PELLET SALE AND PURCHASE AGREEMENT
Exhibit 10.64
PELLET SALE AND PURCHASE AGREEMENT
THIS AGREEMENT (this “Agreement”) is entered into, dated and effective as of January 31, 2002, by and among THE CLEVELAND-CLIFFS IRON COMPANY, an Ohio corporation (“CCIC”), CLIFFS MINING COMPANY, a Delaware corporation (“CMC”) NORTHSHORE MINING COMPANY, a Delaware corporation (“Northshore”; CCIC, CMC and Northshore, collectively, “Cliffs”) and ALGOMA STEEL INC., an Ontario corporation (“Algoma”). Capitalized terms used herein and not defined in context have the respective meanings given to them or cross-referenced in Section 1.
RECITALS
WHEREAS, concurrently with the execution and delivery of this Agreement, Algoma, Cannelton Iron Ore Company (“Cannelton”), CCIC and Cliffs TIOP, Inc. (“TIOP”) are entering into that Purchase and Sale Agreement (“PSA”) pursuant to which TIOP is to acquire Cannelton’s 45% membership interest in Xxxxxx Mining Company L.C. (“Xxxxxx”) (the date such acquisition occurs, the “Closing Date”); and
WHEREAS, Algoma desires to purchase from Cliffs, and Cliffs desires to sell to Algoma, a tonnage of Cliffs Pellets equal to Algoma’s Annual Requirements from and after the Closing Date;
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, their mutual covenants and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS.
(a) “Business Day” means any day on which banks in Xxxxxxxxx, Xxxx xx Xxxxxxx, Xxxxxxx are not permitted or required by law to be closed for business.
(b) “Composite Index” means, for any year, the sum of:
| (i) | 0.40, multiplied by a fraction, the numerator of which is the United States Producer Price Index—All Commodities-Series Id: WPU00000000- Annual Average for such year, and the denominator of which is the United States Producer Price Index—All Commodities-Series Id: WPU00000000- Annual Average for 2001; plus |
| (ii) | 0.20, multiplied by a fraction, the numerator of which is the United States Producer Price Index - Metals and Metal Products-Sheets, Cold Rolled Carbon - Series Id: WPU10170711-Annual Average for such year, and the |
| denominator of which is the United States Producer Price Index—Metals and Metal Products-Sheets, Cold Rolled Carbon—Series Id: WPU10170711—Annual Average for 2001; plus |
| (iii) | 0.40, multiplied by a fraction, the numerator of which is the Eastern Canadian Pellet Price for such year, and the denominator of which is the Eastern Canadian Pellet Price for 2001. (Eastern Canadian Pellet Price for 2001 is $0.5236 per iron unit.) |
For each year beginning in 2004, the Composite Index, (w) shall be initially determined based on Cliffs’ good faith reasonable estimate (which shall take into account all data that is final for the year in determination) given to Algoma not later than December 15 of the prior year, (x) shall be updated based on Cliffs’ good faith estimate (which shall take into account all data that is final for the year in determination) given to Algoma not later than June 15 of such year, (y) shall be updated again based on Cliffs’ good faith estimate (which shall take into account all data that is final for the year in determination) given to Algoma not later than January 15 of the following year, and (z) shall be finally determined and certified by Cliffs on June 15 of the following year. Should Algoma disagree with Cliffs’ estimate or final determination, Algoma may require that such estimate or final determination be determined by arbitration pursuant to Section 15.
(c) “Eastern Canadian Pellet Price” means, for any year, the arithmetical average of the per iron unit pellet prices, as published in Xxxxxxxxx (or, if not published therein, as published in Tex Report) of Quebec Cartier Mining (f.o.b. Port Cartier, Quebec) and Iron Ore Company of Canada (f.o.b. Sept-Iles, Quebec), for such year.
(d) “Expected Iron Content” means at 1.5% moisture (i) for Xxxxxx Mag Flux Pellets, 60.38%, (ii) for Xxxxxx Hem Flux Pellets, 60.58%, (iii) for Empire Royal Pellets, 60.09%, and (iv) for any kind of Other Cliffs Pellets (x) in the first year they are provided by Cliffs, the percentage specified by Cliffs in good faith, and (y) in all other years, the actual iron percentage for such kind of Other Cliffs Pellets for the prior year.
(e) The words “iron unit”, as used herein, shall mean one percent (1%) of contained iron, and all prices per iron unit shall be expressed on an iron unit per ton basis.
(f) The word “pellets”, as used herein, shall mean iron-bearing products obtained by the pelletizing of iron ore or iron ore concentrates, suitable for making iron in blast furnaces.
(g) The word “person”, as used herein, means any natural person, or any corporation, limited liability company, limited or general partnership, trust, association or other legal entity.
(h) The word “ton”, as used herein, shall mean a gross ton of 2,240 pounds avoirdupois natural weight.
(i) “World Pellet Price” means, at any time, a price per iron unit equal to the sum of:
| (i) | 0.50, multiplied by the Eastern Canadian Pellet Price; plus |
| (ii) | 0.50, multiplied by the average published price per iron unit for pellets of Companhia Vale Rio Doce, S.A. (f.o.b. Tubaro). |
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Schedule 1(i) illustrates calculation of the World Pellet Price for 2001, which is $0.5163 per iron unit.
(j) The word “year”, as used herein, shall mean a calendar year commencing on January 1 and ending December 31.
(k) If any of the information required to calculate the Composite Index, the Eastern Canadian Pellet Price or the World Pellet Price ceases to be published (either because a particular product ceases to be available, or because information is no longer publicly available), the parties will negotiate in good faith to revise the definition of such term to one based on then-published information, and any dispute will be resolved pursuant to Section 15.
(l) The following terms are defined on the pages cross-referenced below:
| Adjusted Expected Price per Iron Unit |
9 | |||
| Agreement |
1 | |||
| Algoma |
1 | |||
| Annual Requirements |
4 | |||
| Base Price per Iron Unit |
8 | |||
| Basic Cliffs Pellets |
4 | |||
| Benchmark Delivered Cost |
15 | |||
| Business Day |
1 | |||
| Cannelton |
1 | |||
| CCIC |
1 | |||
| Cliffs |
1 | |||
| Cliffs Pellets |
5 | |||
| Closing Date |
1 | |||
| CMC |
1 | |||
| Commission |
18 | |||
| Composite Index |
1 | |||
| Confidential Information |
18 | |||
| Eastern Canadian Pellet Price |
2 | |||
| Empire Plant |
4 | |||
| Empire Royal Pellets |
4 | |||
| Expected Iron Content |
2 | |||
| Hibbing Pellets |
5 | |||
| Hibbing Plant |
5 | |||
| iron unit |
2 | |||
| Northshore |
1 | |||
| Northshore Pellets |
5 | |||
| Northshore Plant |
5 | |||
| Other Cliffs Pellets |
5 | |||
| pellets |
2 |
3
| person |
2 | |||
| PSA |
1 | |||
| Sault Ste. Xxxxx Plant |
4 | |||
| Source Requirements |
6 | |||
| Xxxxxx |
1 | |||
| Xxxxxx Hem Flux Pellets |
4 | |||
| Xxxxxx Mag Flux Pellets |
4 | |||
| Xxxxxx Pellets |
4 | |||
| Xxxxxx Plant |
4 | |||
| TIOP |
1 | |||
| ton |
2 | |||
| WCS |
12 | |||
| World Pellet Price |
2 | |||
| year |
3 |
2. SALE AND PURCHASE/VOLUME.
(a) Subject to the other provisions of this Section 2, for each of the 15 years 2002 through 2016 inclusive, Cliffs shall sell and deliver to Algoma, and Algoma shall purchase and receive from Cliffs and pay Cliffs for, a tonnage of Cliffs Pellets equal to 100% of Algoma’s total pellet tonnage requirements, adjusted for inventory positions, (“Annual Requirements”) for such year required for use at its facility at Sault Ste. Xxxxx, Ontario (the “Sault Ste. Xxxxx Plant”); provided, however, that in no year shall Algoma purchase and receive from Cliffs, and pay Cliffs for, less than 2,500,000 tons of Cliffs Pellets.
(b) If Algoma’s Annual Requirements, as initially fixed pursuant to Section 5(a) or as adjusted pursuant to Section 5(b), in any year exceeds 4,000,000 tons, Cliffs shall have the right, but not the obligation, to sell and deliver any pellets in excess of 4,000,000 tons. Such right may be exercised as provided in Section 5.
(c) Because the Closing Date will occur after January 1, 2002, (i) Algoma shall not be required to purchase any Cliffs Pellets hereunder unless and until the Closing Date occurs, (ii) Cliffs shall not be required to sell any Cliffs Pellets hereunder unless and until the Closing Date occurs, and (iii) in the year 2002 Cliffs shall sell and deliver to Algoma, and Algoma shall purchase and receive from Cliffs and pay Cliffs for, a tonnage of pellets equal to Algoma’s Annual Requirements, less Algoma’s share of pellets delivered pursuant to the membership interest of Cannelton in Xxxxxx between January 1, 2002 and the Closing Date.
3. SOURCING.
(a) Cliffs shall initially supply Algoma with pellets produced at the Xxxxxx iron ore pellet plant (“Xxxxxx Mag Flux Pellets” and “Xxxxxx Hem Flux Pellets”, as the case may be; collectively. “Xxxxxx Pellets”) in National Mine, Michigan (the “Xxxxxx Plant”) and/or pellets produced at the Empire Iron Mining Partnership iron ore pellet plant (“Empire Royal Pellets;” collectively with the Xxxxxx Pellets, “Basic Cliffs Pellets”) located in Xxxxxx, Michigan (the “Empire Plant”).
