What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-14 compared with 2022-02-11 · 466 added, 783 removed, 1265 unchanged (50% of the section changed)

3 unchanged sentences

AND SUBSIDIARIES

(In Millions)

(In millions, except share information) 2022 2021

Current assets:

7 unchanged sentences

Goodwill 1,130 1,116

Pension and OPEB, asset 356 223

Other non-current assets 777 797

4 unchanged sentences

Accrued employment costs 429 585

State and local taxes 138 147

Other current liabilities 934 903

4 unchanged sentences

OPEB liability, non-current 585 2,383

Deferred income taxes 590 112

Other non-current liabilities 1,267 1,329

1 unchanged sentence

Commitments and contingencies (See Note 20)

Series B Participating Redeemable Preferred Stock - no par value

Authorized, Issued and Outstanding - no shares (2020 - 583,273 shares)

Common Shares - par value $ 0.125 per share

3 unchanged sentences

Capital in excess of par value of shares 4,871 4,892

Retained deficit ( 1 ) ( 2,989 )

Retained earnings (deficit) 1,334 ( 1 )

Cost of 17,710,751 common shares in treasury (2021 - 6,673,582 shares)

( 310 ) ( 82 )

Accumulated other comprehensive income (loss) 618 ( 133 )

Accumulated other comprehensive income 1,830 618

Total Cliffs shareholders' equity 7,791 5,490

1 unchanged sentence

TOTAL EQUITY 8,042 5,774

TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY $ 18,975 $ 16,771

TOTAL LIABILITIES AND EQUITY $ 18,755 $ 18,975

The accompanying notes are an integral part of these consolidated financial statements.

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STATEMENTS OF CONSOLIDATED OPERATIONS

1 unchanged sentence

AND SUBSIDIARIES

(In Millions, Except Per Share Amounts)

Year Ended December 31,

2021 2020 2019

(In millions, except per share amounts) 2022 2021 2020

Revenues $ 22,989 $ 20,444 $ 5,354

9 unchanged sentences

Gain (loss) on extinguishment of debt ( 75 ) ( 88 ) 130

Net periodic benefit credits (costs) other than service cost component 210 54 ( 1 )

Other non-operating income 6 3 4

Net periodic benefit credits other than service cost component 212 210 54

Other non-operating income (loss) ( 4 ) 6 3

Total other expense ( 143 ) ( 209 ) ( 51 )

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Income (loss) from continuing operations 1,373 3,030 ( 82 )

Income (loss) from discontinued operations, net of tax 3 1 ( 2 )

Income from discontinued operations, net of tax 3 3 1

Net income (loss) 1,376 3,033 ( 81 )

10 unchanged sentences

The accompanying notes are an integral part of these consolidated financial statements.

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STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

1 unchanged sentence

AND SUBSIDIARIES

(In Millions)

Year Ended December 31,

2021 2020 2019

(In millions) 2022 2021 2020

Net income (loss) $ 1,376 $ 3,033 ( 81 )

1 unchanged sentence

Changes in pension and OPEB, net of tax 1,298 684 181

Changes in foreign currency translation ( 2 ) 3 —

Changes in derivative financial instruments, net of tax ( 84 ) 69 2

Total other comprehensive income (loss) 751 186 ( 35 )

Changes in foreign currency translation ( 2 ) ( 2 ) 3

Total other comprehensive income 1,212 751 186

Comprehensive income 2,588 3,784 105

2 unchanged sentences

The accompanying notes are an integral part of these consolidated financial statements.

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STATEMENTS OF CONSOLIDATED CASH FLOWS

1 unchanged sentence

AND SUBSIDIARIES

(In Millions)

Year Ended December 31,

2021 2020 2019

(In millions) 2022 2021 2020

OPERATING ACTIVITIES

4 unchanged sentences

Deferred income taxes 90 767 ( 101 )

Pension and OPEB costs (credits) ( 103 ) ( 23 ) 20

Pension and OPEB credits ( 132 ) ( 103 ) ( 23 )

Loss (gain) on extinguishment of debt 75 88 ( 130 )

Impairment of long-lived assets 29 1 —

Other 122 138 ( 70 )

2 unchanged sentences

Inventories 64 ( 1,370 ) ( 146 )

Income taxes ( 22 ) ( 136 ) 50

Pension and OPEB payments and contributions ( 204 ) ( 343 ) ( 75 )

23 unchanged sentences

The accompanying notes are an integral part of these consolidated financial statements.

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STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY

1 unchanged sentence

AND SUBSIDIARIES

(In Millions)

Cliffs Shareholders

(In millions) Number

Shares Outstanding Par Value of Common

7 unchanged sentences

Stock and other incentive plans 2 — ( 24 ) — 37 — — 13

Common share repurchases ( 24 ) — — — ( 253 ) — — ( 253 )

Common share dividends ($ 0.27 per share)

— — — ( 75 ) — — — ( 75 )

December 31, 2019 271 $ 37 $ 3,873 $ ( 2,842 ) $ ( 391 ) $ ( 319 ) $ — $ 358

Comprehensive income (loss) — — — ( 122 ) — 186 41 105

Stock and other incentive plans 2 — ( 24 ) — 37 — — 13

Acquisition of AK Steel 127 16 602 — — — 330 948

4 unchanged sentences

December 31, 2020 478 $ 63 $ 5,431 $ ( 2,989 ) $ ( 354 ) $ ( 133 ) $ 323 $ 2,341

Comprehensive income (loss) — — — 2,988 — 751 45 3,784

Comprehensive income — — — 2,988 — 751 45 3,784

Issuance of common shares 20 — 78 — 244 — — 322

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December 31, 2021 500 $ 63 $ 4,892 $ ( 1 ) $ ( 82 ) $ 618 $ 284 $ 5,774

Comprehensive income — — — 1,335 — 1,212 41 2,588

Stock and other incentive plans 2 — 7 — 12 — — 19

1.500% 2025 Convertible Senior Notes redemption 24 3 ( 28 ) — — — — ( 25 )

Common share repurchases ( 13 ) — — — ( 240 ) — — ( 240 )

Net distributions to noncontrolling interests — — — — — ( 74 ) ( 74 )

December 31, 2022 513 $ 66 $ 4,871 $ 1,334 $ ( 310 ) $ 1,830 $ 251 $ 8,042

The accompanying notes are an integral part of these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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NATURE OF BUSINESS

Cliffs is the largest flat-rolled steel producer in North America.

We are the largest flat-rolled steel producer in North America.

Founded in 1847 as a mine operator, we are also the largest manufacturer of iron ore pellets in North America.

We are vertically integrated from mined raw materials, direct reduced iron and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing.

We serve a diverse range of markets due to our comprehensive offering of flat-rolled steel products and are the largest supplier of steel to the automotive industry in North America.

Headquartered in Cleveland, Ohio, we employ approximately 26,000 people across our operations in the United States and Canada.

We are the largest supplier of steel to the automotive industry in North America and serve a diverse range of markets due to our comprehensive offering of flat-rolled steel products.

Headquartered in Cleveland, Ohio, we employ approximately 27,000 people across our operations in the United States and Canada, of which approximately 19,000 were represented by labor unions under various agreements.

More than 90% of our hourly workforce is represented by three prominent unions - USW, UAW and IAM.

Unless otherwise noted, discussion of our business and results of operations in this Annual Report on Form 10-K refers to our continuing operations.

Acquisition of FPT

On November 18, 2021, we completed the acquisition of FPT.

FPT is a leading prime ferrous scrap processor in the U.S.

FPT's operations consist of 22 scrap facilities located primarily in the Midwest region of the United States.

Refer to NOTE 3 - ACQUISITIONS for further information.

BUSINESS OPERATIONS

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We review an investment for impairment when circumstances indicate that a loss in value below its carrying amount is other than temporary.

As of December 31, 2019, our 23 % ownership in Hibbing was recorded as an equity method investment.

As a result of the acquisition of ArcelorMittal USA, we acquired an additional 62.3 % ownership interest in Hibbing.

As of both December 31, 2021 and December 31, 2020, our ownership in the Hibbing joint venture was 85.3 % and was fully consolidated within our operating results with a noncontrolling interest.

Our investment in affiliates of $ 133 million and $ 128 million as of December 31, 2022 and 2021, respectively, was classified in Other non-current assets.

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USE OF ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the

reporting period.

Our mineral reserves;

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environmental, reclamation and closure obligations;

valuation of business combinations, long-lived assets, inventory, tax assets and post-employment, post-retirement and other employee benefit liabilities;

valuation of business combinations, goodwill, long-lived assets, inventory, tax assets and post-employment, post-retirement and other employee benefit liabilities;

reserves for contingencies and litigation require the use of various management estimates and assumptions.

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Assets acquired and liabilities assumed in a business combination are recognized and measured based on their estimated fair values at the acquisition date, while the acquisition-related costs are expensed as incurred.

Any excess of the purchase consideration when compared to the fair value of the net tangible and intangible assets acquired, if any, is recorded as goodwill.

Any excess of the purchase consideration when compared to the fair value of the net tangible and intangible assets acquired 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.

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Where right of offset exists, we report cash balances net.

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TRADE ACCOUNTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSS

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We establish provisions for expected lifetime losses on accounts receivable at the time a receivable is recorded based on historical experience, customer credit quality and forecasted economic conditions.

We regularly review our accounts receivable balances and the allowance for credit loss and establish or adjust the allowance as necessary using the specific identification method in accordance with CECL.

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.

We evaluate the aggregation and risk characteristics of receivable pools and develop loss rates that reflect historical collections, current forecasts of future economic conditions over the time horizon we are exposed to credit risk, and payment terms or conditions that may materially affect future forecasts.

1 unchanged sentence

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 further information.

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

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We have established policies and procedures, including the use of certain derivative instruments, to manage such risks.

Derivative financial instruments are recognized as either assets or liabilities in the Statements of Consolidated Financial Position and measured at fair value.

Derivative financial instruments are recognized as either assets or liabilities on 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).

2 unchanged sentences

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, 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 income (loss) .

Amounts recorded in Accumulated other comprehensive income (loss) are reclassified to earnings or losses in the period the underlying hedged transaction affects earnings or when the underlying hedged transaction is no longer reasonably possible of occurring.

When it is determined that a derivative is not highly effective as a 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 income .

Amounts recorded in Accumulated other comprehensive income are reclassified to earnings or losses in the period the underlying hedged transaction affects earnings or when the underlying hedged transaction is no longer reasonably possible of occurring.

For derivative instruments that have not been designated as cash flow hedges, changes in fair value are recorded in the period of the instrument's earnings or losses.

10 unchanged sentences

Equipment Straight line/Double declining balance 3 to 45 years

Refer to NOTE 6 - PROPERTY, PLANT AND EQUIPMENT for further information.

Goodwill represents the excess purchase price paid over the fair value of the net assets from an acquisition.

Goodwill is not amortized for financial statement purposes, but it is assessed for impairment on an annual basis on October 1 (or more frequently if necessary).

Refer to NOTE 3 - ACQUISITIONS and NOTE 7 - GOODWILL AND INTANGIBLE ASSETS AND LIABILITIES for further information.

OTHER INTANGIBLE ASSETS AND LIABILITIES

Intangible assets and liabilities are subject to periodic amortization on a straight-line basis over their estimated useful lives.

Refer to NOTE 3 - ACQUISITIONS and NOTE 7 - GOODWILL AND INTANGIBLE ASSETS AND LIABILITIES for further information.

We determine if an arrangement contains a lease at inception.

1 unchanged sentence

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.

Short-term leases (leases with an initial lease term of 12 months or less), right-of-use assets and lease liabilities are not recognized on the Statements of Consolidated Financial Position.

Operating 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

1 unchanged sentence

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").

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.

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.

During the year ended December 31, 2022, we concluded that there were no triggering events resulting in the need for an impairment assessment except for the announcement of the permanent closure of Mountain State Carbon, which resulted in a $ 29 million asset impairment charge during the year.

For the years ended December 31, 2021 and 2020, no impairment indicators were present that would indicate the carrying value of any of our asset groups may not be recoverable;

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

Refer to NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS and NOTE 10 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further information.

Pensions and Other Postretirement Benefits

PENSION AND OTHER POSTRETIREMENT BENEFITS

We offer defined benefit pension plans, defined contribution pension plans and OPEB plans, primarily consisting of retiree healthcare benefits as part of our total compensation and benefits programs.

2 unchanged sentences

if the pension and OPEB obligations exceed the plan assets, the amount of the underfunded obligations is recorded as a liability.

Year-end balance sheet adjustments to pension and OPEB assets and obligations are recorded as Accumulated other comprehensive income (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.

Year-end balance sheet adjustments to pension and OPEB assets and obligations are recorded as Accumulated other comprehensive income on the Statements of Consolidated Financial Position.

The actuarial estimates of the PBO (Projected benefit obligation) and APBO (Accumulated postretirement benefit obligation) 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.

5 unchanged sentences

The expected return on plan assets is calculated on a plan-by-plan basis using each plan's strategic asset allocation and our expected long-term capital market return assumptions.

net actuarial gain/loss, and other costs are classified within Net periodic benefit credits (costs) other than service cost component.

Refer to NOTE 10 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further information.

Labor Agreements

At December 31, 2021, we employed approximately 26,000 people, of which approximately 18,500 were represented by labor unions under various agreements.

We have ten agreements that expire in 2022 and three agreements that expire in 2023.

Workers at some of our North American facilities are covered by agreements with the USW, UAW and IAM, as well as several other smaller unions that have various expiration dates.

Service costs are classified within Cost of goods sold, 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 Net periodic benefit credits other than service cost component.

Cumulative actuarial gains and losses will be amortized to expense using the corridor method, where gains and losses are recognized if they exceed 10% of the greater of the fair value of plan assets or the plans' benefit obligations.

The amortization period will vary by plan.

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ASSET RETIREMENT OBLIGATIONS

Asset retirement obligations are recognized when incurred and recorded as liabilities at fair value.

An asset retirement obligation is recognized when incurred if a reasonable estimate of fair value can be made, and is initially measured at fair value.

The fair value of the liability is determined as the discounted value of the expected future cash flows.

7 unchanged sentences

Changes in estimates at inactive operations are reflected in earnings in the period an estimate is revised.

Refer to NOTE 14 - ASSET RETIREMENT OBLIGATIONS for further information.

ENVIRONMENTAL REMEDIATION COSTS

Certain of our operating activities are subject to various laws and regulations governing protection of the environment.

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.

4 unchanged sentences

Potential insurance recoveries have not been reflected in the determination of the liabilities.

Refer to NOTE 20 - COMMITMENTS AND CONTINGENCIES for further information.

REVENUE RECOGNITION

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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 time control is transferred to the customer.

Refer to NOTE 4 - REVENUES for further information.

REPAIRS AND MAINTENANCE

4 unchanged sentences

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 historical and projected stock prices was developed for both the Company and its predetermined peer group of mining and metals companies.

A correlation matrix of historical and projected stock prices was developed for both the Company and its predetermined peer group of metals and mining 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.

We estimate the volatility of our common shares and that of the peer group of metals and mining 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.

3 unchanged sentences

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, the option exercise price, 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 11 - STOCK COMPENSATION PLANS for additional information.

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.

5 unchanged sentences

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.

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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.

Refer to NOTE 12 - INCOME TAXES for further information.

FOREIGN CURRENCY

4 unchanged sentences

We present both basic and diluted EPS amounts for continuing operations and discontinued operations.

Total basic 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.

converted method and the calculated common share equivalents in excess of the conversion rate related to our 1.500% 2025 Convertible Senior Notes using the treasury-stock method.

