prices occurs, we would expect to realize a modest increase in price realizations in 2001 because the pricing formulas in our multi-year sales contracts allow us to realize about half of any change in the international price. Prices in our multi-year contracts increase or decrease over the contract term using a number of factors including the international pellet price, energy costs, labor costs and steel prices.

Losses from CAL are expected to be somewhat lower in 2001, but first half losses will be greater than first-half 2000. Modifications to the Trinidad plant were completed on schedule and on budget, and the plant will begin briquette production in March. CIRCAL™ briquettes were trial tested in two U.S. electric furnaces in November and December 2000 with positive results. We are receiving numerous inquiries regarding trial shipments and tests at other electric furnace operations and at some blast furnace operations as soon as additional briquettes are available. The pricing for all metallics in the United States is still very weak, but we expect some improvement as the year develops. In today's high-energy-cost environment that has forced the closure of all reducediron plants located in the United States, CAL is exceptionally well positioned with low-cost, stable gasprices in Trinidad. We continue to expect an increase in global electric-arc-furnace steel production, and consequently an improving market for our CIRCAL™ briquettes.

On January 9th, your Board of Directors reduced the quarterly dividend from 37.5 cents per share
to 10 cents per share. Based on the 10.1 million shares currently outstanding, this action will reduce the annual cash outlay for dividends by more than $11 million. While the Board regretted the action,
we believe it was appropriate during this period of extreme uncertainty in the North American steel industry.

We are also making a significant reduction in our capital spending in 2001. Excluding expenditures at CAL, we spent over $23 million on capital in 2000, which was slightly less than depreciation of $26 million. We would expect comparable spending to be only $14 million in 2001, again excluding CAL. We will also be reducing our pellet inventory by at least 1.3 million tons during the year, which will generate cash flow of $35 million.

We fully expect our cash flow in 2001 will allow us to repay by year-end the $65 million borrowed in January under our revolving credit facility. We believe our strong balance sheet, and the actions we have taken with respect to the dividend, capital spending and cost reductions will provide the liquidity we need to meet the challenges and take advantage of the opportunities that are ahead of us in 2001.

We cannot control the demand for iron ore and other ferrous metallics products, but we can minimize the impact by producing the highest quality products at the lowest possible cost. We also can
be proactive in pursuing business opportunities that are created by the adversities in our business. We intend to be relentless in pursuing the goals and objectives that will allow Cliffs to steer the uncertain road that is ahead and restore Cliffs value. We appreciate your support.

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