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(b) Cliffs may change pellet sourcing from Basic Cliffs Pellets to pellets from other sources (“Other Cliffs Pellets”), including, without limitation, those produced at the Hibbing Taconite Company Joint Venture iron ore pellet plant (“Hibbing Pellets”) in Hibbing, Minnesota (the “Hibbing Plant”) and those produced at the Northshore iron ore pellet plant (“Northshore Pellets”) in Silver Bay, Minnesota (the “Northshore Plant;” Other Cliffs Pellets together with Basic Cliffs Pellets, are defined as “Cliffs Pellets”). If Cliffs desires to provide Algoma with Other Cliffs Pellets, Cliffs shall give Algoma not less than three months prior notice, and then may make such change provided that (i) Algoma’s cost of handling pellets, including the movement of pellets to the stock house, is not increased, or, if Algoma’s costs of handling are increased, Cliffs shall adjust the price of Other Cliffs Pellets so that the additional handling costs are mitigated so as to fully offset the increased handling costs, and (ii) Algoma has had a reasonable opportunity to purge its stockpile of conflicting grades of iron ore.
4. QUALITY.
(a) As measured pursuant to Section 4(c), if solely Basic Cliffs Pellets are supplied to Algoma hereunder, they will conform in all material respects with the AIM pellet specifications and requirements as set forth in Exhibit A-1. As measured pursuant to Section 4(c), if any Other Cliffs Pellets are supplied to Algoma hereunder, then all Cliffs Pellets supplied to Algoma hereunder, will conform in all material respects with the AIM pellet specifications and requirements as set forth in Exhibit A-2.
(b) As measured pursuant to Section 4(c), if solely Basic Cliffs Pellets are supplied hereunder they will not fall below the LSL, or exceed the USL, in either case as specified on Exhibit A-l. As measured pursuant to Section 4(c), if any Other Cliffs Pellets are supplied hereunder, then all Cliffs Pellets supplied hereunder shall not fall below the LSL, or exceed the USL, in either case as specified on Exhibit A-2.
(c) In each case, consistency with the AIM specifications, LSL and USL will be determined on a quarterly basis (1/1—3/31; 4/1—6/30; 7/1—9/30; 10/1—12/31) based on the AIM specifications, LSL and USL of the kinds of Cliffs Pellets shipped for such quarter, weighted according to the percentage of each kind of Cliffs Pellets to be consumed in such quarter pursuant to Algoma’s blast furnace plan.
(d) Cliffs will report the characteristics of Cliffs Pellets to Algoma on the following basis:
| (i) | On the volume of Cliffs Pellets in a vessel or train load for direct rail shipments, as soon as practicably available and, in particular, for direct rail shipments, within 24 hours of shipment from the mine: |
Chemical: Fe, SiO2, Al2O3 , CaO, MgO, Mn, P, CaO/SiO2; and
Physical: % + 1/2”, %—1/2” x + 3/8”, %—1/4%, %—28 mesh.
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Moisture
| (ii) | On the volume of Cliffs Pellets actually shipped to Algoma in a calendar month: Compression (LBS). |
| (iii) | On the volume of Cliffs Pellets actually shipped to Algoma in a calendar quarter (1/1—3/31; 4/1—6/30; 7/1—9/30; 10/1—12/31): |
Xxxxxxxx: X, XxX0, Xx0X, X0X;
Metallurgical: Reducibility (R40), LTB (% + 1/4”), Swelling, Softening Temperature.
(e) For each source of Cliffs Pellets, the parties shall agree upon a defined set of characteristics or specifications for Cliffs Pellets from that source (“Source Requirements”). Cliffs shall ensure that the characteristics of each train load or vessel conforms to its applicable Source Requirements. Attached as Exhibit A-3 are the Source Requirements for the types of Cliffs Pellets set out in Section 3.
(f) If specifications for the chemical composition of steel change so that it is a competitive requirement for Algoma that Algoma lower the phosphorous content of the Cliffs Pellets, then at any time after December 31, 2006, and with not less than one year’s prior notice to Cliffs, specifying the change to be made, Algoma may propose a change to the phosphorous specification for the Cliffs Pellets set forth in Exhibit A-1 and Exhibit A-2; provided, however, that Algoma shall not propose any change to the pellet specification that would make a phosphorous change to Algoma’s pellet chemistry that is disproportionate to the phosphorous change in the chemistry of Algoma’s other blast furnace and steel making burden materials that have a significant effect on phosphorous levels. If any allowable change in the phosphorous specification as provided in this Section 4(f) results in financially disadvantaging Cliffs, then Cliffs and Algoma shall, for up to 60 days from the date of Algoma’s delivery to Cliffs of the notice proposing a change in the phosphorous specification, use all reasonable efforts to reach agreement on both a new phosphorous specification and new prices in a manner that maintains Algoma’s relative position in respect of its delivered pellet cost per iron unit. If an agreement is not reached within 60 days, then Cliffs may (i) agree to continue to supply Algoma the Cliffs Pellets at the current contract price with the new phosphorous specification, or (ii) terminate this agreement 300 days after the expiry of the 60-day period. In the event Cliffs notifies Algoma of Cliffs’ option to terminate this agreement, Cliffs shall retain the right during the 300 day period to supply Algoma’s future Annual Requirements at the revised phosphorous specification at a price that would be 2% below (on a delivered cost basis) the lowest cost competitive offer which Algoma receives during such 300 day period (provided that following receipt of Algoma’s notice to Cliffs of the competitive offer, Cliffs shall notify Algoma within 45 days as to Cliffs’ option to exercise its right to supply Algoma’s future Annual Requirements); and if Cliffs exercises such right, then this Agreement shall not terminate. In the event that new prices are determined as a result of changing the pellet phosphorous specifications, then the Base Prices per Iron Unit shall be adjusted so that, after taking into account Section 6(b), Section 6 can be used to set prices in future years. Any dispute arising out of this Section 4(f) shall be resolved by arbitration as provided in Section 15.
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5. NOTIFICATION AND NOMINATION.
(a) Annually on or before November 1, Algoma shall notify Cliffs of Algoma’s good faith estimate of its preliminary Annual Requirements for the upcoming year. Schedule 5(a) sets forth such information for the year 2002.
(b) Algoma shall have the right to modify, based upon Algoma’s good faith estimate, its Annual Requirements for any year:
| (i) | by notice to Cliffs sent not later than January 10 of such year, Algoma may decrease or, subject to Section 5(c), increase its Annual Requirements by up to 10% of the original Annual Requirements for such year; and/or |
| (ii) | by notice to Cliffs sent not later than July 10 of such year, Algoma may decrease or, subject to Section 5(c), increase its Annual Requirements (as previously adjusted pursuant to Section 5(b)(i), if applicable) by up to 5%; and/or |
| (iii) | in unforeseen circumstances where Algoma’s need for pellets unexpectedly increases, Algoma may, on 30 days notice to Cliffs, amend its Annual Requirements to increase them beyond the parameters provided for in (i) and (ii) above. |
(c) If (i) Algoma’s Annual Requirements (as forecast pursuant to Section 5(a) or as amended pursuant to Section 5(b)) is for an amount in excess of 4,000,000 tons or (ii) Algoma amends its Annual Requirements pursuant to Section 5(b)(ii) and (iii) to increase such requirement above the tonnage previously specified for such year, Cliffs shall within 30 days of receipt of the initial specification or amendment, as the case may be, notify Algoma whether Cliffs will commit to provide all, a portion or no portion of such excess or increased tonnage. If Cliffs commits to sell and deliver all or any portion of such excess or increased tonnage, Cliffs shall be obligated to supply such additional tonnage as herein set forth. Cliffs shall have no obligation to supply any portion of such excess or additional tonnage that it does not commit to supply. If Cliffs does not commit to provide all of such excess or increased tonnage, then Algoma may purchase from another party any such tonnage that Cliffs has not committed to provide.
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6. PRICE AND ADJUSTMENTS.