Total basic EPS amounts are calculated by dividing Net income (loss) attributable to Cliffs shareholders , less the earnings allocated to any of our outstanding Series B Participating Redeemable Preferred Stock, by the weighted average number of common shares outstanding during the period presented.

Total diluted 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 1.500% 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.

Refer to NOTE 8 - DEBT AND CREDIT FACILITIES and NOTE 19 - EARNINGS PER SHARE for further information.

VARIABLE INTEREST ENTITIES

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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 18 - VARIABLE INTEREST ENTITIES for additional information.

RECENT ACCOUNTING PRONOUNCEMENTS

Issued and Not Effective

ISSUED AND ADOPTED

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).

1 unchanged sentence

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.

Subsequent to the year ended December 31, 2021, we redeemed all of our outstanding 1.500% 2025 Convertible Senior Notes;

therefore, there will be no impact as a result of our adoption of this update as of January 1, 2022.

Refer to NOTE 21 - SUBSEQUENT EVENTS for further information.

We utilized the modified retrospective method of adoption;

using this approach, the guidance was applied to transactions outstanding as of the beginning of the fiscal year in which the amendment was adopted.

On January 18, 2022, we redeemed all of our outstanding 1.500% 2025 Convertible Senior Notes;

therefore, there was a de minimis impact as a result of our adoption of this update.

ISSUED AND NOT YET EFFECTIVE

In September 2022, the FASB issued ASU No.

2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations .

This guidance requires annual and interim disclosure of the key terms of outstanding supplier finance programs and a roll-forward of the related obligations.

The new standard does not affect the recognition, measurement or financial statement presentation of the supplier finance program obligations.

These amendments are effective for fiscal years beginning after December 15, 2022, except for the amendment on roll-forward information, which is effective for fiscal years beginning after December 15, 2023.

Upon adoption, we may be required to include additional disclosures to the extent we have material supplier finance program obligations.

NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION

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Allowance for credit losses as of January 1 $ ( 4 ) $ ( 5 )

Decrease (increase) in allowance 1 ( 5 )

Decrease in allowance — 1

Allowance for credit losses as of December 31 $ ( 4 ) $ ( 4 )

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

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

(In millions) 2022 2021

Year Ended December 31,

Product inventories

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The excess of current cost over LIFO cost of iron ore inventories was $ 169 million and $ 124 million at December 31, 2022 and 2021, respectively.

As of December 31, 2021, the product inventory balance for iron ore inventories increased, resulting in a LIFO increment in 2021.

The effect of the inventory build was an increase in Inventories of $ 45 million in the Statements of Consolidated Operations for the year ended December 31, 2021.

As of December 31, 2020, the product inventory balance for iron ore inventories decreased, resulting in the liquidation of a LIFO layer.

As of December 31, 2022, the product inventory balance for iron ore inventories decreased, resulting in a liquidation of a LIFO layer in 2022.

The effect of the inventory reduction was an increase in Cost of goods sold of $ 36 million in the Statements of Consolidated Operations for the year ended December 31, 2022.

As of December 31, 2021, the product inventory balance for iron ore inventories increased, resulting in a LIFO increment in 2021.

The effect of the inventory build was an increase in Inventories of $ 45 million on the Statements of Consolidated Financial Position for the year ended December 31, 2021.

CASH FLOW INFORMATION

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

(In Millions)

Year Ended December 31,

2021 2020 2019

(In millions) 2022 2021 2020

Capital additions $ 1,033 $ 857 $ 483

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Right-of-use assets - finance leases 55 50 44

Grants — — ( 10 )

Cash paid for capital expenditures including deposits $ 943 $ 705 $ 525

Additionally, included within Other investing activities on the Statements of Consolidated Cash Flows are grant reimbursements related to governmental funded capital projects.

For the years ended December 31, 2022 and 2021, grant reimbursements were $ 27 million and $ 2 million, respectively.

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

Year Ended December 31,

(In millions) 2022 2021 2020

2021 2020 2019

Taxes paid on income $ 334 $ 166 $ 5

2 unchanged sentences

1 Capitalized interest was $ 9 million, $ 6 million and $ 53 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Other Non-Cash Investing and Financing Activities

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Other non-cash investing and financing activities are as follows:

Year Ended December 31,

(In millions) 2022 2021 2020

2021 2020 2019

1.500% 2025 Convertible Senior Notes redemption $ 25 $ — $ —

Fair value of settlement of a pre-existing relationship as part of consideration in connection with FPT Acquisition — ( 20 ) —

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The AM USA Transaction transformed us into a fully-integrated steel enterprise with the size and scale to expand product offerings and improve through-the-cycle margins.

The FPT Acquisition gives us a competitive advantage in sourcing prime scrap, a key raw material for our steelmaking facilities.

The FPT Acquisition provides us a competitive advantage in sourcing prime scrap, a key raw material for our steelmaking facilities.

FPT ACQUISITION

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For the period subsequent to the FPT Acquisition (November 18, 2021 through December 31, 2021), FPT generated Revenues of $ 153 million and a loss of $ 18 million included within Net income (loss) attributable to Cliffs shareholders, which included $ 22 million related to amortization of the fair value inventory step-up.

Additionally, we incurred acquisition-related costs, excluding severance costs, of $ 1 million for the year ended December 31, 2021 in connection with the FPT Acquisition, which was recorded in Acquisition-related costs on the Statements of Consolidated Operations .

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

(In millions)

Cash consideration (subject to customary working capital adjustments) $ 775

Cash consideration:

Cash consideration pursuant to the FPT Acquisition Agreement $ 778

Cash consideration paid related to IRC Section 338(h)(10) 23

Total cash consideration 801

Fair value of settlement of a pre-existing relationship ( 20 )

Total purchase consideration $ 781

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

Additionally, if the Company decides to make any elections under Section 338(h)(10) of the IRC with respect to entities acquired in connection with the FPT Acquisition, the final cash consideration could potentially change.

We made certain elections under Section 338(h)(10) of the IRC with respect to entities acquired in connection with the FPT Acquisition that were finalized during the third quarter of 2022, which changed the final cash consideration.

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VALUATION ASSUMPTION AND PURCHASE PRICE ALLOCATION

We estimated fair values at November 18, 2021 for the preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in connection with the FPT Acquisition.

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 FPT Acquisition, most notably, inventories, personal and real property, leases, investments, deferred taxes, environmental obligations and intangible assets, 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.

The preliminary purchase price allocation to assets acquired and liabilities assumed in the FPT Acquisition was:

(In Millions)

Initial Allocation of Consideration

The allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in connection with the FPT Acquisition was based on estimated fair values at November 18, 2021, and was finalized during the quarter ended December 31, 2022.

The following is a summary of the purchase price allocation to assets acquired and liabilities assumed in the FPT Acquisition:

(In millions) Initial Allocation of Consideration Measurement

Period Adjustments Final Allocation of Consideration as of December 31, 2022

Cash and cash equivalents $ 9 $ — $ 9

6 unchanged sentences

Accrued employment costs ( 8 ) — ( 8 )

State and local taxes ( 1 )

Other current liabilities ( 9 ) 3 ( 6 )

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Net identifiable assets acquired 476 12 488

Goodwill 279 14 293

Total net assets acquired $ 755 $ 26 $ 781

The goodwill resulting from the FPT Acquisition primarily represents the incremental benefit of providing substantial access to prime scrap for our vertically integrated steelmaking business, as well as any synergistic benefits to be realized from the FPT Acquisition within our Steelmaking segment.

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

We have $ 296 million in goodwill that is deductible for tax purposes from the FPT Acquisition.

The purchase price allocated to identifiable intangible assets acquired was:

(In millions) Weighted Average Life (In years)

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Following the closing of the AM USA Transaction, we own 100% of the interests in Kote and Tek.

We incurred acquisition-related costs, excluding severance costs, of $ 3 million and $ 26 million for the years ended December 31, 2021 and 2020, respectively, in connection with the AM USA Transaction, which were recorded in Acquisition-related costs on the Statements of Consolidated Operations.

71 | CLF 2022 FORM 10-K

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

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Cash consideration for purchase of the remaining JV partner's interest of Kote and Tek 182

Total cash consideration receivable ( 48 )

Cash consideration pursuant to working capital adjustments ( 48 )

Total cash consideration $ 639

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Total fair value of settlement of a pre-existing relationship $ 237

72 | CLF 2022 FORM 10-K

VALUATION ASSUMPTION AND PURCHASE PRICE ALLOCATION

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The following is a summary of the purchase price allocation to assets acquired and liabilities assumed in the AM USA Transaction:

(In Millions)

Initial Allocation of Consideration Measurement

(In millions) Initial Allocation of Consideration Measurement

Period Adjustments Final Allocation Consideration as of December 31, 2021

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ACQUISITION OF AK STEEL

On March 13, 2020, pursuant to the AK Steel Merger Agreement, we completed the acquisition of AK Steel, in which we were the acquirer.

On March 13, 2020, pursuant to the AK Steel Merger Agreement (Agreement and Plan of Merger, dated as of December 2, 2019, among Cleveland-Cliffs Inc., AK Steel and Merger Sub), 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.

We incurred acquisition-related costs, excluding severance costs, of $ 1 million and $ 26 million for the years ended December 31, 2021 and 2020, respectively, in connection with the AK Steel Merger, which were recorded in Acquisition-related costs on the Statements of Consolidated Operations.

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

3 unchanged sentences

Total purchase consideration $ 1,535

73 | CLF 2022 FORM 10-K

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 was calculated as follows:

(In Millions,

Except Per Share Amounts)

(In millions, except per share amounts)

Number of shares of AK Steel common stock issued and outstanding 317

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The following is a summary of the purchase price allocation to assets acquired and liabilities assumed in the AK Steel Merger:

(In Millions)

Initial Allocation of Consideration Measurement Period Adjustments Final Allocation of Consideration as of March 31, 2021

(In millions) Initial Allocation of Consideration Measurement Period Adjustments Final Allocation of Consideration as of March 31, 2021

Cash and cash equivalents $ 38 $ 1 $ 39

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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 to be deductible for income tax purposes.

74 | CLF 2022 FORM 10-K

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

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

(In Millions)

Year Ended December 31,

(In millions) December 31, 2020

Revenues $ 12,837

Net income (loss) attributable to Cliffs shareholders ( 520 ) ( 11 )

Net loss attributable to Cliffs shareholders ( 520 )

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 2020 Acquisitions occurred on January 1, 2019.

Significant pro forma adjustments include the following:

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.

The elimination of intercompany revenues between Cliffs and ArcelorMittal USA and AK Steel of $ 844 million for the year ended December 31, 2020.

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.

The elimination of non-recurring transaction costs incurred by Cliffs, AK Steel and ArcelorMittal USA in connection with the 2020 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.

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.

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.

The 2020 pro forma net loss was adjusted to exclude $ 140 million for the year ended December 31, 2020, for the impact of reversal of the fees charged for management, financial and legal services under the Industrial Franchise Agreement with the former parent.

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.

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.

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.

FPT ACQUISITION

The following table provides unaudited pro forma financial information, prepared in accordance with Topic 805, as if FPT had been acquired as of January 1, 2020:

(In Millions)

Year Ended December 31,

(In millions) 2021 2020

Revenues $ 21,701 $ 13,549

Net income (loss) attributable to Cliffs shareholders 3,074 ( 526 )

75 | CLF 2022 FORM 10-K

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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 and $ 78 million for the years ended December 31, 2020 and 2019, respectively.

The following table represents our Revenues by market:

(In Millions)

Year Ended December 31,

2021 2020 2019

Automotive $ 4,726 $ 2,062 $ —

(In millions) 2022 2021 2020

Direct automotive $ 6,661 $ 4,726 $ 2,062

Infrastructure and manufacturing 5,869 5,380 784

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Other Businesses:

Automotive 426 329 —

Direct automotive 478 426 329

Infrastructure and manufacturing 52 47 34

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The following table represents our Revenues by product line:

(Dollars In Millions, Sales Volumes in Thousands)

Year Ended December 31,

2021 2020 2019

Revenue Volume 1

(In millions) 2022 2021 2020

Hot-rolled steel $ 4,529 $ 5,615 $ 386

3 unchanged sentences

Plate 1,651 1,316 46

Other steel products 1,247 1,460 46 79 — —

Other 1,051 N/A 1,382 N/A 1,990 N/A

Slab and other steel products 1,492 1,247 46

Other 2,329 1,051 1,382

Total steelmaking 22,383 19,901 4,965

Other Businesses:

Other 543 N/A 389 N/A — N/A

Other 606 543 389

Total revenues $ 22,989 $ 20,444 $ 5,354

1 All product volumes are stated in net tons.

Deferred Revenue

The table below summarizes our deferred revenue balances:

(In Millions)

Deferred Revenue (Current) Deferred Revenue (Long-Term)

2021 2020 2021 2020

Opening balance as of January 1 $ 7 $ 22 $ — $ 26

Net increase (decrease) 18 ( 15 ) — ( 26 )

Closing balance as of December 31 $ 25 $ 7 $ — $ —

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 Revenues in the Statements of Consolidated Operations during the year ended December 31, 2020.

76 | CLF 2022 FORM 10-K

NOTE 5 - SEGMENT REPORTING

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Our results by segment are as follows:

(In Millions)

Year Ended December 31,

2021 2020 2019

(In millions) 2022 2021 2020

Steelmaking $ 22,383 $ 19,901 $ 4,965

4 unchanged sentences

Other Businesses 69 9 47

Corporate and eliminations ( 169 ) ( 127 ) ( 111 )

Eliminations 1

11 ( 12 ) ( 10 )

Total Adjusted EBITDA $ 3,169 $ 5,277 $ 353

1 In 2022, we began allocating Corporate Selling, general and administrative expenses to our operating segments.

Prior periods have been adjusted to reflect this change.

The Eliminations line now only includes sales between segments.

77 | CLF 2022 FORM 10-K

The following table provides a reconciliation of our consolidated Net income (loss) to total Adjusted EBITDA:

(In Millions)

Year Ended December 31,

2021 2020 2019

(In millions) 2022 2021 2020

Net income (loss) $ 1,376 $ 3,033 $ ( 81 )

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Gain (loss) on extinguishment of debt ( 75 ) ( 88 ) 130

Severance costs ( 15 ) ( 38 ) ( 2 )

Acquisition-related costs excluding severance costs ( 5 ) ( 52 ) ( 7 )

Acquisition-related loss on equity method investment ( 31 ) — —

Amortization of inventory step-up ( 161 ) ( 96 ) —

Impact of discontinued operations 3 1 ( 1 )

Acquisition-related expenses and adjustments ( 1 ) ( 197 ) ( 148 )

Asset impairment ( 29 ) — —

Other, net ( 29 ) ( 27 ) ( 37 )

Total Adjusted EBITDA $ 3,169 $ 5,277 $ 353

4 unchanged sentences

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

(In Millions)

Year Ended December 31,

2021 2020 2019

(In millions) 2022 2021 2020

Depreciation, depletion and amortization:

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Other Businesses ( 40 ) ( 37 ) ( 27 )

Corporate 5 5 5

Total depreciation, depletion and amortization $ ( 1,034 ) $ ( 897 ) $ ( 308 )

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Total segment assets 18,385 18,632

Corporate 343 683

Corporate/Eliminations 370 343

Total assets $ 18,755 $ 18,975

78 | CLF 2022 FORM 10-K

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

(In millions) 2022 2021 2020

2021 2020 2019

United States $ 20,991 $ 18,881 $ 4,580

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We recorded depreciation expense of $ 988 million, $ 848 million and $ 298 million for the years ended December 31, 2022, 2021 and 2020, respectively.

We recorded capitalized interest into property, plant and equipment of $ 6 million, $ 53 million and $ 25 million during the years ended December 31, 2021, 2020 and 2019, respectively.