(a) In each year the price paid for the Cliffs Pellets purchased and sold hereunder shall be determined as follows:
| (i) | First, taking each kind of Basic Cliffs Pellets separately, the Base Price per Iron Unit shall be determined, based on an annual purchase of between 3,475,000 and 3,525,000 tons, as provided in Section 6(b). |
| (ii) | Second, taking each kind of Basic Cliffs Pellets separately, the Base Price per Iron Unit shall be adjusted based on the amount of Cliffs Pellets purchased and sold, either up or down, as provided in Section 6(c), to determine the Adjusted Expected Price per Iron Unit. |
| (iii) | Third, the Adjusted Expected Price per Iron Unit for any kind(s) of Other Cliffs Pellets shall be determined as provided in Section 6(d). |
| (b) | (i) Basic Cliffs Pellets shall have the following “Base Price per Iron Unit” for the year 2002: |
| Pellet |
f.o.b. |
Base Price Per Iron Unit |
||||
| Xxxxxx Mag Flux |
Railcar at Xxxxxxxxx | $ | 0.5755 | |||
| Xxxxxx Mag Flux |
Vessel at Port Marquette | $ | 0.5846 | |||
| Xxxxxx Hem Flux |
Railcar at Xxxxxxxxx | $ | 0.5736 | |||
| Xxxxxx Hem Flux |
Vessel at Port Marquette | $ | 0.5827 | |||
| Empire Royal |
Railcar at Empire | $ | 0.5783 | |||
| Empire Royal |
Vessel at Port Marquette | $ | 0.5875 | |||
| (ii) | Basic Cliffs Pellets shall have the following Base Price per Iron Unit for the year 2003: |
| Pellet |
f.o.b. |
Base Price Per Iron Unit |
||||
| Xxxxxx Mag Flux |
Railcar at Xxxxxxxxx | $ | 0.5838 | |||
| Xxxxxx Mag Flux |
Vessel at Port Marquette | $ | 0.5929 | |||
| Xxxxxx Hem Flux |
Railcar at Xxxxxxxxx | $ | 0.5819 | |||
| Xxxxxx Hem Flux |
Vessel at Port Marquette | $ | 0.5910 | |||
| Empire Royal |
Railcar at Empire | $ | 0.5866 | |||
| Empire Royal |
Vessel at Port Marquette | $ | 0.5879 | |||
| (iii) | The Base Price per Iron Unit for each of the Basic Cliffs Pellets, f.o.b railcar or vessel, shall be determined as follows for the years 2004 through 2016, inclusive: |
| (A) | First, the 2002 Base Price per Iron Unit for such Basic Cliffs Pellets shall be multiplied by the estimated Composite Index for the year in determination. |
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| (B) | Second, if the Base Price per Iron Unit for the year in determination (calculated as provided in Section 6(b)(iii)(A)) is greater than 106% of the Base Price per Iron Unit for the prior year, the Base Price per Iron Unit for the year in determination shall be reduced to 106% of the Base Price per Iron Unit for the prior year. If the Base Price per Iron Unit for the year in determination (calculated as provided in Section 6(b)(iii)(A)) is less than 94% of the Base Price per Iron Unit for the prior year, the Base Price per Iron Unit for the year in determination shall be increased to 94% of the Base Price per Iron Unit for the prior year. |
| (C) | Third, if the Base Price per Iron Unit for the year in determination (as adjusted pursuant to Section 6(b)(iii)(B)) is greater than 120.2% of the World Pellet Price for the year in determination, the Base Price per Iron Unit shall be reduced to 120.2% of the World Pellet Price. If the Base Price per Iron Unit for the year in determination (as adjusted pursuant to Section 6(b)(iii)(B)) is less than 106.2% of the World Pellet Price for the year in determination, the Base Price per Iron Unit shall be increased to 106.2% of the World Pellet Price. (If the World Pellet Price is replaced in the future by an alternative generally accepted published formulation of a benchmark price per iron unit, the parties will negotiate in good faith or the applicable of such formulation to the pricing limits contained herein, and any dispute will be resolved pursuant to Section 15.) |
(c) For each year, the Base Price per Iron Unit (as defined in Section 6(b)) for each kind of Basic Cliffs Pellets shall be increased by $0.0007 per iron unit for each 25,000 tons by which the Annual Requirement is less than 3,500,000 tons or decreased by $0.0007 for each 25,000 tons by which the Annual Requirement exceeds 3,500,000 tons, in order to determine the price per iron unit to be paid for such year (the “Adjusted Expected Price per Iron Unit”) for each kind of Cliffs Pellet.
(d) If in any year Cliffs supplies any Other Cliffs Pellets to Algoma, the Adjusted Expected Price per Iron Unit for such kind(s) of Other Cliffs Pellets shall be that price per iron unit that, after taking into account the difference, if any, in transportation costs, results in the same average cost per iron unit delivered to the Sault Ste. Xxxxx Plant as the average cost per iron unit delivered to the Sault Ste. Xxxxx Plant would be if the entire Annual Requirements were provided from the Xxxxxx Plant.
(e) Attached as Exhibit B-2 is an example of the application of the provisions of this Section 6.
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7. PAYMENTS AND ADJUSTMENTS.
(a) Subject to adjustment as provided in Sections 7(b) and 7(c):
| (i) | During the six years 2002 through 2007 inclusive, Algoma shall pay Cliffs on the first and the 15th day of each month (or if such day is not a Business Day, the Business Day immediately thereafter) an amount equal to 1/24 the total cost of all of the tons of the various kinds of Cliffs Pellets to be supplied to meet Algoma’s Annual Requirements for such year, to be determined in each case by multiplying such Annual Requirements by the Expected Iron Content and the Adjusted Expected Price per Iron Unit. This payment method will result in a significant prepayment by Algoma early in each year. For any year from 2003 through 2007 inclusive Algoma may, on 60 days’ notice prior to the commencement of such year, require that Cliffs provide security in respect of such prepayment. Such security may take the form of an interest in or charge on pellets, a trust arrangement or any other form of security mutually agreeable to Cliffs and Algoma. In the event that Cliffs does not provide security as set out herein in a particular year, then the method of payment for such year shall be as set out in Section 7(a)(ii). |
| (ii) | For the nine years 2008 through 2016 inclusive, Algoma shall pay Cliffs, on the second Monday of January of each year and every two weeks thereafter throughout such year, an amount calculated as follows: |
| (A) | The number of tons of each kind of pellets delivered by Cliffs to Algoma during the week ended at the midnight immediately preceding the date of such payment, multiplied in each case by the applicable Expected Iron Content and Adjusted Expected Price per Iron Unit; plus |
| (B) | The number of tons of each kind of pellets estimated by Algoma to be delivered by Cliffs to Algoma during the week beginning at midnight immediately preceding the date of such payment, multiplied in each case by the applicable Expected Iron Content and Adjusted Expected Price per Iron Unit; plus or minus, as the case may be; |
| (C) | The variance, if any, between the number of tons of each kind of pellets estimated to be delivered during the week beginning at midnight immediately prior to the date of the preceding payment, and the number of tons actually delivered during such week, multiplied in each case by the applicable Expected Iron Content and Adjusted Expected Price per Iron Unit. |
In case of any payment scheduled to be made on a Monday that is not a Business Day, such payment shall be made on the next occurring Business Day, but all calculations shall be made as if the payment were made on the Monday.
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(b) The payments provided for in Section 7(a) shall be adjusted as follows:
| (i) | Since the Closing Date will be after January 1, 2002, the 2002 payments shall be adjusted so that (x) a partial payment is made on the day following the Closing Date for the period between the Closing Date and the next occurring first or 15th day of the month, and (y) equal regular payments begin on the next occurring first or 15th day of the month. |
| (ii) | In the event of any adjustment to the Annual Requirements pursuant to Section 5(b), any payments to be made pursuant to Section 7(a)(i) after such adjustment shall be increased or decreased so that such payments will be (x) equal in amount, and (y) the minimum amount such that at no time during the year, based on then-existing month-by-month forecasts, will Algoma have taken delivery of a greater amount of pellets than it has paid for. |
| (iii) | Beginning in 2004, not later than June 15 of each year, Cliffs shall prepare and certify to Algoma (x) Cliffs’ revised good faith estimate of the Composite Index for such year, (y) Cliffs’ recalculation of the Adjusted Expected Price per Iron Unit for each kind of Cliffs Pellets, based thereon, and (z) the amount of the difference between the amount previously paid for Cliffs Pellets during the year and the amount that would have been paid had such adjusted Composite Index been in effect from the beginning of the year. All subsequent payments to be made under Section 7(a) shall be adjusted to reflect the revised Adjusted Expected Price per Iron Unit, and the next such payment shall be adjusted by the amount specified in clause (z) above. |
(c) In addition to the adjustments to be made pursuant to Section 7(b), the following lump sum adjustments shall be made:
| (i) | Not later than January 15 of each year, Cliffs shall prepare and certify to Algoma: (w) Cliffs’ revised good faith estimate of the Composite Index for the prior year (beginning in 2004), (x) Cliffs’ calculation of the actual tonnage of each kind of Cliffs Pellets and any variance from tonnage forecast to be delivered to satisfy. Algoma’s Annual Requirements, in each case for the prior year, (y) the actual iron units in each kind of Cliffs Pellets, and any variance from the Expected Iron Content expected therefore, in each case for the prior year, and (z) the amount due from Cliffs to Algoma, or vice versa, to adjust to correct for all of the variances in clauses (w) through (y), for the prior year. The payment due pursuant to Section 7(a) next occurring after January 15 shall be adjusted by the amount specified in clause (z). |
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| (ii) | Beginning in 2005, in addition to the adjustment provided for in Section 7(b)(iii), not later than June 15 of each year, Cliffs shall calculate and certify to Algoma (x) the final Composite Index for the prior year, (y) Cliffs’ calculation of the adjustment to the Adjusted Expected Price per Iron Unit for each kind of Cliffs Pellets, and (z) the total amount required to be paid by Cliffs to Algoma, or vice versa, to correct the total amount paid by Algoma to Cliffs for the prior year (as previously adjusted) for the actual Adjusted Expected Price per Iron Unit derived for the actual Composite Index. The payment due pursuant to Section 7(a) next occurring after June 15 shall be adjusted by the amount specified in clause (z). |
(d) All payments shall be made by wire transfer of immediately available funds according to such instructions as Cliffs may from time to time provide, and shall be made in U.S. dollars.
(e) In the event Algoma shall fail to make payment when due of any amounts, Cliffs, in addition to all other remedies available to Cliffs in law or in equity, shall have the right, but not the obligation, to withhold further performance by Cliffs under this Agreement until all claims Cliffs may have against Algoma under this Agreement are fully satisfied.
(f) Exhibit C illustrates the operation of the provisions of this Section 7.
8. SHIPMENTS AND DELIVERY.
(a) Cliffs and Algoma will agree on a mutually acceptable delivery schedule for each year prior to November 1 of the preceding year. Such schedule must be established to match both Algoma’s furnace requirements and Cliffs’ pellet availability. Cliffs and Algoma will balance the delivery schedule by pellet source and type so that monthly shipments will be relatively equal, considering winter shipping restrictions and production schedules. Cliffs and Algoma recognize that changes in schedule will occur as provided in Section 5, and will use commercially reasonable efforts to accommodate such changes.
(b) During 2002, Cliffs will use commercially reasonable efforts (which shall not require incurring additional operating or capital costs) to load an average of 70 railcars per day for direct delivery by the Wisconsin Central System, or its successor (“WCS”), to the Sault Ste. Xxxxx Plant. The number of railcars shipped daily from the various locations shall be agreed upon by Cliffs and Algoma, but the total shall not exceed 70. Thereafter, Cliffs will use commercially reasonable efforts (which shall not require incurring additional operating or capital costs) to increase the tonnage of shipments to the Sault Ste. Xxxxx Plant by direct rail with the objective of being able to (i) ship a minimum of 90% of Algoma’s annual pellet requirements by direct rail, and (ii) cause a minimum of 90% of the railcars loaded out of the Xxxxxx Plant or the Empire Plant not to exceed their capacities, and not to have a gross weight over rail in excess of 263,000 pounds. Cliffs and Algoma acknowledge that neither of them owns any railcars and as such they must obtain the cooperation of WCS. To this end, Algoma will pursue with WCS a more appropriately sized rail car fleet (i.e., smaller rail cars) to be used for shipments by WCS. Algoma will cause WCS to adjust the weight of any railcar that is loaded in excess of its designed carrying capacity.
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(c) Deliveries shall be made as follows:
| (i) | Xxxxxx Mag Flux Pellets and Xxxxxx Hem Flux Pellets shall be delivered by Cliffs to Algoma f.o.b. loaded vessel at Port Marquette, Michigan or f.o.b. loaded railcar at Xxxxxxxxx, Michigan, as the case may be, and in either case title and all risk of loss, damage or destruction shall pass to Algoma at the time of discharge of the pellets from the loading device to the vessel or at the time of transfer of rail cars to WCS. |
| (ii) | Empire Royal Pellets shall be delivered by Cliffs to Algoma f.o.b. loaded vessel at Port Marquette, Michigan, or loaded rail car at the Empire Plant, as the case may be, and in either case title and all risk of loss, damage or destruction shall pass to Algoma at the time of discharge of the pellets from the loading device to the vessel or railcar. |
| (iii) | Other Cliffs Pellets shall be delivered by Cliffs to Algoma f.o.b. loaded vessel at Allouez, Wisconsin or Silver Bay, Minnesota or loaded railcar at the Hibbing Plant, or other mutually agreed location (by vessel or rail), as the case may be, and in any case title and all risk of loss, damage or destruction shall pass to Algoma at the time of discharge of the pellets from the loading device to the vessel or railcar. |
9. WEIGHTS.
Railcar xxxx of lading weight determined by railroad scale weights, bin scale weights or belt scale weights in accordance with the procedures in effect at each of the plants, and vessel xxxx of lading weight determined by railroad scale weights or belt scale weights in accordance with the procedures in effect from time to time at each of the loading ports, shall be accepted by the parties as finally determining the amount of Cliffs Pellets delivered to Algoma pursuant to this Agreement. Cliffs shall ensure that all weighing devices are regularly tested, verified and maintained.
10. EMPLOYMENT OF VESSELS AND RAILCARS.
Algoma assumes the obligation for arranging and providing appropriate vessels and railcars for the transportation of the Cliffs Pellets delivered by Cliffs to Algoma hereunder. Algoma shall arrange and provide (a) for all rail shipments, railcars capable of loading at the Xxxxxx Plant, Empire Plant, Hibbing Plant or Northshore Plant, as the case may be, and (b) for all vessel shipments, ore carrier or bulk carrier type vessels suitable in all respects to enter, berth at and leave the loading ports and suitable for the loading and mooring facilities at the loading ports. If Cliffs supplies any Other Cliffs Pellets hereunder, Algoma shall (i) use all commercially reasonable efforts to obtain the best possible price and other terms for transportation of such Other Cliffs Pellets, and (ii) certify the use of such efforts, and the prices obtained for such transportation, to Cliffs at the end of each year.
13
11. SAMPLING PROCEDURES.
All pellet sampling procedures and analytical tests conducted on Cliffs Pellets sold to Algoma to demonstrate compliance with typical and average analysis characteristics specified in Section 4 shall be performed by Cliffs at the loading point on each pellet vessel shipment or train shipment, as the case may be. Test methods to be used shall be the appropriate ASTM or ISO standard methods published at the time of testing or the customary procedures and practices previously furnished by Cliffs to Algoma, or any other procedures and practices that may be mutually agreed to by Cliffs and Algoma. The final values of all characteristics are those determined by Cliffs at the loading point. Algoma may, at any time and from time to time through one or more authorized representatives, be present during production, loading, or to observe sampling and analysis of pellets being processed for shipment to Algoma. At Algoma’s option and at its own expense, Algoma may from time to time require independent sampling.
12. WARRANTIES.
(a) EXCEPT AS SET FORTH IN SECTION 4(b), CLIFFS MAKES NO, AND HEREBY DISCLAIMS AND EXCLUDES ANY, EXPRESS OR IMPLIED WARRANTIES INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY, OF FITNESS, OR OF FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO ALL CLIFFS PELLETS; PROVIDED, HOWEVER, THAT NOTHING IN THIS SECTION 12(a) SHALL LIMIT CLIFFS’ OBLIGATION TO USE ITS BEST EFFORTS TO COMPLY WITH SECTION 4(a).
(b) All notices of material variance of any Cliffs Pellets from the LSL and USL described on Exhibit X-0, Xxxxxxx X-0, Exhibit A-3.1, Exhibit A-3.2, Exhibit A-3.3, Exhibit A- 3.4, Exhibit A-3.5 or Exhibit A-3.6, as the case may be, over the average volumes specified in Section 4(c) shall be delivered to Cliffs prior to such Cliffs Pellets being charged in the Sault Ste. Xxxxx Plant’s blast furnace, or any claim arising from any such material variance shall be waived by Algoma. Each party shall afford the other party prompt and reasonable opportunity to inspect the Cliffs Pellets as to which any notice is given as above stated. The Cliffs Pellets shall not be returned to Cliffs without prior consent of Cliffs, which consent, in the case of direct rail shipments, shall not be unreasonably withheld. IN NO EVENT SHALL CLIFFS BE LIABLE FOR ANY DAMAGE TO ALGOMA’S PROPERTY OR LOST PROFITS, INJURY TO GOOD WILL OR ANY OTHER SPECIAL OR CONSEQUENTIAL DAMAGES UNLESS IT IS PROVED THAT CLIFFS HAS ENGAGED IN WILLFUL MISCONDUCT.
13. PRICE REOPENER.
If at the end of 2007, 2010 or 2013, (a) Algoma believes that its delivered pellet cost per iron unit under this Agreement is higher than either (i) the delivered cost per iron unit for comparable grades of pellets, on average, paid by other blast furnace operators in the Great Lakes region served by ports located on Lake Erie, Lake Huron, Lake Michigan or Lake Superior, or (ii) the delivered cost per iron unit for comparable grades of pellets, on average, sourced from iron ore deposits in the United States, paid by other Canadian blast furnace operators served by ports located on Lake Ontario (the lesser of the costs described in clauses (i)
14
and (ii), the “Benchmark Delivered Cost”) or (b) Cliffs believes that Algoma’s delivered pellet cost per ton is 6% less than the Benchmark Delivered Cost, then Algoma or Cliffs, as the case may be, may, by notice to the other within 30 days after the end of 2007, 2010 or 2013, as the case may be, request a price renegotiation. If Cliffs and Algoma are unable to reach agreement on a mutually agreeable price within 60 days of such notice, either of them may initiate arbitration, as provided in Section 15, for the determination of a price per iron unit for the various kinds of Cliffs Pellets (excluding transportation costs) that results in (x) a delivered cost per iron unit to Algoma (taking into account transportation costs) that is equal to the Benchmark Delivered Cost if Algoma has initiated this price reopener provision, or (y) in a delivered cost per iron unit to Algoma (taking into account transportation costs) that is 2% below the Benchmark Delivered Cost if Cliffs has initiated this price reopener provision. In addition, the arbitration shall adjust the Base Prices per Iron Unit for 2002 in such a manner that, taking into account Section 6(b), Section 6 hereof can be used to establish prices for future years. The prices determined by the arbitrators shall be effective retroactively to the beginning of the year in which Algoma or Cliffs requested a price renegotitation. Cliffs shall pay Algoma, or Algoma shall pay Cliffs, within 10 days of the arbitrators decision, an amount equal to the adjustment calculated by the arbitrators for the prior period of that year.
14. COVENANTS.
(a) During the term of this Agreement, Algoma shall continue to operate its No. 7 blast furnace located at its Sault Ste. Xxxxx Plant in accordance with prevailing industry practice.