Depreciation expense for the year ended December 31, 2022 includes $ 23 million of accelerated depreciation related to the decision to indefinitely idle the coke facility at Middletown Works and $ 68 million of accelerated depreciation related to the indefinite idle of the Indiana Harbor #4 blast furnace.

During the year ended December 31, 2022, we announced the permanent closure of Mountain State Carbon, which resulted in a $ 29 million asset impairment charge.

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

6 unchanged sentences

We recorded depletion expense of $ 38 million, $ 46 million and $ 8 million for the years ended December 31, 2022, 2021, and 2020, respectively.

79 | CLF 2022 FORM 10-K

NOTE 7 - GOODWILL AND INTANGIBLE ASSETS AND LIABILITIES

4 unchanged sentences

Total goodwill $ 1,130 $ 1,116

The decrease of $ 290 million in the balance of Goodwill in our Steelmaking segment as of December 31, 2021, compared to December 31, 2020, is due to the decrease in estimated identified goodwill as a result of measurement period adjustments to the purchase price allocation for the acquisition of ArcelorMittal USA, partially offset by the increase due to the preliminary assignment of Goodwill in 2021 based on the preliminary purchase price allocation for the acquisition of FPT.

The increase of $ 14 million in the balance of Goodwill in our Steelmaking segment as of December 31, 2022, compared to December 31, 2021, is due to the change in estimated identified goodwill as a result of measurement period adjustments to the purchase price allocation for the acquisition of FPT.

Refer to NOTE 3 - ACQUISITIONS for further details.

1 unchanged sentence

The following is a summary of our intangible assets and liabilities:

(In Millions)

December 31, 2022 December 31, 2021

Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount

(In millions) Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount

Intangible assets 1 :

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Estimated future amortization expense related to intangible assets is $ 13 million annually for the years 2023 through 2027.

Income from amortization related to intangible liabilities was $ 7 million in both of the years ended December 31, 2021 and 2020.

Income from amortization related to intangible liabilities was $ 5 million and $ 7 million for the years ended December 31, 2022 and 2021, respectively.

Estimated future amortization income related to the intangible liabilities is $ 5 million annually for the years 2023 through 2027.

80 | CLF 2022 FORM 10-K

NOTE 8 - DEBT AND CREDIT FACILITIES

1 unchanged sentence

(In Millions)

December 31, 2021

Debt Instrument Issuer 1

Annual Effective Interest Rate Total Principal Amount Unamortized Debt Issuance Costs Unamortized Premiums (Discounts) Total Debt

Annual Effective Interest Rate December 31, 2022 December 31, 2021

Senior Secured Notes:

18 unchanged sentences

Cliffs 6.34 % 235 263

IRBs due 2024 to 2028 AK Steel Various 66 — 2 68

ABL Facility 3

1.87 % 4,500 — — 1,609

Total long-term debt $ 5,238

1 Unless otherwise noted, references in this column and throughout this NOTE 8 - DEBT AND CREDIT FACILITIES to "Cliffs" are to Cleveland-Cliffs Inc., and references to "AK Steel" are to AK Steel Corporation (n/k/a Cleveland-Cliffs Steel Corporation).

2 Refers to Cleveland-Cliffs Inc.

as borrower under our ABL Facility.

3 The total principal amount for the ABL Facility is stated at the maximum borrowing capacity.

(In Millions)

December 31, 2020

Debt Instrument Issuer 1

Annual Effective Interest Rate Total Principal Amount Unamortized

Debt Issuance Costs Unamortized Premiums (Discounts) Total Debt

Senior Secured Notes:

4.875 % 2024 Senior Secured Notes

Cliffs 5.00 % $ 395 $ ( 3 ) $ ( 1 ) $ 391

9.875 % 2025 Senior Secured Notes

Cliffs 10.57 % 955 ( 8 ) ( 25 ) 922

6.750 % 2026 Senior Secured Notes

Cliffs 6.99 % 845 ( 20 ) ( 9 ) 816

Senior Unsecured Notes:

7.625 % 2021 AK Senior Notes

AK Steel 7.33 % 34 — — 34

7.500 % 2023 AK Senior Notes

AK Steel 6.17 % 13 — — 13

6.375 % 2025 Senior Notes

Cliffs 8.11 % 64 — ( 4 ) 60

6.375 % 2025 AK Senior Notes

AK Steel 8.11 % 29 — ( 2 ) 27

1.500 % 2025 Convertible Senior Notes

Cliffs 6.26 % 296 ( 4 ) ( 49 ) 243

5.750 % 2025 Senior Notes

Cliffs 6.01 % 396 ( 3 ) ( 4 ) 389

7.000 % 2027 Senior Notes

Cliffs 9.24 % 73 — ( 8 ) 65

7.000 % 2027 AK Senior Notes

AK Steel 9.24 % 56 — ( 6 ) 50

5.875 % 2027 Senior Notes

Cliffs 6.49 % 556 ( 4 ) ( 18 ) 534

6.250 % 2040 Senior Notes

Cliffs 6.34 % 263 ( 2 ) ( 3 ) 258

IRBs due 2024 to 2028 AK Steel Various 92 — 2 94

EDC Revolving Facility 3

* 3.25 % 40 — — 18

IRBs AK Steel Various — 66

ABL Facility 3

2.15 % 3,500 — — 1,510

Total debt 4,306 5,369

Unamortized discounts and issuance costs ( 57 ) ( 131 )

Total long-term debt $ 4,249 $ 5,238

*Our subsidiaries, Fleetwood Metal Industries Inc.

and The Electromac Group Inc., were the borrowers under the EDC Revolving Facility.

1 unchanged sentence

as borrower under our ABL Facility.

3 The total principal amounts for the indicated credit facilities are stated at their respective maximum borrowing capacities.

3 Our ABL Facility annual effective interest rate was 5.60 % and 1.87 %, respectively, as of December 31, 2022 and December 31, 2021.

OUTSTANDING SENIOR SECURED NOTES

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

Debt Instrument Maturity Interest Payable

(until maturity)

9.875% 2025 Senior Secured Notes October 17, 2025 April 17 and October 17

6.750% 2026 Senior Secured Notes March 15, 2026 March 15 and September 15

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

We may redeem the 9.875 % 2025 Senior Secured Notes, in whole or in part, at any time at our option upon not less than 30, and not more than 60, days' prior notice sent to the holders of the 9.875% 2025 Senior Secured Notes.

The 9.875% 2025 Senior Secured Notes are redeemable prior to October 17, 2022, at a redemption price equal to 100 % of the principal amount thereof plus a "make-whole" premium set forth in the indenture, plus accrued

and unpaid interest, if any, to, but not including, the date of redemption.

We may also redeem up to 35% of the aggregate principal amount of the 9.875% 2025 Senior Secured Notes prior to October 17, 2022, at a redemption price equal to 109.875 % of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including, the date of redemption with the net cash proceeds of one or more equity offerings.

On March 11, 2021, we exercised this optional redemption feature when we purchased $ 322 million aggregate principal amount of the 9.875% 2025 Senior Secured Notes using the net proceeds from the underwritten public offering of 20 million common shares.

The 9.875% 2025 Senior Secured Notes are redeemable beginning on October 17, 2022, at a redemption price equal to 107.406 % of the principal amount thereof, decreasing on each April 17 thereafter until April 17, 2025, on and after which the 9.875% 2025 Senior Secured Notes are redeemable at par, in each case, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

The 6.750 % 2026 Senior Secured Notes bear interest at a rate of 6.750 % per annum, payable semi-annually in arrears on March 15 and September 15 of each year.

The 6.750 % 2026 Senior Secured Notes will mature on March 15, 2026.

The 6.750 % 2026 Senior Secured Notes are jointly and severally and fully and unconditionally guaranteed on a senior secured basis by substantially all of our material domestic subsidiaries and are secured (subject in each case to certain exceptions and permitted liens) by (i) a first-priority lien, on substantially all of our assets and the assets of the guarantors, other than the ABL Collateral (as defined below), and (ii) a second-priority lien on the ABL Collateral, which is junior to a first-priority lien for the benefit of the lenders under our ABL Facility.

We may redeem the 6.750 % 2026 Senior Secured Notes in whole or in part, at any time at our option upon not less than 30, and not more than 60, days' prior notice sent to the holders of the 6.750% 2026 Senior Secured Notes.

The 6.750% 2026 Senior Secured Notes are redeemable prior to March 15, 2022, at a redemption price equal to 100 % of the principal amount thereof plus a "make-whole" premium set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

We may also redeem up to 35% of the aggregate principal amount of the 6.750% 2026 Senior Secured Notes prior to March 15, 2022, at a redemption price equal to 106.750 % of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including, the date of redemption with the net cash proceeds of one or more equity offerings.

The 6.750% 2026 Senior Secured Notes are redeemable beginning on March 15, 2022, at a redemption price equal to 105.063 % of the principal amount thereof, decreasing on each March 15 thereafter until March 15, 2025, on and after which the 6.750% 2026 Senior Secured Notes are redeemable at par, in each case, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

The 6.750% 2026 Senior Secured Notes became redeemable on March 15, 2022 at a redemption price equal to 105.063 % of the principal amount thereof, and decrease to 103.375 % on March 15, 2023, 101.688 % on March 15, 2024 and are redeemable at par beginning on March 15, 2025.

In each case, we pay the redemption premiums plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

In addition, if a change in control triggering event, as defined in the indenture, occurs with respect to the 6.750 % 2026 Senior Secured Notes, we will be required to offer to purchase the notes at a purchase price equal to 101 % of their principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of purchase.

1 unchanged sentence

however, there are no financial covenants.

81 | CLF 2022 FORM 10-K

OUTSTANDING SENIOR UNSECURED NOTES

2021 Issuances

On February 17, 2021, we entered into an indenture among Cliffs, the guarantors party thereto and U.S.

Bank National Association, as trustee, relating to the issuances of $ 500 million aggregate principal amount of 4.625 % 2029 Senior Notes and $ 500 million aggregate principal amount of 4.875 % 2031 Senior Notes, each issued at par.

The 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes were issued in private placement transactions exempt from the registration requirements of the Securities Act.

The 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes are unsecured senior obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated indebtedness.

The 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes are guaranteed on a senior unsecured basis by our material direct and indirect wholly owned domestic subsidiaries and, therefore, are structurally senior to any of our existing and future indebtedness that is not guaranteed by such guarantors and are structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries that do not guarantee the 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes.

In addition, if a change in control triggering event, as defined in the indenture, occurs with respect to the 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes, we will be required to offer to repurchase the notes at a purchase price equal to 101 % of their principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.

The terms of the 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes contain certain customary covenants;

however, there are no financial covenants.

4.625% 2029 Senior Notes

The 4.625% 2029 Senior Notes bear interest at a rate of 4.625 % per annum, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2021.

The 4.625% 2029 Senior Notes will mature on March 1, 2029.

The 4.625% 2029 Senior Notes may be redeemed, in whole or in part, on not less than 10, nor more than 60, days’ prior notice sent to the holders of the notes.

The following is a summary of redemption prices for our 4.625% 2029 Senior Notes:

Redemption Period Redemption Price 1

Restricted Amount

Prior to March 1, 2024 - using the proceeds of equity issuance 104.625 % Up to 35% of original aggregate principal

Prior to March 1, 2024 2

Beginning March 1, 2024 102.313

Beginning March 1, 2025 101.156

Beginning on March 1, 2026 and thereafter 100.000

1 Plus accrued and unpaid interest, if any, up to, but excluding, the redemption date.

2 Plus a "make-whole" premium.

4.875% 2031 Senior Notes

The 4.875% 2031 Senior Notes bear interest at a rate of 4.875 % per annum, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2021.

The 4.875% 2031 Senior Notes will mature on March 1, 2031.

The 4.875% 2031 Senior Notes may be redeemed, in whole or in part, on not less than 10, nor more than 60, days’ prior notice sent to the holders of the notes.

The following is a summary of redemption prices for our 4.875% 2031 Senior Notes:

Redemption Period Redemption Price 1

Restricted Amount

Prior to March 1, 2026 - using the proceeds of equity issuance 104.875 % Up to 35% of original aggregate principal

Prior to March 1, 2026 2

Beginning March 1, 2026 102.438

Beginning March 1, 2027 101.625

Beginning March 1, 2028 100.813

Beginning on March 1, 2029 and thereafter 100.000

1 Plus accrued and unpaid interest, if any, up to, but excluding, the redemption date.

2 Plus a "make-whole" premium.

1.500% 2025 Convertible Senior Notes

The 1.500 % 2025 Convertible Senior Notes bear interest at a rate of 1.500% per year, payable semiannually in arrears on January 15 and July 15 of each year.

The 1.500% 2025 Convertible Senior Notes mature on January 15, 2025.

The 1.500% 2025 Convertible Senior Notes are senior unsecured obligations and rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 1.500% 2025 Convertible Senior Notes;

equal in right of payment to any of our unsecured indebtedness that is not so subordinated;

effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness;

and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

The terms of the 1.500% 2025 Convertible Senior Notes contain certain customary covenants;

however, there are no financial covenants.

Holders may convert their 1.500% 2025 Convertible Senior Notes at their option at any time prior to the close of business on the business day immediately preceding July 15, 2024, only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2018, if the last reported sale price of our common shares, par value $ 0.125 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

(2) during the five-business day period after any five-consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 1.500% 2025 Convertible Senior Notes for each trading day of

the measurement period was less than 98 % of the product of the last reported sale price of our common shares and the conversion rate on each such trading day;

(3) if we call the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date;

or (4) upon the occurrence of specified corporate events.

On or after July 15, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 1.500% 2025 Convertible Senior Notes at any time, regardless of the foregoing circumstances.

Upon conversion, we will pay or deliver, as the case may be, cash, common shares or a combination of cash and common shares, at our election.

Upon the issuance of the 1.500% 2025 Convertible Senior Notes the initial conversion rate was 122.4365 common shares per $1,000 principal, with a conversion price of $ 8.17 per common share.

The conversion rate is subject to adjustment in some circumstances, including the payment of dividends on common shares, but will not be adjusted for any accrued and unpaid interest.

In addition, following certain corporate events that occur prior to the maturity date, or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 1.500% 2025 Convertible Senior Notes in connection with such a corporate event or notice of redemption, as the case may be.

As of December 31, 2021, the conversion rate was 129.2985 common shares per $1,000 principal amount of 1.500% 2025 Convertible Senior Notes.

We may not redeem the 1.500% 2025 Convertible Senior Notes prior to January 15, 2022.

We may redeem all or any portion of the 1.500% 2025 Convertible Senior Notes, for cash at our option on or after January 15, 2022 if the last reported sale price of our common shares has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30-consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the 1.500% 2025 Convertible Senior Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If we undergo a fundamental change as defined in the indenture, holders may require us to repurchase for cash all or any portion of their 1.500% 2025 Convertible Senior Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the 1.500% 2025 Convertible Senior Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

In accounting for the issuance of the notes, we separated the 1.500% 2025 Convertible Senior Notes into liability and equity components.

The carrying amount of the liability component was calculated by measuring the fair value of similar liabilities that did not have associated convertible features.

The carrying amount of the equity component of $ 86 million representing the conversion option was determined by deducting the fair value of the liability component from the par value of the notes.

The difference represents the debt discount that is amortized to interest expense over the term of the notes.

The equity component is not remeasured as long as it continues to qualify for equity classification.

On December 1, 2021, we issued a notice of redemption for all $ 294 million aggregate principal amount outstanding of the 1.500% 2025 Convertible Senior Notes.