(b) Algoma agrees that it will limit its purchase of steel slabs to 200,000 tons per year during the term of this Agreement provided that no restriction on slab purchases by Algoma will apply to: (i) any year where Algoma’s Annual Requirements are 3,500,000 tons or greater; (ii) slab purchases made in connection with either a blast furnace reline or other equipment related issues; or (iii) any period after a decision by Algoma to discontinue the operation of Algoma’s slab caster.
(c) During the term of this Agreement, Algoma shall not: (i) sell, transfer or otherwise permit any other Person to use any pellets purchased hereunder, other than as security for a bona fide extension of credit in the ordinary course of business; (ii) use any pellets purchased hereunder in any facility other than the Sault Ste. Xxxxx Plant; or (iii) sell, lease or otherwise transfer title or the right to use the Sault Ste. Xxxxx Plant (including without limitation its blast furnaces), or any material portion thereof, to any Person, or merge, consolidate or reorganize with any Person unless that Person assumes in writing this Agreement and all of Algoma’s obligations hereunder.
15. ARBITRATION.
Any matter related hereto that is required to be resolved by arbitration or pursuant to Section 15 hereof shall be resolved in Cleveland, Ohio by application of the rules of The American Arbitration Association applicable to commercial disputes, modified as follows:
15
| (a) | there shall be three arbitrators, all of whom shall have expertise relevant to the matter to be determined, and none of whom shall be an employee, officer, director or consultant of, or of a direct competitor of, Algoma or Cliffs; |
| (b) | in connection with any arbitration arising out of Section 13, each of Cliffs and Algoma shall have the right to submit information to the arbitrators to be held in confidence by them and not disclosed to the other party (or any other person), provided that (i) the party providing such information shall certify its accuracy to the best of its actual knowledge; and (ii) such information shall be made available to counsel for the other party upon delivery by such counsel of its undertaking to hold the information (either in the form provided or in any other form) in confidence and not to disclose it to its client, or any other person (other than the arbitrators); |
| (c) | before making their determination in any matter, the arbitrators must request from each of the parties a complete statement of its proposed resolution of such matter, and the arbitrators shall select between the two proposed resolutions, without making any alteration to either of them (or if either party does not submit a proposed resolution, or submits one that is materially incomplete, shall select the proposed resolution of the other party); and |
| (d) | the costs of the arbitrators shall be borne entirely by the party that did not prevail. |
The judgment of the arbitrators shall be final and binding on the parties, and may be entered and enforced by any court of the United States, any state thereof, Canada or any province thereof.
16. FORCE MAJEURE.
No party hereto shall be liable for damages resulting from failure to deliver or accept and pay for all or any of the Cliffs Pellets as described herein, if and to the extent that such delivery or acceptance would be contrary to or would constitute a violation of any regulation, order or requirement of a recognized governmental body or agency, or if such failure, including (a) failure of the mines supplying the Cliffs Pellets to be delivered under this Agreement to produce the Cliffs Pellets, or (b) failure of Algoma’s facilities to produce steel, is caused by or results directly or indirectly from acts of God, war, insurrections, interference by foreign powers, acts of terrorism, strikes, hindrances, labor disputes, labor shortages, fires, flood, embargoes, accidents or delays at the mines, on the railroads or docks or in transit, shortage of transportation facilities, disasters of navigation, or other causes, similar or dissimilar, if such other causes are beyond the control of the party charged with a failure to deliver or to accept and pay for the Cliffs Pellets. To the extent a force majeure is claimed hereunder by a party hereto, such shall relieve the other party from fulfilling its corresponding agreement hereunder to the party claiming such force majeure, but only for the period and to the extent of the claimed force majeure, unless otherwise mutually agreed to by the parties.
16
17. NOTICES.
All notices, consents, reports and other documents authorized and required to be given pursuant to this Agreement shall be given in writing and either personally served on an officer of the party hereto to whom it is given, or sent by recognized overnight delivery service, mailed by registered or certified mail, postage prepaid, or by facsimile, addressed as follows:
If to CCIC, CMC or Northshore:
0000 Xxxxxxxx Xxxxxx—00xx Xxxxx
Xxxxxxxxx, Xxxx 00000-0000
Attention: Secretary
cc: Vice President-Sales
If to Algoma:
000 Xxxx Xxxxxx
Xxxxx Xxx. Xxxxx, Xxxxxxx X0X 0X0
Attention: Corporate Secretary
Fax: (000) 000-0000
provided, however, that any party may change the address to which notices or other communications to it shall be sent by giving to the other party written notice of such change, in which case notices and other communications to the party giving the notice of the change of address shall not be deemed to have been sufficiently given or delivered unless addressed to it at the new address as stated in said notice.
18. TERM.
The term of this Agreement shall commence as of 12:01 a.m. on the day following the Closing Date and continue through December 31, 2016; provided, however, that if the Closing Date has not occurred prior to February 28, 2002, then either party shall have the right to terminate this Agreement at any time prior to the Closing Date, by notice to the other party. This Agreement shall remain valid and fully enforceable for the fulfillment of obligations incurred prior to termination.
19. AMENDMENT.
This Agreement may not be modified or amended except by an instrument in writing signed by all parties hereto.
20. WAIVER.
No waiver of any of the terms of this Agreement shall be valid unless in writing and signed by all parties hereto. No waiver or any breach of any provision hereof or default under any provisions hereof shall be deemed a waiver of any subsequent breach or default of any kind whatsoever.
17
21. CONFIDENTIALITY.
(a) Cliffs and Algoma acknowledge that this Agreement contains certain volume pricing, adjustment and term provisions which are confidential, proprietary or of a sensitive commercial nature and which would put Cliffs or Algoma at a competitive disadvantage if disclosed to the public, specifically, Sections 1, 2, 6, 7, 13 and 14, and all of the Schedules and Exhibits hereto (“Confidential Information”). Cliffs and Algoma further agree that all provisions of this Agreement shall be kept confidential and, without the prior consent of the other party, shall not be disclosed to any party not a party to this Agreement except as required by law or governmental or judicial order and except that disclosure of the existence of this Agreement shall not be precluded by this Section 21.
(b) If either party is required by law or governmental or judicial order or receives legal process or a court or agency directive requesting or requiring disclosure of any of the Confidential Information contained in this Agreement, such party will promptly notify the other party prior to disclosure to permit such party to seek a protective order or take other appropriate action to preserve the confidentiality of such Confidential Information. If either party determines to file this Agreement with the Securities and Exchange Commission (“Commission”) or any other federal, state, provincial or local governmental or regulatory authority, or with any stock exchange or similar body, such determining party will use its best efforts to obtain confidential treatment of such Confidential Information pursuant to any applicable rule, regulation or procedure of the Commission and any applicable rule, regulation or procedure relating to confidential filings made with any such other authority or exchange. If the Commission (or any such other authority or exchange) denies such party’s request for confidential treatment of such Confidential Information, such party will use its best efforts to obtain confidential treatment of the portions thereof that the other party designates. Each party will allow the other party to participate in seeking to obtain such confidential treatment for Confidential Information.
(c) GOVERNING LAW.
This Agreement shall in all respects, including matters of construction, validity and performance, be governed by and be construed in accordance with the laws of the State of Ohio.
22. ASSIGNMENT.
(a) For purposes of this Agreement, the term “Algoma” includes and means not only Algoma, but also any successor by merger or consolidation of Algoma and any permitted assigns of Algoma.
(b) In case Algoma shall consolidate with or merge into another corporation or shall transfer to another person, partnership, corporation or entity, all or substantially all of its iron and steel business, this Agreement shall be assigned by Algoma to, and shall be binding upon, the corporation resulting from such consolidation or merger or the person, partnership, corporation or entity to which such transfer is made; otherwise no assignment of this Agreement by Algoma shall be valid unless Cliffs shall consent in writing thereto.
18
(c) In case CCIC, CMC or Northshore, or any permitted assign of any of them, shall consolidate with or merge into another corporation or shall transfer to another person, partnership, corporation or entity, all or substantially all of its business, this Agreement shall be assigned by CCIC, CMC or Northshore, as the case may be, to, and shall be binding upon, the corporation resulting from such consolidation or merger or the person, partnership, corporation or entity to which such transfer is made; otherwise, no assignment of this Agreement by CCIC, CMC or Northshore, shall be valid unless Algoma shall consent thereto in writing.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective authorized officers.
| THE CLEVELAND-CLIFFS IRON COMPANY | ALGOMA STEEL INC. | |||||||
| By: | /s/ Xxxxxx X. Xxxxxxxxx | By: | /s/ Xxxx Manchester | |||||
| Name: | Xxxxxx X. Xxxxxxxxx | Name: | Xxxx Manchester | |||||
| Title: | Vice President | Title: | Vice President—Finance and Administration | |||||
| CLIFFS MINING COMPANY | NORTHSHORE MINING COMPANY | |||||||
| By: | /s/ Xxxxxx X. Xxxxxxxxx | By: | /s/ Xxxxxx X. Xxxxxxxxx | |||||
| Name: | Xxxxxx X. Xxxxxxxxx | Name: | Xxxxxx X. Xxxxxxxxx | |||||
| Title: | Vice President | Title: | Vice President | |||||
19
Schedule 1(i)
PELLET SALE AND PURCHASE AGREEMENT
WORLD PELLET PRICE CALCULATION
YEAR 2001
| 2001 WORLD PELLET PRICES |
||||||||||||||||
| PRODUCER |
WEIGHT | DMTU | DGTU | WTD AVG | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Eastern Canadian Pellet Price |
50.0 | % | 0.5153 | 0.5236 | 0.2618 | |||||||||||
| Companhia Vale Rio Doce, S.A. — (f.o.b. Tubaro) |
50.0 | % | 0.5010 | 0.5090 | 0.2545 | |||||||||||
|
|
|
|||||||||||||||
| TOTAL |
$ | 0.5163 | ||||||||||||||
Schedule 5(a)
| Xxxxxx X. Xxxxxxxx | Algoma Steel Inc. | |||
| Manager Corporate Logistics, | 000 Xxxx Xxxxxx | |||
| Xxxxxxxxxx xxx Xxxxxx | Xxxxx Xxx. Xxxxx, Xxxxxxx, Xxxxxx | |||
| Telephone: (000) 000-0000 | P6A 7B4 | |||
| Facsimile: (000) 000-0000 | ||||
| e-mail: xxxxxxxxx@xxxxxx.xxx |
November 7, 2001
VIA FAX 000-000-0000
Mr. Xxx Xxxxxxxxx
Cleveland Cliffs Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Dear Don:
Pellet Nomination for 2002
As per our recent agreement, our November pellet nomination for 2002 will be 3.0m gt.
Our monthly shipment expectations are as follows:
| January: |
260,000gt | July: | 256,000gt | |||
| February: |
199,000gt | August: | 253,000gt | |||
| March: |
220,000gt | September: | 243,000gt | |||
| April: |
292,000gt | October: | 257,000gt | |||
| May: |
276,000gt | November: | 248,000gt | |||
| June: |
243,000gt | December: | 253,000gt |
Algoma Steel would like to meet with Cliffs, at your convenience, to discuss our detailed monthly requirements and routing expectations. For your information, the volumes for the year reflect a slightly higher rail movement than previously discussed.
As you know, the steel market has deteriorated during the 4th quarter of 2001. Our nomination for 2002 is based on our expectations of seeing some business improvement beginning in early 2002. Our January nomination may change based upon market projections.
Yours truly,
ALGOMA STEEL INC.
/s/ Ed /s/
Xx Xxxxxxxx
Manager Corporate Logistics, Purchasing and Stores
Cc X. Xxxxxxx
Exhibit A-1
Iron Ore Fluxed Pellets
Average Composite Specification for all Fluxed Pellet Blends
| Pellet Specification | ||||||||||||
| LSL | AIM | USL | Frequency | |||||||||
| A. % DRY CHEMICAL ANALYSIS |
||||||||||||
| Fe |
60.20 | 61.20 | S | |||||||||
|
SiO2 |
5.30 | 5.60 | S | |||||||||
|
Al2O3 |
0.33 | S | ||||||||||
| CaO |
4.75 | S | ||||||||||
| MgO |
1.60 | S | ||||||||||
| Mn |
0.10 | S | ||||||||||
| P |
0.020 | 0.023 | S | |||||||||
| S |
0.015 | Q | ||||||||||
|
TiO2 |
0.060 | Q | ||||||||||
|
Na2O |
0.035 | Q | ||||||||||
|
K2O |
0.040 | Q | ||||||||||
| CaO/ SiO2 |
0.85 | 0.90 | 0.95 | |||||||||
| B/A |
1.14 | |||||||||||
| MgO/ SiO2 |
||||||||||||
| B. PHYSICAL |
||||||||||||
| % + l/2” |
8.0 | S | ||||||||||
| % - 1/2” x +3/8” |
75.0 | 80.0 | S | |||||||||
| % - 1/4” |
2.0 | 3.5 | S | |||||||||
| % - 28 Mesh |
0.3 | S | ||||||||||
| C. REDUCIBILITY (R4O) |
1.10 | Q | ||||||||||
| D. LTB (% + 1/4”) |
85 | 90 | Q | |||||||||
| E. COMPRESSION (LBS) |
400 | M | ||||||||||
| F. SWELLING |
15.0 | 20.0 | Q | |||||||||
| G. SOFTENING TEMP (°C) |
1350 | Q | ||||||||||
| H. MOISTURE AS LOADED |
1.5 | 4.0 | S | |||||||||
Additional Requirements:
| 1. | Specifications to be based on a weighted pellet quality specification as charged to the blast furnace. |
| 2. | Individual pellet specifications to be provided on a train lot or vessel cargo basis. Physical and moisture limits apply on a shipment by shipment basis. Moisture shall also be limited to a maximum of 3.5% on a monthly average basis. |
| 3. | Changes to pellet sourcing must result in a specification substantially equivalent to the above, and shall be reviewed by Algoma and Cliffs prior to shipments. |
| 4. | Pellet blend limited to two (2) “families” of pellets. (Xxxxxx Magnetite and Empire Royal are a family.) Cliffs may (at its own cost) blend pellets to create a single family, such as Xxxxxx Magnetite blended with the Xxxxxx Hematite to create one family. |
Frequency of reporting: S = Shipment, M = Monthly average, Q = Quarterly average.
Exhibit A-2
Iron Ore Blended Pellets
Average Composite Specification for Fluxed and
Maximum 15% Standard Pellet Blends
| Pellet Specification | ||||||||||||||||
| LSL | AIM | USL | Frequency | |||||||||||||
| A. % DRY CHEMICAL ANALYSIS |
||||||||||||||||
| Fe |
60.80 | 61.80 | S | |||||||||||||
|
SiO2 |
5.25 | 5.50 | S | |||||||||||||
|
Al2O3 |
0.36 | S | ||||||||||||||
| CaO |
4.17 | S | ||||||||||||||
| MgO |
1.44 | S | ||||||||||||||
| Mn |
0.09 | S | ||||||||||||||
| P |
0.020 | 0.023 | S | |||||||||||||
| S |
0.015 | Q | ||||||||||||||
|
TiO2 |
0.060 | Q | ||||||||||||||
|
Na2O |
0.035 | Q | ||||||||||||||
|
K2O |
0.037 | Q | ||||||||||||||
| CaO/ SiO2 |
0.74 | 0.79 | 0.84 | |||||||||||||
| B/A |
||||||||||||||||
| MgO/ SiO2 |
||||||||||||||||
| B. PHYSICAL |
||||||||||||||||
| % + l/2” |
8.0 | S | ||||||||||||||
| % - 1/2” x +3/8” |
75.0 | 80.0 | S | |||||||||||||
| % - 1/4” |
2.0 | 3.5 | S | |||||||||||||
| % - 28 Mesh |
0.3 | S | ||||||||||||||
| C. REDUCIBILITY (R40) |
1.0 | Q | ||||||||||||||
| D. LTB (% + 1/4”) |
85 | 90 | Q | |||||||||||||
| E. COMPRESSION (LBS) |
400 | M | ||||||||||||||
| F. SWELLING |
15.0 | 20.0 | Q | |||||||||||||
| G. SOFTENING TEMP (°C) |
1325 | Q | ||||||||||||||
| H. MOISTURE AS LOADED |
1.5 | 4.0 | S | |||||||||||||
Additional Requirements:
1. Specifications to be based on a weighted pellet quality specification as charged to the blast furnace.
2. Individual pellet specifications to be provided on a train lot or vessel cargo basis. Physical and moisture limits apply on a shipment by shipment basis. Moisture shall also be limited to a maximum of 3.5% on a monthly average basis.
3. Changes to pellet sourcing must result in a specification substantially equivalent to the above, and shall be reviewed by Algoma and Cliffs prior to shipments.
4. Pellet blend limited to two (2) “families” of pellets. (Xxxxxx Magnetite and Empire Royal are a family.) Cliffs may (at its own cost) blend pellets to create a single family, such as Xxxxxx Magnetite blended with the Xxxxxx Hematite to create one family.
Frequency of reporting: S = Shipment, M = Monthly average, Q = Quarterly average.
Exhibit A-3.1
THE CLEVELAND-CLIFFS IRON COMPANY
EMPIRE IRON MINING PARTNERSHIP
EMPIRE ROYAL FLUX PELLET
| PELLET SPECIFICATION | ||||||||||||
| LSL | AIM | USL | ||||||||||
| A. % DRY CHEMICAL ANALYSIS |
||||||||||||
| Fe |
60.50 | 61.00 | ||||||||||
| Si02 |
5.50 | 5.80 | ||||||||||
| A1203 |
0.33 | |||||||||||
| CaO |
4.95 | |||||||||||
| MgO |
1.50 | |||||||||||
| Mn |
0.06 | |||||||||||
| P |
0.016 | 0.022 | ||||||||||
| S |
0.005 | |||||||||||
| Ti02 |
0.06 | 0.10 | ||||||||||
| Na20 |
0.030 | |||||||||||
| K20 |
0.047 | |||||||||||
| CaO / SiPO2 (L/S) |
0.85 | 0.90 | 0.95 | |||||||||
| MgO / SiO2 |
0.27 | |||||||||||
| B. SIZING (BT) |
||||||||||||
| % + 1/2” |
5.0 | 10.0 | ||||||||||
| % – l/2” x + 3/8” |
84.0 | |||||||||||
| % – 3/8” x + 1/4” |
6.0 | |||||||||||
| % – 1/4” |
1.0 | 1.5 | ||||||||||
| C. POROSITY, % VOIDS |
30.25 | |||||||||||
| D. REDUCIBILITY (R40) |
0.95 | 1.03 | ||||||||||
| E. LTB (% + 1/4”) |
85.0 | 92.0 | ||||||||||
| F. COMPRESSION (LBS) |
450 | 528 | ||||||||||
| G. HIGH TEMP UNDER LOAD (% RED.) |
86.0 | |||||||||||
| H. SWELLING (% VOLUME CHANGE) |
13.0 | 18.0 | ||||||||||
| I. SOFTENING TEMP (°C) |
1320 | 1350 | ||||||||||
| J. BULK DENSITY (LBS/CU FT) |
||||||||||||
| K. MOISTURE AS LOADED |
1.5 | 4.0 | ||||||||||
| ANALYSIS ARE LOADED AT MINE |
||||||||||||
Comments:
Currently Empire does not analyze for Ti02—Ti02 impacts granulated slag.