Refer to NOTE 21 - SUBSEQUENT EVENTS for further information on the redemption of the 1.500% 2025 Convertible Senior Notes.

Other Outstanding Unsecured Senior Notes

CLEVELAND-CLIFFS INC.

UNSECURED SENIOR NOTES

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

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5.875% 2027 Senior Notes June 1, 2027 June 1 and December 1

4.625% 2029 Senior Notes March 1, 2029 March 1 and September 1

4.875% 2031 Senior Notes March 1, 2031 March 1 and September 1

6.250% 2040 Senior Notes October 1, 2040 April 1 and October 1

The senior notes are unsecured obligations and rank equally in right of payment with all our other existing and future unsecured and unsubordinated indebtedness.

The 7.000% 2027 Senior Notes and 5.875% 2027 Senior Notes are guaranteed on a senior unsecured basis by our material direct and indirect wholly owned domestic subsidiaries and, therefore, are structurally senior to any of our existing and future indebtedness that is not guaranteed by such guarantors and are structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries that do not guarantee the notes.

The 7.000% 2027 Senior Notes, 5.875% 2027 Senior Notes, 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes are guaranteed on a senior unsecured basis by our material direct and indirect wholly owned domestic subsidiaries and, therefore, are structurally senior to any of our existing and future indebtedness that is not guaranteed by such guarantors and are structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries that do not guarantee the notes.

There are no subsidiary guarantees of the interest and principal amounts for the 6.250% 2040 Senior Notes.

The 7.000 % 2027 Senior Notes may be redeemed, in whole or in part, at any time at our option upon not less than 30, and not more than 60 days' prior notice sent to the holders.

The 7.000% 2027 Senior Notes are redeemable prior to March 15, 2022, at a redemption price equal to 100 % of the principal amount thereof plus a "make-whole" premium set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

The 7.000% 2027 Senior Notes are redeemable beginning on March 15, 2022, at a redemption price equal to 103.500 % of the principal amount thereof, decreasing on each March 15 thereafter until March 15, 2025, on and after which the 7.000% 2027 Senior Notes are redeemable at par, in each case, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

The 5.875 % 2027 Senior Notes are redeemable prior to June 1, 2022, at a redemption price equal to 100 % of the principal amount thereof plus a “make-whole” premium set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

We may also redeem up to 35% of the aggregate principal amount of the 5.875% 2027 Senior Notes prior to June 1, 2022 at a redemption price equal to 105.875 % of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of redemption with the net cash proceeds of one or more equity offerings.

The 5.875% 2027 Senior Notes are redeemable beginning on June 1, 2022, at a redemption price equal to 102.938 % of the principal amount thereof, decreasing on each June 1 thereafter until June 1, 2025, on and after which the 5.875% 2027 Senior Notes are redeemable at par, in each case, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

The 7.000% 2027 Senior Notes became redeemable on March 15, 2022 at a redemption price equal to 103.500 % of the principal amount thereof, and decrease to 102.333 % on March 15, 2023, 101.167 % on March 15, 2024 and are redeemable at par beginning on March 15, 2025.

In each case, we pay the redemption premiums plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

The 5.875 % 2027 Senior Notes became redeemable on June 1, 2022 at a redemption price equal to 102.938 % of the principal amount thereof, and decrease to 101.958 % on June 1, 2023, 100.979 % on June 1, 2024 and are redeemable at par beginning on June 1, 2025.

In each case, we pay the redemption premiums plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

The 4.625 % 2029 Senior Notes may be redeemed, in whole or in part, on not less than 10, nor more than 60, days’ prior notice sent to the holders of the notes.

The 4.625% 2029 Senior Notes are redeemable prior to March 1, 2024, at a redemption price equal to 100% of the principal amount thereof plus a "make-whole" premium set forth in the indenture.

We may also redeem up to 35% of the aggregate principal amount of the 4.625% 2029 Senior Notes prior to March 1, 2024 at a redemption price equal to 104.625 % of the principal amount thereof with the net cash proceeds of one or more equity offerings.

The 4.625% 2029 Senior Notes are redeemable beginning on March 1, 2024, at a redemption price equal to 102.313 % of the principal amount thereof, decreasing to 101.156 % on March 1, 2025 and are redeemable at par beginning on March 1, 2026.

In each case, we pay the redemption and "make-whole" premiums plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

The 4.875 % 2031 Senior Notes may be redeemed, in whole or in part, on not less than 10, nor more than 60, days’ prior notice sent to the holders of the notes.

The 4.875% 2031 Senior Notes are redeemable prior to March 1, 2026, at a redemption price equal to 100% of the principal amount thereof plus a "make-whole" premium set forth in the indenture.

We may also redeem up to 35% of the aggregate principal amount of the 4.875% 2031 Senior Notes prior to March 1, 2026 at a redemption price equal to 104.875 % of the principal amount thereof with the net cash proceeds of one or more equity offerings.

The 4.875% 2031 Senior Notes are redeemable beginning on March 1, 2026, at a redemption price equal to 102.438 % of the principal amount thereof, decreasing to 101.625 % on March 1, 2027, 100.813 % on March 1, 2028 and are redeemable at par beginning on March 1, 2029.

In each case, we pay the redemption and "make-whole" premiums plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

The 6.250 % 2040 Senior Notes may be redeemed any time at our option upon not less than 30, nor more than 60, days' prior notice is sent to the holders.

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These notes contain no financial covenants.

82 | CLF 2022 FORM 10-K

The 7.000 % 2027 AK Senior Notes may be redeemed, in whole or in part, at any time at our option upon not less than 30, and not more than 60, days' prior notice sent to the holders.

The 7.000% 2027 AK Senior Notes are redeemable prior to March 15, 2022, at a redemption price equal to 100 % of the principal amount thereof plus a “make-whole” premium set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

The 7.000% 2027 AK Senior Notes are redeemable beginning on March 15, 2022, at a redemption price equal to 103.500 % of the principal amount thereof, decreasing on each March 15 thereafter until March 15, 2025, on and after which the 7.000% 2027 Senior Notes are redeemable at par, in each case, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

On March 13, 2020, in connection with the AK Steel Merger, we entered into a new ABL Facility with various financial institutions to replace and refinance Cliffs’ Former ABL Facility and AK Steel Corporation’s former revolving credit facility.

The ABL Facility will mature upon the earlier of March 13, 2025 or 91 days prior to the maturity of certain other material debt and provided for up to $ 2 billion in borrowings, including a $ 555 million sublimit for the issuance of letters of credit and a $ 125 million sublimit for swingline loans.

The 7.000% 2027 AK Senior Notes became redeemable on March 15, 2022 at a redemption price equal to 103.500 % of the principal amount thereof, and decrease to 102.333 % on March 15, 2023, 101.167 % on March 15, 2024 and are redeemable at par beginning on March 15, 2025.

In each case, we pay the redemption premiums plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

We have an ABL Facility which provides for up to $ 4.5 billion in borrowings, including a $ 555 million sublimit for the issuance of letters of credit and a $ 200 million sublimit for swingline loans.

The ABL Facility will mature upon the earlier of March 13, 2025 or 91 days prior to the maturity of certain other material debt.

Availability under the ABL Facility is limited to an eligible borrowing base, as applicable, determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.

On March 27, 2020, we amended our ABL Facility to, among other things, provide for a new FILO tranche B of commitments in the aggregate amount of $ 150 million by exchanging existing commitments under the ABL Facility.

The total commitments under the ABL Facility after giving effect to this first amendment remained at $ 2 billion.

The terms and conditions (other than the pricing) that apply to the FILO tranche were substantially the same as the terms and conditions that apply to the tranche A facility of the ABL Facility immediately prior to the amendment.

On December 9, 2020, we entered into the Second ABL Amendment.

The Second ABL Amendment modified the ABL Facility to, among other things, increase the amount of tranche A revolver commitments available thereunder by an additional $ 1.5 billion and increase certain dollar baskets related to certain negative covenants that apply to the ABL Facility.

After giving effect to the ABL Amendment, the aggregate principal amount of tranche A revolver commitments under the ABL Facility was $ 3.35 billion and the aggregate principal amount of FILO tranche B revolver commitments under the ABL Facility remained at $ 150 million.

On December 17, 2021, we entered into the Third ABL Amendment.

The Third ABL Amendment modified the ABL Facility to, among other things, increase the amount of tranche A revolver commitments available thereunder by an additional $ 1 billion and exchange $ 150 million of tranche B revolver commitments available thereunder for tranche A revolver commitments.

After giving effect to the Third ABL Amendment, the aggregate principal amount of tranche A revolver commitments under the ABL Facility is $ 4.5 billion and there are no remaining tranche B revolver commitments under the ABL Facility.

The increase is a result of a larger projected borrowing base driven by more favorable market conditions.

The ABL Facility and certain bank products and hedge obligations are guaranteed by certain of our existing wholly owned U.S.

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We may amend our ABL Facility to replace the LIBOR rate with one or more secured overnight financing based rates or an alternative benchmark rate, giving consideration to any evolving or then-existing convention for similar dollar denominated syndicated credit facilities for such alternative benchmarks.

If we do not amend or replace the ABL Facility, the ABL Facility provides a mechanism to automatically transition to a SOFR-based benchmark when all U.S.

dollar LIBOR settings are no longer provided or are no longer representative.

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

As of December 31, 2022 and 2021, we were in compliance with the ABL Facility liquidity requirements and, therefore, the springing financial covenant requiring a minimum fixed charge coverage ratio of 1.0 to 1.0 was not applicable.

The ABL Facility provides for customary events of default, including, among other things, the event of nonpayment of principal, interest, fees or other amounts, a representation or warranty proving to have been materially incorrect when made, failure to perform or observe certain covenants within a specified period of time, a cross-default to certain material indebtedness, the bankruptcy or insolvency of the Company and certain of its subsidiaries, monetary judgment defaults of a specified amount, invalidity of any loan documentation, a change of control of the Company, and ERISA defaults resulting in liability of a specified amount.

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For certain events of default related to insolvency and receivership, the commitments of the lenders will be automatically terminated and all outstanding loans and other amounts will become immediately due and payable.

As of December 31, 2021 and 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.

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

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2 We issued standby letters of credit with certain financial institutions in order to support business obligations including, but not limited to, workers' compensation, employee severance, insurance, operating agreements and environmental obligations.

Other Financing Arrangements

Industrial Revenue Bonds

AK Steel had outstanding $ 66 million aggregate principal amount of fixed-rate, tax-exempt IRBs as of December 31, 2021.

The weighted-average fixed rate of these IRBs is 6.86 %.

These IRBs are unsecured senior debt obligations that are equal in ranking with AK Steel's senior notes and AK Steel's guarantees of Cliffs' unsubordinated indebtedness.

These IRBs are effectively subordinated to AK Steel’s guarantees of Cliffs’ secured indebtedness to the extent of the value of AK Steel’s assets securing such guarantees.

These IRBs contain certain customary covenants;

however, there are no financial covenants.

Debt Extinguishment - 2021

During the fourth quarter of 2021, we paid in full the outstanding balance of our EDC revolving facilities for $ 55 million in aggregate principal amount and terminated the agreements.

Prior to such terminations, the EDC revolving facilities provided for up to $ 80 million in borrowings.

On October 15, 2021, we redeemed $ 26 million in aggregate principal amount of the IRBs due 2024.

During the third quarter of 2021, we repurchased $ 2 million in aggregate principal amount of 1.500% 2025 Convertible Senior Notes.

On June 28, 2021, we redeemed all $ 396 million aggregate principal amount outstanding of the 5.750% 2025 Senior Notes using available liquidity.

During the second quarter of 2021, we also repurchased $ 25 million aggregate principal amount of 9.875% 2025 Senior Secured Notes.

On March 11, 2021, we purchased $ 322 million aggregate principal amount of the 9.875% 2025 Senior Secured Notes using the net proceeds from the February 11, 2021 issuance of 20 million common shares and cash on hand.

On March 12, 2021, we fully redeemed the 4.875% 2024 Senior Secured Notes, 7.625% 2021 AK Senior Notes, 7.50% 2023 AK Senior Notes, 6.375% 2025 Senior Notes and 6.375% 2025 AK Senior Notes, which totaled an aggregate principal amount of $ 535 million.

83 | CLF 2022 FORM 10-K

DEBT EXTINGUISHMENTS - 2022

On January 18, 2022, we redeemed all of our outstanding 1.500% 2025 Convertible Senior Notes through a combination settlement, with the aggregate principal amount of $ 294 million paid in cash, and 24 million common shares, with a fair value of $ 499 million, delivered to noteholders in settlement of the premium due per the terms of the indenture, plus cash in respect of the accrued and unpaid interest on the 1.500% 2025 Convertible Senior Notes to, but not including, the redemption date per the terms of the indenture.

During the year ended December 31, 2022, we redeemed all $ 607 million remaining aggregate principal amount outstanding of our 9.875% 2025 Senior Secured Notes and all $ 66 million aggregate principal amount outstanding of the IRBs with available liquidity.

Additionally, during the year ended December 31, 2022, we repurchased $ 351 million in aggregate principal amount of our outstanding senior notes of various tranches with available liquidity at an average price of 92 % of par.

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

(In Millions)

December 31, 2021

Debt Extinguished (Loss) on Extinguishment

Year Ended December 31, 2022

(In millions) Debt Extinguished Gain (Loss) on Extinguishment

9.875% 2025 Senior Secured Notes $ 607 $ ( 85 )

6.750% 2026 Senior Secured Notes 16 ( 1 )

7.625% 2021 AK Senior Notes 34 —

7.500% 2023 AK Senior Notes 13 —

6.375% 2025 Senior Notes 64 ( 7 )

1.500% 2025 Convertible Senior Notes 294 ( 16 )

6.375% 2025 AK Senior Notes 29 ( 3 )

4.625% 2029 Senior Notes 132 9

IRBs due 2024 26 —

Total $ 1,306 $ ( 88 )

Debt Extinguishment - 2020

During the year ended December 31, 2020, we used the net proceeds from the offering of the additional 9.875% 2025 Senior Secured Notes to repurchase $ 736 million aggregate principal amount of our outstanding senior notes of various series, which resulted in a net debt reduction of $ 181 million.

We also repurchased an additional $ 35 million aggregate principal amount of our outstanding senior notes of various series and we redeemed $ 7 million aggregate principal amount of our outstanding 2020 IRBs, with cash on hand.

Additionally, in connection with the AK Steel Merger, we purchased $ 364 million aggregate principal amount of 7.625% 2021 AK Senior Notes and $ 311 million aggregate principal amount of 7.500% 2023 AK Senior Notes upon early settlement of tender offers made by Cliffs.

The net proceeds from the offering of 6.750% 2026 Senior Secured Notes, along with a portion of the ABL Facility borrowings, were used to fund such purchases.

As the 7.625% 2021 AK Senior Notes and 7.500% 2023 AK Senior Notes were recorded at fair value just prior to being purchased, there was no gain or loss on extinguishment.

Additionally, in connection with the final settlement of the tender offers, we purchased $ 9 million aggregate principal amount of the 7.625% 2021 AK Senior Notes and $ 56 million aggregate principal amount of the 7.500% 2023 AK Senior Notes with cash on hand.

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

(In Millions)

December 31, 2020

Debt Extinguished Gain (Loss) on Extinguishment

7.625% 2021 AK Senior Notes $ 373 $ —

7.500% 2023 AK Senior Notes 367 3

4.875% 2024 Senior Secured Notes 175 13

6.250% 2040 Senior Notes 28 3

1.500% 2025 Convertible Senior Notes 20 1

5.750% 2025 Senior Notes 77 16

7.000% 2027 Senior Notes 262 27

5.875% 2027 Senior Notes 195 49

6.250% 2040 Senior Notes 36 13

6.375% 2025 AK Senior Notes 9 ( 1 )

Total $ 1,318 $ ( 75 )

Debt Extinguishment - 2019

During the year ended December 31, 2019, we used the net proceeds from the issuance of $ 750 million aggregate principal amount of 5.875% 2027 Senior Notes, along with cash on hand, to redeem in full all of our outstanding 4.875% 2021 Senior Notes and to fund the repurchase of $ 600 million aggregate principal amount of our outstanding 5.750% 2025 Senior Notes in a tender offer.

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

(In Millions)

December 31, 2019

Debt Extinguished (Loss) on Extinguishment

4.875% 2021 Senior Notes $ 124 $ ( 5 )

5.750% 2025 Senior Notes 600 ( 13 )

Total $ 724 $ ( 18 )

DEBT MATURITIES

The following represents a summary of our debt instrument maturities based on the principal amounts outstanding at December 31, 2021:

(In Millions)

Maturities of Debt

Thereafter 1,978

Total maturities of debt $ 5,369

NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS

There were no significant assets or liabilities measured at fair value as of December 31, 2021 or December 31, 2020.

The valuation of financial assets classified in Level 2 was determined using a market approach based upon quoted prices for similar assets in active markets or other inputs that were observable.

Our supply agreement with ArcelorMittal USA contained provisions for supplemental revenue or refunds based on the HRC price in the year the iron ore product was consumed in ArcelorMittal USA’s blast furnaces.

We accounted for these provisions as derivative instruments at the time of sale and adjusted the derivative instruments to fair value through Revenues each reporting period until the product was consumed and the amounts were settled.

These instruments were classified as Level 3 assets.

Upon the completion of the AM USA Transaction, the outstanding derivatives were settled as part of acquisition accounting.

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

(In Millions)

Level 3 Assets

Beginning balance - January 1 $ — $ 45

Total gains included in earnings — 122

Settlements — ( 27 )

Settlement of pre-existing relationship — ( 140 )

Ending balance - December 31 $ — $ —

Total gains for the period included in earnings attributable to the change in unrealized gains on assets still held at the reporting date $ — $ —

The carrying values of certain financial instruments (e.g.

Accounts receivable, net , Accounts payable and Other current liabilities ) approximate fair value and, therefore, have been excluded from the table below.

A summary of the carrying value and fair value of other financial instruments were as follows:

(In Millions)

December 31, 2021 December 31, 2020

Classification Carrying

Value Fair Value Carrying

Value Fair Value

Senior notes Level 1 $ 3,561 $ 3,911 $ 3,802 $ 4,446

IRBs due 2024 to 2028 Level 1 68 66 94 91

EDC Revolving Facility - outstanding balance Level 2 — — 18 18

ABL Facility - outstanding balance Level 2 1,609 1,609 1,510 1,510

Total $ 5,238 $ 5,586 $ 5,424 $ 6,065

The fair value of both current and long-term debt was determined using quoted market prices.

The following represents a summary of our debt instrument maturities based on the principal amounts outstanding at December 31, 2022 (in millions):

2023 2024 2025 2026 2027 Thereafter Total

$ — $ — $ 1,864 $ 829 $ 685 $ 928 $ 4,306

NOTE 9 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS

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Benefits are also provided through multiemployer plans for certain union members.

As a result of the acquisitions of AK Steel and ArcelorMittal USA, we assumed the obligations under their defined benefit pension plans, OPEB plans, defined contribution plans and commitments to multiemployer pension plans according to collective bargaining agreements that cover certain union-represented employees.

The AK Steel defined benefit pension plans and OPEB plans acquired amounted to a benefit obligation, net of assets of $ 949 million based on a March 13, 2020 measurement.

The ArcelorMittal USA defined benefit pension plans and OPEB plans acquired amounted to a benefit obligation, net of assets of $ 3,294 million based on a December 9, 2020 measurement.

DEFINED BENEFIT PENSION PLANS

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Certain salaried plans calculate benefits using a cash balance formula, which earns interest credits and allocations based on a percent of pay.

We offer postretirement health care and life insurance benefits to retirees through various plans.

We offer postretirement health care and life insurance benefits to retirees through various funded and unfunded plans.

The vast majority of our plans are closed to new participants.

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Certain labor agreements require the funding of VEBAs, which, depending on funding levels, may be used to reimburse the employer for paid benefits.

USW LABOR AGREEMENTS

On September 30, 2022, a new 47-month labor agreement with the USW was ratified.

The contract became effective on October 1, 2022, and covers approximately 2,000 USW-represented employees at our United Taconite, Hibbing Taconite, Tilden and Empire mines.

For the affected defined benefit pension plans, we agreed to increase the pre-2023 service multiplier to $ 115 and the service multiplier applicable to service beginning in 2023 to $ 126 for retirements after January 1, 2023.

For the affected OPEB plans, we introduced a new Medicare Advantage plan to the Medicare-eligible retirees.

Effective January 1, 2023, all Medicare-eligible retirees covered under this agreement will switch to this plan.

The Medicare Advantage plan will offer similar benefits to the previous healthcare plan but will have significantly lower premiums due to increased government subsidies and our successful use of scale to negotiate better healthcare rates with our vendors.

84 | CLF 2022 FORM 10-K

On October 12, 2022, a new 4-year labor agreement with the USW, covering 12,000 USW-represented employees at 13 operating locations, was ratified.

For the affected OPEB plans, we implemented a cap on healthcare costs for employees retiring after January 1, 2026.

Separate from the labor agreements, we negotiated favorable Medicare Advantage Prescription Drug healthcare rates, which will go into effect January 1, 2023.

Additionally, we paused the contribution requirement to the Cleveland-Cliffs Steel LLC VEBA based on earnings for the remainder of the labor agreement with the USW, which expires in September of 2026.

Additionally, we increased our contribution rate to the Steelworkers Pension Trust by $ 0.50 to $ 4.00 per eligible hour with both agreements.

The increase was effective November 1, 2022.

These labor agreements triggered interim remeasurements on their ratification dates.

All affected plans were remeasured again at December 31, 2022.

OBLIGATIONS AND FUNDED STATUS

The following tables and information provide additional disclosures:

(In Millions)

Pension Benefits OPEB

(In millions) Pension Benefits OPEB

Change in benefit obligations:

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Plan amendments 122 — ( 163 ) 8

Actuarial loss (gain) ( 131 ) 162 ( 456 ) 14

Actuarial gain ( 1,236 ) ( 131 ) ( 1,781 ) ( 456 )

Benefits paid ( 431 ) ( 456 ) ( 232 ) ( 227 )

Participant contributions — — 47 47

Acquired through business combinations — 5,535 — 3,528

Effect of settlement ( 34 ) ( 101 ) — —

Other — — 1 —

Benefit obligations — end of year $ 4,646 $ 6,036 $ 1,233 $ 3,254

5 unchanged sentences

Benefits paid ( 431 ) ( 456 ) ( 232 ) ( 227 )

Acquired through business combinations — 4,301 — 519

Effect of settlement ( 34 ) ( 101 ) — —

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Amounts recognized in accumulated other comprehensive loss (income):

Net actuarial loss (gain) $ ( 286 ) $ 164 $ ( 392 ) $ 56

Net actuarial gain $ ( 361 ) $ ( 286 ) $ ( 1,996 ) $ ( 392 )

Prior service cost (credit) 121 5 ( 156 ) 4

1 unchanged sentence

The accumulated benefit obligation for all defined benefit pension plans was $ 4,628 million and $ 6,013 million at December 31, 2022 and 2021, respectively.

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COMPONENTS OF NET PERIODIC BENEFIT COST (CREDIT)

(In Millions)

Pension Benefits OPEB

2021 2020 2019 2021 2020 2019

(In millions) 2022 2021 2020 2022 2021 2020

Service cost $ 45 $ 56 $ 23 $ 35 $ 51 $ 8

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Amortization:

Net actuarial loss 32 27 24 3 3 5

Net actuarial loss (gain) 13 32 27 ( 43 ) 3 3

Prior service costs (credits) 5 1 1 ( 3 ) ( 2 ) ( 2 )

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Total $ ( 159 )

Components of Accumulated Other Comprehensive Loss (Income)

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

(In Millions)

COMPONENTS OF OTHER COMPREHENSIVE LOSS (INCOME)

The following includes details on the significant actuarial losses (gains) impacting the benefit obligation and other components of other comprehensive loss (income):

Pension Benefits OPEB

2021 2020 2021 2020

(In millions) 2022 2021 2022 2021

Discount rates $ ( 1,143 ) $ ( 224 ) $ ( 441 ) $ ( 117 )

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Mortality 17 19 — 13

Per capita health care costs — — ( 350 ) ( 10 )

Per capita healthcare costs 1

— — ( 1,328 ) ( 350 )

Other ( 8 ) ( 2 ) ( 5 ) ( 5 )

Actuarial loss (gain) on benefit obligation ( 131 ) 162 ( 456 ) 14

Actuarial gain on benefit obligation ( 1,236 ) ( 131 ) ( 1,781 ) ( 456 )

Actual returns on assets under (over) expected 1,165 ( 309 ) 134 11

2 unchanged sentences

Settlements 8 22 — —

Other — ( 27 ) 8 ( 2 )

Total recognized in accumulated other comprehensive income $ ( 451 ) $ ( 219 ) $ ( 438 ) $ ( 15 )

Plan amendments 2

122 — ( 163 ) 8

Total recognized in other comprehensive loss (income) $ 41 $ ( 451 ) $ ( 1,764 ) $ ( 438 )

1 The gain in per capita healthcare costs in 2022 relating to our OPEB plans is primarily due to the negotiation of favorable Medicare Advantage Prescription Drug healthcare rates, which will go into effect January 1, 2023.

Additionally, we expanded the Medicare Advantage program to retirees on some of our other plans which added additional savings.

The negotiated rates extend through 2025.

2 The plan amendment loss related to our pension plans is attributable to the increase to the pre-2023 service multiplier to $ 115 and the service multiplier applicable to service beginning in 2023 to $ 126 for retirements after January 1, 2023.

The plan amendment gain related to our OPEB plans is attributable to the implementation of a cap on healthcare costs for employees retiring after January 1, 2026 on one of our Cleveland-Cliffs Steel LLC plans as well as the extension of the Medicare Advantage offering to plans that previously didn't have the program.

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CONTRIBUTIONS

Annual contributions to the pension plans are made within income tax deductibility restrictions in accordance with statutory regulations.

OPEB plans are not subject to minimum regulatory funding requirements, but rather amounts are contributed pursuant to bargaining agreements.

(In Millions)

Other Benefits 2

Company Contributions & Payments VEBA Direct

Payments Total

We make both required and discretionary pension contributions.

Required contributions are based on minimum funding requirements pursuant to ERISA regulations.

Funded OPEB plans are not subject to minimum regulatory funding requirements, but rather amounts are contributed pursuant to bargaining agreements.

Contributions toward unfunded OPEB plans are payments made directly from corporate assets.

Company contributions and payments we expect to make in 2023, and made in 2022 and 2021 are as follows:

Pension Benefits 1

(In millions) VEBA 2

Direct Payments Total

2021 $ 163 $ 67 $ 113 $ 180

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VEBA withdrawals are represented net of direct payments.

The amount expected for 2022 in the VEBA column reflects the contribution to be made in February 2022 for earnings in the quarter ended December 31, 2021.

We do not include an estimate for contributions beyond that due to the variability of the calculation.

There will be no further contributions to the Cleveland-Cliffs Steel LLC VEBA based on earnings for the remainder of labor agreement with the USW which expires September of 2026.

ESTIMATED FUTURE BENEFIT PAYMENTS

(In Millions)

Benefits OPEB

(In millions) Pension Benefits OPEB 1

2023 $ 502 $ 115

2028-2032 1,826 451

1 OPEB benefit payments are displayed net of participant contributions.

The discount rates used to measure plan liabilities as of the December 31 measurement date are determined individually for each plan.

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Depending on the plan, we use either company-specific base mortality tables or tables issued by the Society of Actuaries.

We use the Pri-2012 mortality tables from the Society of Actuaries with adjustments for blue collar, white collar or no collar depending on the plan.

On December 31, 2021, the assumed mortality improvement projection was updated from generational scale MP-2020 to generational scale MP-2021 for the Pri-2012 mortality tables.

For tables issued by the Society of Actuaries, we use Pri-2012 mortality tables with adjustments for blue collar, white collar or no collar depending on the plan.

Mortality is projected for all plans using Scale MP-2021 with generational projection for both years.

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

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Compensation rate increase 3.00 2.52 3.00 3.00

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

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Health care cost trend rate assumed for next year 1

5.44 % 2.36 %

Ultimate health care cost trend rate 4.50 % 4.50 %

Year that the ultimate rate is reached 2030 2031

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

Our investment objective is to outperform the expected return on assets assumption used in the plans’ actuarial reports over the life of the plans.

The expected return on assets takes into account historical returns and estimated future long-term returns based on capital market assumptions applied to the asset allocation strategy.

The expected return is net of investment expenses paid by the plans.

In addition, investment performance is monitored quarterly by benchmarking to various indices and metrics for the one-, three- and five-year periods.

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

The asset allocation review process involves simulating capital market behaviors including global asset class performance, inflation and interest rates in order to evaluate various asset allocation scenarios and determine the asset mix with the highest likelihood of meeting financial objectives.

The process includes factoring in the current funded status and likely future funded status levels of the plans by taking into account expected growth or decline in the contributions over time.

The asset allocation strategy varies by plan.

1 The health care trend rate for the next year is weighted for all of our OPEB plans and factors in our Medicare Advantage Prescription Drug pricing arrangements.

Our investment objectives with respect to our pension and OPEB assets are to maximize investment returns within reasonable and prudent levels of risk and maintain sufficient liquidity to meet benefit obligations over the life of each plan.

The asset allocations are tailored to each individual plan and are determined by analyzing each plan's duration of benefit obligations, funded status and risk profile.

Our investment strategy utilizes a broad mix of equity, fixed income and alternative investments to generate returns and manage risk.

Equity investments are diversified across large-cap, mid-cap and small-cap companies located in the U.S.

and worldwide, with a bias towards U.S.

Fixed income investments primarily include corporate bonds and government debt securities, which are generally customized based on a plan's obligation duration.

To enhance our diversification, we also invest in hedge funds, private equity, structured credit, real estate and absolute return fixed income.

We review investment performance, asset allocations and policy compliance on a quarterly basis.

In the fourth quarter of 2022, we increased our fixed income allocation for one of our more mature pension plans, which totaled $ 1.2 billion on December 31, 2022.

We also transitioned $ 2.9 billion of pension and OPEB assets to be managed by an external investment advisor in a delegated manner.

Due to the timing of this transition, the 2023 target allocation will not match our actual December 31, 2022 asset mix, as the investment strategy will require us to start reallocating assets in the first quarter of 2023.

The anticipated changes in our asset allocation will be reflected in our 2023 expected return on assets.

The expected return on plan assets are calculated on a plan-by-plan basis and take into account each plan's strategic asset allocation.

The calculation of rates by asset class are based primarily on our future expected returns and take into consideration the duration of the cash flows, active management and fees.

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Assets for OPEB plans include VEBA trusts pursuant to bargaining agreements that are available to fund retired employees’ life insurance obligations and medical benefits.

The following table reflects the actual asset allocations for pension and VEBA assets as of December 31, 2022 and 2021, as well as the 2023 weighted average target asset allocations:

Equity investments include securities in large-cap, mid-cap and small-cap companies located in the U.S.

and worldwide.

Fixed income investments primarily include corporate bonds and government debt securities.