Exhibit A-3.2
THE CLEVELAND-CLIFFS IRON COMPANY
XXXXXX MINING COMPANY X.X.
XXXXXX MAGNETITE FLUX PELLET
| PELLET SPECIFICATION | ||||||||||||
| LSL | AIM | USL | ||||||||||
| A. % DRY CHEMICAL ANALYSIS |
||||||||||||
| Fe |
60.80 | 61.30 | ||||||||||
| Si02 |
5.33 | 5.60 | ||||||||||
| AI203 |
0.33 | |||||||||||
| CaO |
4.80 | |||||||||||
| MgO |
1.60 | |||||||||||
| Mn |
0.10 | |||||||||||
| P |
0.017 | 0.020 | ||||||||||
| S |
0.020 | |||||||||||
| Ti02 |
0.050 | |||||||||||
| Na20 |
0.035 | |||||||||||
| K20 |
0.030 | |||||||||||
| CaO / SiO2 (L/S) |
0.85 | 0.90 | 0.95 | |||||||||
| B/A |
1.13 | |||||||||||
| MgO / SiO2 |
0.30 | |||||||||||
| B. PHYSICAL |
||||||||||||
| % + 1/2” |
10.0 | 25.0 | ||||||||||
| % – l/2” x + 3/8” |
70.0 | 76.0 | ||||||||||
| % – 1/4” |
1.5 | 2.0 | ||||||||||
| % – 28 Mesh |
0.3 | |||||||||||
| C. POROSITY, % VOIDS |
35.0 | |||||||||||
| D. REDUCIBILITY (R40) |
1.05 | 1.15 | ||||||||||
| E. LTB (% + 1/4”) |
85.0 | 93.0 | ||||||||||
| F. COMPRESSION (LBS) |
300 | 350 | ||||||||||
| G. HIGH TEMP UNDER LOAD (% RED.) |
||||||||||||
| H. SWELLING (% VOLUME CHANGE) |
15.0 | 18.0 | ||||||||||
| I. SOFTENING TEMP (°C) |
1320 | 1350 | ||||||||||
| J. BULK DENSITY (LBS/CU FT) |
118 | |||||||||||
| K. MOISTURE AS LOADED |
1.5 | 4.0 | ||||||||||
| ANALYSIS ARE LOADED AT MINE |
||||||||||||
Comments:
NOTE %+l/2” is high and should be lowered to ~15%, interim 20%.
Exhibit A-3.3
THE CLEVELAND-CLIFFS IRON COMPANY
XXXXXX MINING COMPANY X.X.
XXXXXX HEMATITE FLUX PELLET
| PELLET SPECIFICATION | ||||||||||||
| LSL | AIM | USL | ||||||||||
| A. % DRY CHEMICAL ANALYSIS |
||||||||||||
| Fe |
61.00 | 61.50 | ||||||||||
| SiO2 |
4.90 | 5.20 | ||||||||||
| A12O3 |
0.53 | |||||||||||
| CaO |
4.40 | |||||||||||
| MgO |
1.70 | |||||||||||
| Mn |
0.10 | |||||||||||
| P |
0.035 | 0.040 | ||||||||||
| S |
0.015 | |||||||||||
| TiO2 |
0.090 | |||||||||||
| Na2O |
0.035 | |||||||||||
| K2O |
0.030 | |||||||||||
| CaO / SiO2 (L/S) |
0.85 | 0.90 | 0.95 | |||||||||
| B/A |
1.12 | |||||||||||
| MgO / SiO2 |
0.35 | |||||||||||
| B. SIZING (BT) |
||||||||||||
| % + 1/2” |
4.0 | 10.0 | ||||||||||
| % – 1/2” x + 3/8” |
84.5 | |||||||||||
| % – 1/4” |
2.0 | 3.0 | ||||||||||
| % – 28 Mesh |
0.3 | |||||||||||
| C. POROSITY, % VOIDS |
33.00 | |||||||||||
| D. REDUCIBILITY (R40) |
1.00 | 1.10 | ||||||||||
| E. LTB (% + 1/4”) |
85.0 | 92.0 | ||||||||||
| F. COMPRESSION (LBS) |
420 | 470 | ||||||||||
| G. HIGH TEMP UNDER LOAD (% RED.) |
||||||||||||
| H. SWELLING (% VOLUME CHANGE) |
15.0 | 18.0 | ||||||||||
| I. SOFTENING TEMP (°C) |
1320 | 1350 | ||||||||||
| J. BULK DENSITY (LBS/CU FT) |
121 | |||||||||||
| K. MOISTURE AS LOADED |
1.5 | 4.0 | ||||||||||
| ANALYSIS ARE LOADED AT MINE |
||||||||||||
Comments:
Phos Limit at the Blast Furnace is currenlty 0.022% for Pellet Burden. Usage of Xxxxxx Hematite is governed by shift-to-shift Phos average.
Exhibit A-3.4
CLIFFS MINING COMPANY
HIBBING TACONITE COMPANY JOINT VENTURE
HIBTAC STANDARD PELLET
| PELLET SPECIFICATION |
||||||||||||
| LSL | AIM | USL | ||||||||||
| A. % DRY CHEMICAL ANALYSIS |
||||||||||||
| Fe |
65.40 | 66.15 | ||||||||||
| SiO2 |
4.50 | 4.80 | ||||||||||
| A12O3 |
0.30 | |||||||||||
| CaO |
0.30 | |||||||||||
| MgO |
0.31 | |||||||||||
| Mn |
0.08 | |||||||||||
| P |
0.011 | 0.015 | ||||||||||
| S |
0.002 | |||||||||||
| TiO2 |
||||||||||||
| Na2O |
0.019 | |||||||||||
| K2O |
0.016 | |||||||||||
| CaO / SiO2 (L/S) |
0.07 | |||||||||||
| B/A |
0.13 | |||||||||||
| MgO / SiO2 |
0.07 | |||||||||||
| B. SIZING (BT) |
||||||||||||
| % + 1/2” |
4.5 | 10.0 | ||||||||||
| % – 1/2” x + 3/8” |
81.5 | |||||||||||
| % – 1/4” |
3.5 | 7.0 | ||||||||||
| % – 28 Mesh |
0.5 | |||||||||||
| C. POROSITY, % VOIDS |
||||||||||||
| D. REDUCIBILITY (R40) |
0.85 | 0.94 | ||||||||||
| E. LTB (% + 1/4”) |
87.5 | 95.2 | ||||||||||
| F. COMPRESSION (LBS) |
410 | 460 | ||||||||||
| G. HIGH TEMP UNDER LOAD (% RED.) |
||||||||||||
| H. SWELLING (% VOLUME CHANGE) |
||||||||||||
| I. SOFTENING TEMP (°C) |
1260 | 1290 | ||||||||||
| J. BULK DENSITY (LBS/CU FT) |
139 | |||||||||||
| K. MOISTURE AS LOADED |
2.5 | 4.0 | ||||||||||
| ANALYSIS ARE LOADED AT MINE |
||||||||||||
Comments:
Hibtac Pellet to control Monisture and - 1/4” size.
Exhibit A-3.5
NORTHSHORE MINING COMPANY
NORTHSHORE STANDARD (Acid)
| PELLET SPECIFICATION |
||||||
| LSL |
AIM | USL | ||||
| A. % DRY CHEMICAL ANALYSIS |
||||||
| Fe |
64.70 | 65.20 | ||||
| SiO2 |
4.80 | 5.20 | ||||
| Al2O3 |
0.35 | |||||
| CaO |
0.80 | |||||
| MgO |
0.53 | |||||
| Mn |
0.18 | |||||
| P |
0.022 | 0.027 | ||||
| S |
0.003 | |||||
| TiO2 |
||||||
| Na2O |
0.035 | |||||
| K2O |
0.020 | |||||
| CaO / SiO2 (L/S) |
0.17 | |||||
| B/A |
0.26 | |||||
| MgO / SiO2 |
0.11 | |||||
| B. SIZING (BT) |
||||||
| % + 1/2” |
4.4 | 9.0 | ||||
| % – 1/2” x + 3/8” |
86.5 | |||||
| % – 1/4” |
2.0 | 3.0 | ||||
| % – 28 Mesh |
0.3 | |||||
| C. POROSITY, % VOIDS |
||||||
| D. REDUCIBILITY (R40) |
0.87 | 0.97 | ||||
| E. LTB (% + 1/4”) |
85.0 | 90.0 | ||||
| F. COMPRESSION (LBS) |
430 | 480 | ||||
| G. HIGH TEMP UNDER LOAD (% RED.) |
||||||
| H. SWELLING (% VOLUME CHANGE) |
||||||
| I. SOFTENING TEMP (°C) |
1265 | 1295 | ||||
| J. BULK DENSITY (LBS/CU FT) |
||||||
| K. MOISTURE AS LOADED |
2.75 | 4.0 | ||||
| ANALYSIS ARE LOADED AT MINE |
||||||
Comments:
Phos Limit at the Blast Furnace is currenlty 0.022% for Pellet Burden.
Exhibit A-3.6
NORTHSHORE MINING COMPANY
NORTHSHORE FLUX
| PELLET SPECIFICATION |
||||||
| LSL |
AIM | USL | ||||
| A. % DRY CHEMICAL ANALYSIS |
||||||
| Fe |
62.70 | 63.15 | ||||
| SiO2 |
4.00 | 5.20 | ||||
| Al2O3 |
0.40 | |||||
| CaO |
4.00 | |||||
| MgO |
1.00 | |||||
| Mn |
0.20 | |||||
| P |
0.024 | 0.029 | ||||
| S |
0.003 | |||||
| TiO2 |
||||||
| Na2O |
0.040 | |||||
| K2O |
0.025 | |||||
| CaO / SiO2 (L/S) |
1.00 | |||||
| B/A |
1.14 | |||||
| MgO / SiO2 |
0.25 | |||||
| B. SIZING (BT) |
||||||
| % + 1/2” |
3.0 | 7.0 | ||||
| % –l/2” x + 3/8” |
89.0 | |||||
| % – 1/4” |
1.0 | 3.0 | ||||
| % – 28 Mesh |
0.2 | |||||
| C. POROSITY, % VOIDS |
31.00 | |||||
| D. REDUCIBILITY (R40) |
1.10 | 1.20 | ||||
| E. LTB (% + 1/4”) |
85.0 | 91.0 | ||||
| F. COMPRESSION (LBS) |
420 | 460 | ||||
| G. HIGH TEMP UNDER LOAD (% RED.) |
||||||
| H. SWELLING (% VOLUME CHANGE) |
13.0 | |||||
| I. SOFTENING TEMP (°C) |
1300 | 1350 | ||||
| J. BULK DENSITY (LBS/CU FT) |
128 | |||||
| K. MOISTURE AS LOADED |
2.75 | 4.0 | ||||
| ANALYSIS ARE LOADED AT MINE |
||||||
Comments:
Phos Limit at the Blast Furnace is currently 0.022% for Pellet Burden.
Exhibit B-1
PELLET SALE AND PURCHASE AGREEMENT
COMPOSITE INDEX FORMULA FOR YEARS 2004—2016
| Contract Year’s Composite Index Calculation |
||||||||||||||||||||||
| (i) Producer Price Index (PPI)—All Commodities - Series Id: WPU00000000 |
||||||||||||||||||||||
| Contract Year’s PPI—All Commodities |
X | 0.4000 | = | A | ||||||||||||||||||
| Base Year 2001 PPI—All Commodities |
||||||||||||||||||||||
| (ii) Producer Price Index (PPI)—Metals and Metal Products—Sheets’ Cold Rolled Carbon (SCRC)—Series Id: WPU10170711 |
||||||||||||||||||||||
| Contract Year’s PPI—Metals and Metal Products—(SCRC) |
X | 0.2000 | = | B | ||||||||||||||||||
| Base Year 2001 PPI—Metals and Metal Products—(SCRC) |
||||||||||||||||||||||
| (iii) Eastern Canadian Pellet Prices |
||||||||||||||||||||||
| Contract Year’s Eastern Canadian Pellet Prices |
X | 0.4000 | = | C | ||||||||||||||||||
| Base Year 2001 Eastern Canadian Pellet Prices |
||||||||||||||||||||||
| Contract Year’s Composite Index |
= | (A+B+C | ) | |||||||||||||||||||
Exhibit B-2
PELLET SALE AND PURCHASE AGREEMENT
EXAMPLE OF CALCULATION OF CURRENT YEAR’S PELLET PRICE
CONTRACT YEAR 2004
(1) Multiply 2002 Base Price per iron unit by the Composite Index
| Pellet |
f.o.b. | 2002 Base Price Per Per Iron Unit |
Composite Index |
Adjusted Base Price Per Per Iron Unit |
||||||||||||
| Xxxxxx Mag Flux |
Railcar at Xxxxxxxxx | $ | 0.5755 | 0.980 | $ | 0.5640 | ||||||||||
(2) Any contract year’s prices shall be limited to a maximum of 106% above the prior year’s price per iron unit or a minimum of 94% below the prior year’s price per iron unit—Prior year’s price $0,5838
| Pellet |
% of Adjusted Base Price Per Iron Unit vs. Prior Year’s Base Price per Iron Unit |
Adjusted Base Price Caps > = 94% or < = 106% of Prior Year’s Base Price |
Capped Adjusted Base Price Per Iron Unit |
|||||||||
| Xxxxxx Mag Flux |
96.61 | % | $ | 0.5488 - $0.6188 | $ | 0.5640 | ||||||
(3) Any contract year’s price shall be limited to a maximum of 120.2% of the World Pellet Price or a minimum of 106.2% of the World Pellet Price
| Pellet |
2004 World Pellet Price | Adjusted Base Price Caps > = 106.2% or < = 120.2% Current Year’s World Pellet Price |
Adjusted Base Price Per Iron Unit |
|||||||||
| Xxxxxx Mag Flux |
$ | 0.5027 | $ | 0.5339 - $0.6042 | $ | 0.5640 | ||||||
(4) Adjusted Expected Price Per Iron Unit determined by Annual Pellet Requirement Nomination
Pellet Nomination: 3,600,000
| Pellet |
Nomination Range | Per Iron Unit Adjustment Per 25.000 Ton Range |
Adjusted Expected Price Per Iron Unit |
|||||||||
| Xxxxxx Mag Flux |
3,475,000 -3,525,000 | $ | 0.0000 | $ | 0.5640 | |||||||
| 3,525,000 -3,550,000 | $ | 0.0007 | $ | 0.5633 | ||||||||
| 3,550,000 -3,575,000 | $ | 0.0007 | $ | 0.5626 | ||||||||
| 3,575,000 -3,600,000 | $ | 0.0007 | $ | 0.5619 | ||||||||
| (5) | Adjusted Expected Price Per Iron Unit—Contract Year |
| Pellet |
Adjusted Expected Price Per Iron Unit |
|||
| Xxxxxx Mag Flux |
$ | 0.5619 | ||
Exhibit C
PELLET SALE AND PURCHASE AGREEMENT
EXAMPLE OF ONE YEAR’S CYCLE OF RECALCULATION OF ADJUSTED EXPECTED PRICE PER IRON UNIT
CONTRACT YEAR 2004
(1) No later than December 15 of year prior to Contract Year, Cliffs will provide a good faith estimate of the Composite Index for the Contract Year
| Pellet |
f.o.b. | December 15 of Year Prior To Contract Year Estimated Composite Index |
2002 Base Price Per Iron Unit |
Adjusted Base Price Per Iron Unit |
||||||||||||
| Xxxxxx Mag Flux |
Railcar at Xxxxxxxxx | 0.980 | $ | 0.5755 | $ | 0.5640 | ||||||||||
(2) All price caps and volume price adjustments apply to the December 15 Adjusted Expected Price Per Iron Unit for the Contract Year
(3) No later than June 15 of Contract Year, Cliffs will provide a revised good faith estimate of the Composite Index for the Contract Year
| Pellet |
f.o.b. | December 15 of Year Prior To Contract Year Estimated Composite Index |
June 15 of Contract Year Revised Calculated Composite Index |
2002 Base Price Per Iron Unit |
Adjusted Base Price Per Iron Unit |
|||||||||||||||
| Xxxxxx Mag Flux |
Railcar at Xxxxxxxxx | 0.980 | 0.970 | $ | 0.5755 | $ | 0.5582 | |||||||||||||
(4) All price caps and volume price adjustments apply to the June 15 Revised Adjusted Expected Price Per Iron Unit for the Contract Year
(5) No later than January 15 of year following the Contract Year, Cliffs will provide a second revised good faith estimate of the Composite Index for the prior year’s Contract Year
| Pellet |
f.o.b. | June 15 of Contract Year Estimated Composite Index |
January 15 of Year Following Contract Year Revised Calculated Composite Index |
2002 Base Price Per Iron Unit |
Adjusted Base Price Per Iron Unit |
|||||||||||||||
| Xxxxxx Mag Flux |
Railcar at Xxxxxxxxx | 0.970 | 0.975 | $ | 0.5755 | $ | 0.5611 | |||||||||||||
(6) All price caps and volume price adjustments apply to the January 15 Revised Adjusted Expected Price Per Iron Unit for the prior year’s Contract Year
(7) No later than June 15 of year following the Contract Year, Cliffs will provide a final revised Composite Index for the prior year’s Contract Year
| Pellet |
f.o.b. | January 15 of Year Following Contract Year Estimated Composite Index |
June 15 of Year Following Contract Year Final Calculated Composite Index |
2002 Base Price Per Iron Unit |
Adjusted Base Price Per Iron Unit |
|||||||||||||||
| Xxxxxx Mag Flux |
Railcar at Xxxxxxxxx | 0.975 | 0.980 | $ | 0.5755 | $ | 0.5640 | |||||||||||||
(8) All price caps and volume price adjustments apply to the June 15 Final Adjusted Expected Price Per Iron Unit for the prior year’s Contract Year