Pension Assets VEBA Assets

Asset Category 2023

Allocation Percentage of

Plan Assets at

December 31, 2022

Allocation Percentage of

Plan Assets at

Allocation Actual Asset Allocation at December 31, 2023

Allocation Actual Asset Allocation at December 31,

2022 2021 2022 2021

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Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

FAIR VALUE MEASUREMENTS

Investments classified as Level 1 primarily include equity investments and fixed income mutual funds that are based on observable quoted market prices on an active exchange.

Fixed income investments classified as Level 2 include U.S.

Treasury STRIPS which are priced daily through a bond pricing vendor as well as corporate bonds, mortgage-backed securities and non-US bonds which have valuations based on their bid-ask spreads or quoted prices of securities with similar characteristics.

Hedge funds, private equity, structured credit and real estate investments are classified as Level 3 due to the absence of quoted market prices and inherent lack of liquidity.

These investments are generally valued at estimated fair value based on financial inputs from our investment advisors, investment managers or third party appraisers.

Investment commitments are made in private equity funds and capital calls are made over the life of the funds to fund the commitments.

As of December 31, 2022, remaining commitments for our private equity investments total $ 117 million for our pension and OPEB plans.

Committed amounts are funded from plan assets when capital calls are made.

As a practical expedient, in accordance with ASC 820-10, certain investments that are measured at fair value using the NAV per share have not been classified in the fair value hierarchy below.

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

(In Millions)

Quoted Prices in Active

Markets for Identical

(Level 1) Significant Other

(In millions) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs

(Level 2) Significant

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1 Includes cash equivalents.

Assets for OPEB plans include VEBA trusts pursuant to bargaining agreements that are available to fund retired employees’ life insurance obligations and medical benefits.

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

(In Millions)

Quoted Prices in Active

Markets for Identical

(Level 1) Significant Other

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

(In millions) Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other Observable Inputs

(Level 2) Significant

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

(In Millions)

Pension Assets VEBA Assets

2021 2020 2021 2020

(In millions) 2022 2021 2022 2021

Beginning balance — January 1 $ 904 $ 670 $ 42 $ 38

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Ending balance — December 31 $ 912 $ 904 $ 35 $ 42

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

Equity Securities

Equity securities classified as Level 1 investments include U.S.

large-, small- and mid-cap investments and international equities.

These investments are comprised of securities listed on an exchange, market or automated quotation system for which quotations are readily available.

The valuation of these securities is determined using a market approach and is based upon unadjusted quoted prices for identical assets in active markets.

Fixed income securities classified as Level 1 investments include bonds, government debt securities and cash equivalents.

These investments are comprised of securities listed on an exchange, market or automated quotation system for which quotations are readily available.

The valuation of these securities is determined using a

market approach and is based upon unadjusted quoted prices for identical assets in active markets.

Also included in fixed income is a portfolio of U.S.

Treasury STRIPS, which are zero-coupon bearing fixed income securities backed by the full faith and credit of the U.S.

The securities sell at a discount to par because there are no incremental coupon payments.

STRIPS are not issued directly by the Treasury, but rather are created by a financial institution, government securities broker or government securities dealer.

Liquidity on the issue varies depending on various market conditions;

however, in general, the STRIPS market is slightly less liquid than that of the U.S.

Treasury Bond market.

The STRIPS are priced daily through a bond pricing vendor and are classified as Level 2.

Hedge funds are alternative investments comprised of direct or indirect investment in offshore hedge funds with an investment objective to achieve equity-like returns with one half the volatility of equities and moderate correlation.

The valuation techniques used to measure fair value attempt to maximize the use of observable inputs and minimize the use of unobservable inputs.

Considerable judgment is required to interpret the factors used to develop estimates of fair value.

Valuations of the underlying investment funds are obtained and reviewed.

The securities that are valued by the funds are interests in the investment funds and not the underlying holdings of such investment funds.

Thus, the inputs used to value the investments in each of the underlying funds may differ from the inputs used to value the underlying holdings of such funds.

Hedge funds are valued monthly and recorded on a one-month lag.

Private Equity Funds

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

Investment commitments are made in private equity funds based on an asset allocation strategy, and capital calls are made over the life of the funds to fund the commitments.

As of December 31, 2021, remaining commitments total $ 151 million for our pension and OPEB plans.

Committed amounts are funded from plan assets when capital calls are made.

Investment commitments are not pre-funded in reserve accounts.

Private equity investments are valued quarterly and recorded on a one-quarter lag.

For private equity investment values reported on a lag, current market information is reviewed for any material changes in values at the reporting date.

Capital distributions for the funds do not occur on a regular frequency.

Liquidation of these investments would require sale of the partnership interest.

Structured Credit

Structured credit funds provide flexibility and access to both complex and illiquid premiums by investing across global, public and private residential, commercial, corporate and specialty credit markets that are priced based on valuations provided by independent, third-party pricing agents, if available.

Such values generally reflect the last reported sales price if the security is actively traded.

The third-party pricing agents may also value structured credit investments at an evaluated bid price by employing methodologies that utilize actual market transactions, broker-supplied valuations or other methodologies designed to identify the market value of such securities.

Structured credit investments are valued monthly and certain funds have an initial lock-up period and withdrawal restrictions on a semi-annual and quarterly basis.

For structured credit investment values reported on a lag, current market information is reviewed for any material changes in values at the reporting date.

The real estate portfolio for the pension plans is an alternative investment comprised of funds with strategic categories of real estate investments.

All real estate holdings are appraised externally at least annually, and appraisals are conducted by reputable, independent appraisal firms that are members of the Appraisal Institute.

All external appraisals are performed in accordance with the Uniform Standards of Professional Appraisal Practices.

The property valuations and assumptions about each property are reviewed quarterly by the investment manager and values are adjusted if there has been a significant change in circumstances relating to the property since the last external appraisal.

The fair values of the funds are updated on either a monthly or quarterly basis.

Redemption requests are considered on a quarterly basis, subject to notice requirements.

The real estate fund of funds investment for the VEBA trusts invests in pooled investment vehicles that, in turn, invest in commercial real estate properties.

Valuations are performed quarterly and financial statements are prepared on a semi-annual basis, with annual audited statements.

Asset values for this fund are reported with a one-

quarter lag, and current market information is reviewed for any material changes in values at the reporting date.

Withdrawals are permitted on the last business day of each quarter subject to a 95-day prior written notice.

Absolute Return Fixed Income

Absolute return fixed income investments consist of a global fixed income fund with the investment objective of generating positive absolute returns over a full market cycle.

The fund's investments in securities, forward exchange contracts and futures contracts are reported at fair value on a recurring monthly basis.

The fund's trustee values securities based upon independent pricing sources and futures contracts are valued at closing settled prices.

Redemptions of the fund at NAV are permitted monthly under most circumstances.

DEFINED CONTRIBUTION PLANS

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Total expense from these plans was $ 52 million, $ 55 million and $ 22 million in 2022, 2021 and 2020, respectively.

Multiemployer Plans

MULTlEMPLOYER PLANS

We contribute to multiemployer pension plans according to collective bargaining agreements that cover certain union-represented employees.

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• If we choose to stop participating in a multiemployer plan, we may be required to pay that plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

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Information with respect to multiemployer plans in which we participate follows:

Pension Fund EIN/Pension Plan Number Pension Protection Act Zone Status (a) FIP/RP Status Pending/Implemented (b) Contributions Surcharge Imposed (c) Expiration Date of Collective Bargaining Agreement (d)

Pension Fund EIN/Pension Plan Number Pension Protection Act Zone Status 1

FIP/RP Status Pending/Implemented 2

Contributions Surcharge Imposed 3

Expiration Date of Collective Bargaining Agreement 4

2022 2021 2022 2021 2020

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Red Red Yes 22 16 16 Yes 5/15/2023 to 6/15/2025

Other Plans (e)

Other Plans 5

Total $ 115 $ 104 $ 30

(a) The most recent Pension Protection Act zone status available in 2021 and 2020 is for each plan's year-end at December 31, 2020 and 2019.

1 The most recent Pension Protection Act zone status available in 2022 and 2021 is for each plan's year-end at December 31, 2021 and 2020.

The plan's actuary certifies the zone status.

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Additional contributions will be required as part of the rehabilitation plan until the plan exits the "Red Zone".

(b) The "FIP/RP Status Pending/Implemented" column indicates plans for which a financial improvement plan or a rehabilitation plan is either pending or has been implemented, as defined by ERISA.

(c) The surcharge represents an additional required contribution due as a result of the critical funding status of the plan.

(d) We are a party to five collective bargaining agreements that require contributions to the Steelworkers Pension Trust and three collective bargaining agreements that require contributions to the IAM National Pension Fund's National Pension Plan.

(e) Plans that are not individually significant to our Company are presented in aggregate.

With the 2020 Acquisitions, we are one of the largest contributors to the Steelworkers Pension Trust.

2 The "FIP/RP Status Pending/Implemented" column indicates plans for which a financial improvement plan or a rehabilitation plan is either pending or has been implemented, as defined by ERISA.

3 The surcharge represents an additional required contribution due as a result of the critical funding status of the plan.

4 We are a party to six collective bargaining agreements that require contributions to the Steelworkers Pension Trust and three collective bargaining agreements that require contributions to the IAM National Pension Fund's National Pension Plan.

5 Plans that are not individually significant to our Company are presented in aggregate.

With the ratification of our USW labor agreements in 2022, we increased our contribution rate to the Steelworkers Pension Trust by $ 0.50 to $ 4.00 per eligible hour.

The increase was effective November 1, 2022.

We are one of the largest contributors to the Steelworkers Pension Trust.

Our contributions exceeded 5% of total combined contributions in 2022 and 2021.

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the 2021 Equity Plan, the A&R 2015 Equity Plan and the 2012 Amended Equity Plan.

On April 28, 2021, the Company's shareholders approved the 2021 Equity Plan, which succeeded the A&R 2015 Equity Plan and made available 26.0 million new common shares plus 2.5 million shares remaining available under the A&R 2015 Equity Plan.

On April 28, 2021, our shareholders approved the 2021 Equity Plan, which succeeded the A&R 2015 Equity Plan and made available 26.0 million new common shares plus 2.5 million shares remaining available under the A&R 2015 Equity Plan.

As of December 31, 2022, there were 25.0 million remaining shares available for grant under the 2021 Equity Plan.

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however, all awards previously granted under the predecessor plans will continue in accordance with the terms of the outstanding awards.

On March 13, 2020, the maximum number of shares that may be issued under the A&R 2015 Equity Plan increased by 5.7 million common shares in relation to the outstanding AK Steel stock-based incentive awards that we converted at a 0.400 rate of exchange.

The converted stock-based incentive awards include 2.0 million stock options, 1.0 million long-term performance plan awards, 0.5 million performance shares, 0.2 million restricted stock awards and 0.3 million restricted stock units.

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STOCK-BASED COMPENSATION EXPENSE

The following table summarizes the total compensation expense recognized for stock-based compensation awards:

(In Millions, except per

share amounts)

Year Ended December 31,

2021 2020 2019

(In millions, except per share amounts) 2022 2021 2020

Cost of goods sold $ ( 5 ) $ ( 2 ) $ ( 2 )

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The following table summarizes the performance award activity:

Year Ended December 31,

2022 2021 2020

Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value

(Shares in millions) Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value

Outstanding at beginning of year 2.4 $ 14.04 2.5 $ 10.34 1.9 $ 15.58

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On March 13, 2020, we granted 1.0 million long-term performance plan awards and 0.5 million performance shares as AK Steel replacement awards.

As of December 31, 2021, 0.2 million long-term performance plan awards and 0.1 million performance shares were outstanding as a result of qualifying termination events that triggered accelerated performance share payouts and prorated long-term performance plan awards payouts at target.

The long-term performance plan awards are based on a three-year Adjusted EBITDA metric.

We value our performance shares using a Monte Carlo simulation on the grant date.

The outstanding performance shares vest over a period of three years and are intended to be paid out in common shares.

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The following table summarizes the restricted stock units activity:

Year Ended December 31,

2022 2021 2020

Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value

(Shares in millions) Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value

Outstanding at beginning of year 2.1 $ 10.31 2.1 $ 7.12 2.1 $ 9.10

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Outstanding at end of year 2.4 $ 13.66 2.1 $ 10.31 2.1 $ 7.12

On March 13, 2020, we granted 0.2 million restricted stock awards as AK Steel replacement awards.

The restricted stock awards relating to AK Steel vest ratably on the first, second and third anniversaries of the grant.

We valued the AK Steel replacement rewards at $ 4.87 per share using the closing price of our common shares on March 13, 2020, the grant date.

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We value our restricted stock units using the closing price of our common shares on the grant date.

All of the outstanding restricted stock units are subject to continued employment, are retention based, and are payable in common shares or cash in certain circumstances at a time determined by the Compensation Committee at its discretion.

Most restricted stock units that were granted in 2021, 2020 and 2019 cliff vest over three years on December 31, 2023, December 31, 2022 and December 31, 2021, respectively.

Most restricted stock units were granted under three-year cliff vesting terms.

STOCK OPTIONS

The following table summarizes the stock option activity:

Year Ended December 31,

2022 2021 2020

Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price

(Shares in millions) Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price

Outstanding at beginning of year 1.0 $ 12.75 2.5 $ 11.60 0.6 $ 10.42

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The weighted average fair value of the converted options was $ 0.51 per share and was calculated using the Black-Scholes option-pricing model.

Qualifying termination events resulted in vest date accelerations and reductions to the option expiration date from ten years to three years.

The total intrinsic value of options exercised in 2021 was $ 13 million and the amount in 2020 was immaterial.

The total intrinsic value of options exercised in 2022 was $ 3 million and the amount in 2021 was $ 13 million.

For options outstanding at December 31, 2022, the weighted-average remaining contractual life was 2.6 years and the aggregate intrinsic value was $ 4 million.

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The awards are subject to any deferral election and the terms of the Directors’ Plan and an award agreement.

On March 13, 2020, 0.3 million restricted stock units previously awarded to the members of the AK Steel board of directors were distributed per the terms of the AK Steel Merger Agreement.

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

Year of Grant Restricted Shares Deferred Shares

2021 58,851 13,078

2020 253,809 54,794

2019 86,477 23,659

NOTE 11 - INCOME TAXES

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

Year Ended December 31,

(In millions) 2022 2021 2020

2021 2020 2019

United States $ 1,803 $ 3,827 $ ( 201 )

Foreign ( 7 ) ( 24 ) 8

$ 3,803 $ ( 193 ) $ 313

Total $ 1,796 $ 3,803 $ ( 193 )

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

Year Ended December 31,

(In millions) 2022 2021 2020

2021 2020 2019

Current provision (benefit):

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Foreign 1 — ( 1 )

69 ( 3 ) ( 1 )

Deferred provision (benefit):

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(In millions) 2022 2021 2020

2021 2020 2019

statutory rate $ 377 21 % $ 799 21 % $ ( 41 ) 21 %

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Percentage depletion in excess of cost depletion ( 49 ) ( 3 ) ( 99 ) ( 3 ) ( 42 ) 22

Non-taxable income related to noncontrolling interests ( 9 ) — ( 9 ) 4 — —

Luxembourg legal entity reduction — — — — 846 271

Valuation allowance release:

Luxembourg legal entity reduction — — — — ( 846 ) ( 271 )

State taxes, net 71 4 86 2 ( 11 ) 6

Federal & state provision to return 27 1 ( 2 ) — — —

Other items, net ( 3 ) — ( 11 ) — ( 17 ) 8

Provision for income tax expense (benefit) and effective income tax rate including discrete items $ 423 23 % $ 773 20 % $ ( 111 ) 57 %

The increase in income tax expense in 2021 from income tax benefit in 2020 is directly correlated to the increase in pre-tax book income from the prior period for both federal and state income tax purposes.

The increase in income tax benefit from 2019 to 2020 is directly correlated to the decrease in pre-tax book income from the prior period for both federal and state income tax purposes.

The Luxembourg legal entity reduction relates to initiatives resulting in the dissolution of certain entities and settlement of related financial instruments in 2019.

The 2019 NOL deferred tax asset reduction resulted in tax expense of $ 846 million, which was fully offset by a decrease in the respective valuation allowance.

The decrease in income tax expense in 2022, as compared to the prior year, is directly related to the decrease in the pre-tax book income year-over-year.

The increase in income tax expense in 2021 from income tax benefit in 2020 is directly correlated to the increase in pre-tax book income year-over-year.

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

(In millions) 2022 2021 2020

2021 2020 2019

Other comprehensive income (loss):

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Total $ ( 399 ) $ ( 227 ) $ ( 53 )

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

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Pension and OPEB liabilities 244 584

Environmental 96 58

Product inventories 54 28

State and local 14 109

Lease liabilities 62 65

Other liabilities 135 136

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Deferred tax liabilities:

Investment in partnerships ( 191 ) ( 144 )

Investment in ventures ( 195 ) ( 191 )

Lease assets ( 38 ) ( 93 )

Property, plant and equipment and mineral rights ( 827 ) ( 641 )

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We had gross domestic (including states) and foreign NOLs of $ 2,278 million and $ 1,444 million, respectively, at December 31, 2022.

We had gross domestic and foreign NOLs of $ 7,444 million and $ 1,592 million, respectively, at December 31, 2020.

federal NOLs will begin to expire in 2034 and state NOLs will begin to expire in 2022.

The foreign NOLs can be carried forward indefinitely.

We had gross domestic (including states) and foreign NOLs of $ 2,081 million and $ 1,407 million, respectively, at December 31, 2021.

federal NOLs will begin to expire in 2034 and state NOLs begin to expire in 2023.

The foreign NOLs begin to expire in 2035.

We had gross interest expense limitation carryforwards of $ 77 million and $ 18 million for the years ended December 31, 2022 and 2021, respectively.

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(In millions) 2022 2021 2020

2021 2020 2019

Balance at beginning of year $ 409 $ 836 $ 441

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Balance at end of year $ 390 $ 409 $ 836

At December 31, 2022 and 2021, we have a valuation allowance recorded of $ 342 million and $ 339 million, respectively, related to foreign deferred tax assets, and an additional $ 48 million and $ 70 million, respectively, against certain state NOLs, which are expected to expire before utilization.

During 2021, we recorded a decrease to the valuation allowance of $ 345 million related to the election filed with our 2020 federal tax return to waive the pre-acquisition NOLs that are limited under Section 382 of the IRC.

An offsetting decrease is recorded in the NOL deferred tax asset in the same period.

These amounts relate to a portion of the $ 398 million valuation allowance recorded during 2020 through opening balance sheet adjustments to reflect the portion of federal and state NOLs that are limited under Section 382 of the IRC acquired through the AK Steel Merger.

During 2019, a legal entity reduction initiative was completed in Luxembourg resulting in the dissolution of certain entities and settlement of related financial instruments, triggering the utilization of $ 1.3 billion of NOL deferred tax asset and reversal of the intercompany notes deferred tax liability of $ 447 million.

The total net deferred tax reduction resulted in an expense of $ 846 million, which was fully offset by a decrease in the valuation allowance.

Our losses in Luxembourg in recent periods represent sufficient negative evidence to require a full valuation allowance against the remaining deferred tax assets in that jurisdiction.

We intend to maintain a valuation allowance against the deferred tax assets related to these operating losses until sufficient positive evidence exists to support the realization of such assets.

We also have a valuation allowance recorded against certain state NOLs, which are expected to expire before utilization.

At December 31, 2021 and 2020, we had a valuation allowance recorded against certain state NOLs of $ 70 million and $ 98 million, respectively.

An offsetting decrease was recorded in the NOL deferred tax asset in the same period.

These amounts related to a portion of the $ 398 million valuation allowance recorded during 2020 through opening balance sheet adjustments to reflect the portion of federal and state NOLs that are limited under Section 382 of the IRC acquired through the AK Steel Merger.

At December 31, 2022 and 2021, we had no cumulative undistributed earnings of foreign subsidiaries included in retained earnings.

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(In millions) 2022 2021 2020

2021 2020 2019

Unrecognized tax benefits balance as of January 1 $ 35 $ 107 $ 29

Increase for tax positions in current year 4 7 —

Decrease for tax positions of prior year ( 66 ) ( 4 ) —

Increases for tax positions in current year 24 4 7

Decrease due to tax positions in prior year ( 1 ) ( 66 ) ( 4 )

Lapses in statutes of limitations — ( 10 ) —

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Unrecognized tax benefits balance as of December 31 $ 58 $ 35 $ 107

At December 31, 2021 and 2020, we had $ 35 million and $ 107 million, respectively, of unrecognized tax benefits recorded.

Of this amount, $ 1 million was recorded in Other current liabilities for the year ended December 31, 2021.

Additionally, $ 34 million and $ 2 million, were recorded in Other non-current liabilities for the years ended December 31, 2021 and 2020, respectively.

An additional $ 96 million was recorded in Other non-current assets for the year ended December 31, 2020.

If the unrecognized tax benefits were recognized, $ 30 million would impact the effective tax rate.

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The following table presents the classification of unrecognized tax benefits on the Statements of Consolidated Financial Position:

Balance Sheet Location (In millions) 2022 2021

Other current liabilities — $ 1

Other non-current liabilities 58 34

If the unrecognized tax benefits were recognized, the full $ 58 million would impact the effective tax rate.

Interest and penalties related to unrecognized tax benefits are $ 3 million for the year ended December 31, 2022.

We do not expect that the amount of unrecognized benefits will change significantly within the next 12 months.

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NOTE 12 - LEASE OBLIGATIONS

Our operating leases consist primarily of leases for office space, iron ore vessels, rail cars and processing equipment.

Our finance leases consist primarily of processing equipment and mining equipment.

Our operating leases consist primarily of leases for land, office space, rail cars and storage tanks.

Our finance leases consist primarily of mining equipment, an on-site coke battery and rail cars.

We use our incremental borrowing rate as the discount rate to determine the present value of the lease payments, as our leases do not have readily determinable implicit discount rates.

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Lease costs are presented below:

(In Millions)

Year Ended December 31,

(In millions) 2022 2021

Operating leases $ 64 $ 70

Finance leases:

Amortization of lease cost 94 15

Amortization of right-of-use assets 103 94

Interest on lease liabilities 8 9

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Other information related to leases was as follows:

(In Millions)

Year Ended December 31,

(In millions) 2022 2021

Cash paid for amounts included in measurement of lease liabilities:

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1 Right-of-use assets obtained in acquisitions are not included in this figure.

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Future minimum lease payments under noncancellable finance and operating leases as of December 31, 2022 were as follows:

(In Millions)

Finance Leases Operating Leases

(In millions) Finance Leases Operating Leases

2023 $ 101 $ 56

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NOTE 13 - ASSET RETIREMENT OBLIGATIONS

The accrued closure obligation provides for contractual and legal obligations related to our indefinitely idled and closed operations and for the eventual closure of our active operations.

The closure date for each of our active mine sites was determined based on the exhaustion date of the remaining mineral reserves, and the amortization of the related asset and accretion of the liability is recognized over the estimated mine lives.

The closure date and expected timing of the capital requirements to meet our obligations for our indefinitely idled or closed mines is determined based on the unique circumstances of each property.

For indefinitely idled or closed mines, the accretion of the liability is recognized over the anticipated timing of remediation.

As the majority of our asset retirement obligations at our steelmaking operations have indeterminate settlement dates, asset retirement obligations have been recorded at present values using estimated ranges of the economic lives of the underlying assets.

We performed a detailed assessment of our asset retirement obligations related to our active operations most recently in 2020 in accordance with our accounting policy, which requires us to perform an in-depth evaluation of the liability every three years in addition to routine annual assessments.

In 2020, we employed third-party specialists to assist in the evaluation.

The following is a summary of our asset retirement obligations:

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1 Includes $ 277 million and $ 293 million related to our active operations as of December 31, 2022 and 2021, respectively.

The accrued closure obligation provides for contractual and legal obligations related to our indefinitely idled and closed operations and for the eventual closure of our active operations.

routine annual assessments.

In 2020, we employed third-party specialists to assist in the evaluation.

The closure date and expected timing of the capital requirements to meet our obligations for our indefinitely idled or closed mines is determined based on the unique circumstances of each property.

For indefinitely idled or closed mines, the accretion of the liability is recognized over the anticipated timing of remediation.

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

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Increase from acquisitions — 116

Reclassification from environmental obligations 63 —

Accretion expense 26 18

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Asset retirement obligation as of December 31 $ 520 $ 449

The increase from acquisitions for the year ended December 31, 2021 relates to measurement period adjustments as a result of the final purchase price allocation of the AM USA Transaction.

The increase from revision in estimated cash flows primarily relates to rising electricity costs associated with required water management systems related to closed coal mines in Pennsylvania.

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NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of certain financial instruments (e.g.

Accounts receivable, net , Accounts payable and Other current liabilities ) approximate fair value and, therefore, have been excluded from the table below.

See NOTE 15 - DERIVATIVE INSTRUMENTS AND HEDGING for information on our derivative instruments, which are accounted for at fair value on a recurring basis.

A summary of the carrying value and fair value of other financial instruments were as follows:

December 31, 2022 December 31, 2021

(In millions) Classification Carrying

Value Fair Value Carrying

Value Fair Value

Senior notes Level 1 $ 2,385 $ 2,311 $ 3,561 $ 3,911

IRBs Level 1 — — 68 66

ABL Facility - outstanding balance Level 2 1,864 1,864 1,609 1,609

Total $ 4,249 $ 4,175 $ 5,238 $ 5,586

The valuation of financial assets classified in Level 2 was determined using a market approach based upon quoted prices for similar assets in active markets or other inputs that were observable.

NOTE 15 - DERIVATIVE INSTRUMENTS AND HEDGING

We are exposed to fluctuations in market prices of raw materials and energy sources.

We may use cash-settled commodity swaps to hedge the market risk associated with the purchase of certain of our raw materials and energy requirements.

Our hedging strategy is to reduce the effect on earnings from the price volatility of these various commodity exposures, including timing differences between when we incur raw material commodity costs and when we receive sales surcharges from our customers based on those raw materials.

Independent of any hedging activities, price changes in any of these commodity markets could negatively affect operating costs.

Our commodity contracts are designated as cash flow hedges for accounting purposes, and we record the gains and losses for the derivatives in Accumulated other comprehensive income until we reclassify them into Cost of goods sold when we recognize the associated underlying operating costs.

Refer to NOTE 17 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) for further information.

Our commodity contracts are classified as Level 2 as values were determined using a market approach based upon quoted prices for similar assets in active markets or other inputs that were observable.

The following table presents the notional amount of our outstanding hedge contracts:

Notional Amount

Commodity Contracts Unit of Measure Maturity Dates 2022 2021

Natural Gas MMBtu January 2023 - May 2025 127,790,000 92,591,000

Zinc Metric tons Not Applicable — 16,092

Electricity Megawatt hours January 2023 - December 2023 432,043 —

Tin Metric tons January 2023 - December 2023 180 —

The following table presents the fair value of our cash flow hedges and the classification on the Statements of Consolidated Financial Position:

Balance Sheet Location (In millions) 2022 2021

Other current assets $ 15 $ 40

Other non-current assets 30 —

Other current liabilities ( 87 ) ( 10 )

Other non-current liabilities ( 10 ) ( 4 )

NOTE 16 - CAPITAL STOCK

SHARE REPURCHASE PROGRAM

On February 10, 2022, our Board of Directors authorized a program to repurchase outstanding common shares in the open market or in privately negotiated transactions, which may include purchases pursuant to Rule 10b5-1 plans or accelerated share repurchases, up to a maximum of $ 1 billion.

We are not obligated to make any purchases and the program may be suspended or

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discontinued at any time.

The share repurchase program does not have a specific expiration date.

For the year ended December 31, 2022, we repurchased 12.5 million common shares at a cost of $ 240 million in the aggregate.

1.500% 2025 CONVERTIBLE SENIOR NOTES REDEMPTION

On December 1, 2021, we issued a notice of redemption for all $ 294 million in aggregate principal amount outstanding of our 1.500% 2025 Convertible Senior Notes.

Our 1.500% 2025 Convertible Senior Notes were redeemed on January 18, 2022, through a combination settlement, with the aggregate principal amount of $ 294 million paid in cash, and 24 million common shares, with a fair value of $ 499 million, delivered to noteholders in settlement of the premium due per the terms of the indenture, plus cash in respect of the accrued and unpaid interest on the 1.500% 2025 Convertible Senior Notes to, but not including, the redemption date per the terms of the indenture.

UNDERWRITTEN PUBLIC OFFERING

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We used the net proceeds from the offering, plus cash on hand, to redeem $ 322 million aggregate principal amount of our outstanding 9.875 % 2025 Senior Secured Notes.

Acquisition of AK Steel

As more fully described in NOTE 3 - ACQUISITIONS, we acquired AK Steel on March 13, 2020.

At the effective time of the AK Steel Merger, each share of AK Steel common stock issued and outstanding prior to the effective time of the AK Steel Merger was converted into, and became exchangeable for, 0.400 Cliffs common shares, par value $ 0.125 per share.

We issued a total of 127 million common shares in connection with the AK Steel Merger at a fair value of $ 618 million.

Following the closing of the AK Steel Merger, AK Steel's common stock was de-listed from the NYSE.

Acquisition of ArcelorMittal USA

As more fully described in NOTE 3 - ACQUISITIONS, we acquired ArcelorMittal USA on December 9, 2020.

Pursuant to the terms of the AM USA Transaction Agreement, we issued 78,186,671 common shares and 583,273 shares of a new series of our Serial Preferred Stock, Class B, without par value, designated as the “Series B Participating Redeemable Preferred Stock,” in each case to an indirect, wholly owned subsidiary of ArcelorMittal as part of the consideration paid by us in connection with the closing of the AM USA Transaction.

SERIES B PARTICIPATING REDEEMABLE PREFERRED STOCK REDEMPTION

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We also have 4,000,000 shares of Serial Preferred Stock, Class B, without par value, authorized, of which, none are issued or outstanding as of December 31, 2022.

The below table summarizes our recent dividend activity:

Declaration Date Record Date Payment Date Dividend Declared per Common Share

2/18/2020 4/3/2020 4/15/2020 $ 0.06

12/2/2019 1/3/2020 1/15/2020 0.06

Subsequent to the dividend paid on April 15, 2020, our Board suspended future dividends.

Share Repurchase Program

In 2018, our Board of Directors authorized a program to repurchase outstanding common shares in the open market or in privately negotiated transactions.

The share repurchase program was effective until December 31, 2019.

During 2019, we repurchased 24 million common shares at a cost of $ 253 million in the aggregate, including commissions and fees.

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NOTE 17 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

(In Millions)

Amount Tax Benefit

(Expense) After-tax

As of December 31, 2021:

Pension and OPEB $ 669 $ ( 120 ) $ 549

Foreign currency translation adjustments 1 — 1

Derivative financial instruments 89 ( 21 ) 68

$ 759 $ ( 141 ) $ 618

As of December 31, 2020:

Pension and OPEB $ ( 221 ) $ 86 $ ( 135 )

Foreign currency translation adjustments 3 — 3

Derivative financial instruments ( 1 ) — ( 1 )

$ ( 219 ) $ 86 $ ( 133 )

As of December 31, 2019:

Pension and OPEB $ ( 454 ) $ 138 $ ( 316 )

Derivative financial instruments ( 4 ) 1 ( 3 )

$ ( 458 ) $ 139 $ ( 319 )

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

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

(In millions) 2022 2021 2020

Postretirement Benefit Liability,

net of tax Foreign Currency Translation Derivative Financial Instruments,

net of tax Accumulated Other Comprehensive Income (Loss)

December 31, 2018 $ ( 281 ) $ — $ ( 3 ) $ ( 284 )

Other comprehensive loss before reclassifications ( 57 ) — ( 2 ) ( 59 )

Net loss reclassified from AOCI 22 — 2 24

December 31, 2019 ( 316 ) — ( 3 ) ( 319 )

Foreign Currency Translation

Beginning balance $ 1 $ 3 $ —

Other comprehensive income (loss) before reclassifications ( 2 ) ( 2 ) 3

Net loss reclassified from AOCI 18 — 8 26

December 31, 2020 ( 135 ) 3 ( 1 ) ( 133 )

Ending balance $ ( 1 ) $ 1 $ 3

Derivative Instruments

Beginning balance $ 68 $ ( 1 ) $ ( 3 )

Other comprehensive income (loss) before reclassifications 146 151 ( 7 )

Net loss (gain) reclassified from AOCI 9 — ( 48 ) ( 39 )

December 31, 2021 $ 549 $ 1 $ 68 $ 618

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

(In Millions)

Details about Accumulated Other Comprehensive Income (Loss) Components Amount of (Gain)/Loss

Reclassified into Income,

Net of Tax Affected Line Item in the Statement of Consolidated Operations

Year Ended December 31,

Income tax ( 33 ) ( 34 ) 1

Other comprehensive income (loss) before reclassifications, net of tax 113 117 ( 6 )

Losses (gains) reclassified from AOCI to net income 1

( 256 ) ( 61 ) 10

Changes in pension and OPEB:

Prior service costs 1

$ ( 1 ) $ ( 1 ) $ ( 1 ) Net periodic benefit credits (costs) other than service cost component

Net actuarial loss 1

35 30 29 Net periodic benefit credits (costs) other than service cost component

Settlements 1

( 22 ) ( 6 ) — Net periodic benefit credits (costs) other than service cost component

Total before taxes 12 23 28

Income tax benefit ( 3 ) ( 5 ) ( 6 ) Income tax benefit (expense)

Net of taxes $ 9 $ 18 $ 22

Changes in derivative financial instruments:

Commodity contracts $ ( 61 ) $ 10 $ 3 Cost of goods sold

Income tax expense (benefit) 13 ( 2 ) ( 1 ) Income tax benefit (expense)

Net of taxes $ ( 48 ) $ 8 $ 2

Total reclassifications for the period, net of tax $ ( 39 ) $ 26 $ 24

1 See NOTE 10 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further information.

NOTE 17 - RELATED PARTIES

We have certain co-owned joint ventures with companies from the steel and mining industries, including integrated steel companies, their subsidiaries and other downstream users of steel and iron ore products.

Hibbing is a co-owned joint venture with U.S.

Steel, in which, as of both December 31, 2020 and December 31, 2021, we own 85.3 % and U.S.

Steel owns 14.7 %.

As a result of the AM USA Transaction, we acquired an additional 62.3 % ownership stake in the Hibbing mine and became the majority owner and mine manager.

Prior to the AM USA Transaction, ArcelorMittal was a related party due to its ownership interest in Hibbing.

As such, certain long-term contracts with ArcelorMittal resulted in Revenues from related parties, and are included within the below.

Revenues from related parties were as follows:

(In Millions)

Year Ended December 31,

Income tax expense (benefit) 2

Net losses (gains) reclassified from AOCI to net income ( 197 ) ( 48 ) 8

Ending balance $ ( 16 ) $ 68 $ ( 1 )

Pension and OPEB

Beginning balance $ 549 $ ( 135 ) $ ( 316 )

Other comprehensive income before reclassifications 4

1,759 878 210

Revenue from related parties $ 139 $ 893 $ 1,015

Revenues $ 20,444 $ 5,354 $ 1,990

Related party revenues as a percent of Revenues 0.7 % 16.7 % 51.0 %

Purchases from related parties $ 94 $ 16 $ —

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

(In Millions)

Balance Sheet Location of Assets (Liabilities) 2021 2020

Accounts receivable, net $ 3 $ 2

Accounts payable ( 7 ) ( 6 )

Income tax ( 434 ) ( 203 ) ( 47 )

Other comprehensive income before reclassifications, net of tax 1,325 675 163

Losses (gains) reclassified from AOCI to net income 3

Income tax expense (benefit) 2

9 ( 3 ) ( 5 )

Net losses (gains) reclassified from AOCI to net income ( 27 ) 9 18

Ending balance $ 1,847 $ 549 $ ( 135 )

Total AOCI Ending Balance $ 1,830 $ 618 $ ( 133 )

1 Amounts recognized in Cost of goods sold in the Statements of Consolidated Operations.

2 Amounts recognized in Income tax benefit (expense) in the Statements of Consolidated Operations.

3 Amounts recognized in Net periodic benefit credits other than service cost component in the Statements of Consolidated Operations.

4 Refer to NOTE 9 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further information.

NOTE 18 - VARIABLE INTEREST ENTITIES

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SunCoke Middletown had income before income taxes of $ 47 million and $ 52 million for the years ended December 31, 2022 and 2021, respectively, which was included in our consolidated Income (loss) from continuing operations before income taxes .

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The assets of the consolidated VIE can only be used to settle the obligations of the consolidated VIE and not obligations of the Company.

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(In millions) 2022 2021

Cash and cash equivalents $ — $ 5

Inventories $ 28 $ 20

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The following table summarizes the computation of basic and diluted EPS:

(In Millions, Except Per Share Amounts)

Year Ended December 31,

2021 2020 2019

(In millions, except per share amounts) 2022 2021 2020

Income (loss) from continuing operations $ 1,373 $ 3,030 $ ( 82 )

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Net income (loss) from continuing operations attributable to Cliffs shareholders 1,332 2,985 ( 123 )

Income (loss) from discontinued operations, net of tax 3 1 ( 2 )

Income from discontinued operations, net of tax 3 3 1

Net income (loss) attributable to Cliffs shareholders $ 1,335 $ 2,988 $ ( 122 )

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Diluted 524 558 379

Earnings (loss) per common share attributable to

Cliffs common shareholders - basic 1 :

Earnings (loss) per common share attributable to Cliffs common shareholders - basic 2 :

Continuing operations $ 2.57 $ 5.62 $ ( 0.32 )

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$ 2.57 $ 5.63 $ ( 0.32 )

Earnings (loss) per common share attributable to

Cliffs common shareholders - diluted:

Earnings (loss) per common share attributable to Cliffs common shareholders - diluted:

Continuing operations $ 2.55 $ 5.35 $ ( 0.32 )

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$ 2.55 $ 5.36 $ ( 0.32 )

1 On January 1, 2022, we adopted 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).

We utilized the modified retrospective method of adoption;

using this approach, the guidance was applied to transactions outstanding as of the beginning of the fiscal year.

2 For the year ended December 31, 2021, basic earnings per share was calculated by dividing Net income (loss) attributable to Cliffs shareholders , less $ 187 million of earnings attributed to Series B Participating Redeemable Preferred Stock, by the weighted average number of basic common shares outstanding during the period presented.

The following table summarizes the shares that have been excluded from the diluted earnings per share calculation for the year ended December 31, 2020, as they were anti-dilutive:

(In Millions)

Redeemable preferred shares 4

Convertible senior notes 2

Shares related to employee stock plans 1

NOTE 20 - COMMITMENTS AND CONTINGENCIES

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We negotiate most of our purchases of chrome, industrial gases and a portion of our electricity under multi-year agreements.

Our purchases of

coke are made under annual or multi-year agreements with periodic price adjustments.

Our purchases of coke are made under annual or multi-year agreements

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with periodic price adjustments.

We typically purchase coal under annual fixed-price agreements.

We also purchase certain transportation services under multi-year contracts with minimum quantity requirements.

Unconditional purchase obligations, including take-or-pay agreements, are as follows (in millions):

2023 2024 2025 2026 2027 Thereafter

$ 2,503 $ 1,072 $ 766 $ 225 $ 117 $ 785

CONTINGENCIES

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(In millions) 2022 2021

2021 December 31,

Environmental obligations $ 141 $ 207

Less current portion 20 18

current portion 23 20

Long-term environmental obligations $ 118 $ 187

The increase in environmental obligations as of December 31, 2021, compared to December 31, 2020, related to measurement period adjustments as a result of the purchase price allocation of the AM USA Transaction and the preliminary purchase price allocation of the FPT Acquisition.

The decrease in environmental obligations relates to a reclassification of $ 63 million from environmental to asset retirement obligations as of December 31, 2022.

We cannot predict the ultimate costs for each site with certainty because of the evolving nature of the investigation and remediation process.

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However, since we recognize amounts in the consolidated financial statements in accordance with GAAP that exclude potential losses that are not probable or that may not be currently estimable, the ultimate costs of these environmental matters may be higher than the liabilities we currently have recorded in our consolidated financial statements.

Pursuant to RCRA, which governs the treatment, handling and disposal of hazardous waste, the EPA and authorized state environmental agencies may conduct inspections of RCRA-regulated facilities to identify areas where there have been releases of hazardous waste or hazardous constituents into the environment and may order the facilities to take corrective action to remediate such releases.

Pursuant to RCRA (Resource Conservation and Recovery Act), which governs the treatment, handling and disposal of hazardous waste, the EPA and authorized state environmental agencies may conduct inspections of RCRA-regulated facilities to identify areas where there have been releases of hazardous waste or hazardous constituents into the environment and may order the facilities to take corrective action to remediate such releases.

Likewise, the EPA or the states may require closure or post-closure care of residual, industrial and hazardous waste management units.

Environmental regulators have the

authority to inspect all of our facilities.

Environmental regulators have the authority to inspect all of our facilities.

While we cannot predict the future actions of these regulators, it is possible that they may identify conditions in future inspections of these facilities that they believe require corrective action.

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Because of the uncertain status of these investigations, however, we cannot reasonably predict whether or when such spending might be required or its magnitude.

On April 29, 2002, AK Steel entered a mutually agreed-upon administrative order with the consent of the EPA pursuant to Section 122 of CERCLA to perform a RI/FS of the Hamilton plant site located in New Miami, Ohio.

The plant ceased operations in 1990 and all of its former structures have been demolished.

AK Steel submitted the investigation portion of the RI/FS and completed supplemental studies.

Until the RI/FS is complete, we cannot reasonably estimate the additional costs, if any, we may incur for potentially required remediation of the site or when we may incur them.

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BURNS HARBOR WATER ISSUES

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District Court for the Northern District of Indiana alleging violations resulting from the August 2019 event and other Clean Water Act claims.

We believe that a consent decree has been finalized and is currently pending final approvals, which requires specified enhancements to the mill's wastewater treatment systems and a $ 3 million civil penalty, along with other terms and conditions.

ELPC and HEC are also proposed signatories to the consent decree.

ArcelorMittal Burns Harbor LLC was served with a subpoena on December 5, 2019, from the United States District Court for the Northern District of Indiana, relating to the August 2019 event and has responded to the subpoena requests, including follow-up requests.

With the resolution of monetary sanctions and injunctive relief requirements under the pending consent decree, we do not believe that the costs to resolve any other third-party claims, including potential natural resource damages claims, that may arise out of the August 2019 event are likely to have, individually or in the aggregate, a material adverse effect on our consolidated financial condition, results of operations or cash flows.

On February 14, 2022, the United States and the State of Indiana filed a complaint and a proposed consent decree, and on April 21, 2022, the United States, with the consent of all of the parties, filed a motion seeking final approval of the consent decree from the court.

The consent decree was approved by the court with an effective date of May 6, 2022.

The consent decree requires specified enhancements to the mill's wastewater treatment systems and required us to pay a $ 3 million civil penalty, along with other terms and conditions.

Other parties to the consent decree include the United States, the State of Indiana, ELPC and HEC.

The ELPC/HEC civil litigation was dismissed with prejudice on May 12, 2022.

In addition, ArcelorMittal Burns Harbor LLC was served with a subpoena on December 5, 2019, from the United States District Court for the Northern District of Indiana, relating to the August 2019 event and has responded to the subpoena requests, including follow-up requests.

With the resolution of monetary sanctions and injunctive relief requirements under the consent decree, we do not believe that the costs to resolve any other third-party claims, including potential natural resource damages claims, that may arise out of the August 2019 event are likely to have, individually or in the aggregate, a material adverse effect on our consolidated financial condition, results of operations or cash flows.

In addition to the foregoing matters, we are or may be involved in proceedings with various regulatory authorities that may require us to pay fines, comply with more rigorous standards or other requirements or incur capital and operating expenses for environmental compliance.

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In addition to the matters discussed above, there are various pending and potential claims against us and our subsidiaries involving product liability, personal injury, commercial, employee benefits and other matters arising in the ordinary course of business.

Because of the considerable uncertainties that exist for any claim, it is difficult to reliably

or accurately estimate what the amount of a loss would be if a claimant prevails.

Because of the considerable uncertainties that exist for any claim, it is difficult to reliably or accurately estimate what the amount of a loss would be if a claimant prevails.

If material assumptions or factual understandings we rely on to evaluate exposure for these contingencies prove to be inaccurate or otherwise change, we may be required to record a liability for an adverse outcome.

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NOTE 21 - SUBSEQUENT EVENTS

On December 1, 2021, we issued a notice of redemption for all $ 294 million in aggregate principal amount outstanding of the 1.500% 2025 Convertible Senior Notes.

The 1.500% 2025 Convertible Senior Notes were redeemed on January 18, 2022, through a combination settlement, with the aggregate principal amount of $ 294 million paid in cash, and 24 million common shares, with a fair value of $ 499 million, delivered to noteholders in settlement of the premium due per the terms of the indenture, plus cash in respect of the accrued and unpaid interest on the 1.500% 2025 Convertible Senior Notes to, but not including, the redemption date per the terms of the indenture.

We are not obligated to make any purchases and the program may be suspended or discontinued at any time.

The share repurchase program does not have a specific expiration date.

We have evaluated subsequent events through the date of financial statement issuance.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Mineral Reserves — Asset Retirement Obligations, Valuation of Long-Lived Assets, Depreciation, Depletion and Amortization of Property, Plant and Equipment and Valuation in Acquisition Accounting — Refer to Notes 3, 5, 6 and 14 to the financial statements

MINERAL RESERVES — ASSET RETIREMENT OBLIGATIONS, VALUATION OF GOODWILL AND LONG-LIVED ASSETS AND DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT — REFER TO NOTES 5, 6, 7 AND 13 TO THE FINANCIAL STATEMENTS

Critical Audit Matter Description

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Since the liability represents the present value of the expected future obligation, a significant change in iron ore mineral reserves or iron ore mine lives could have a substantial effect on the recorded obligation.

Iron ore mineral reserve estimates are also used in evaluating potential impairments of iron ore 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 iron ore mine assets.

Further, iron ore mineral reserve estimates are used in estimating the fair value of mineral reserves established through the purchase price allocation in a business combination.

Iron ore mineral reserve estimates are also used in evaluating potential impairments of goodwill and iron ore 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 iron ore mine assets.

The Company performs an in-depth evaluation of its iron ore mineral reserve estimates by iron ore mine on a periodic basis, in addition to routine annual assessments.

The determination of iron ore mineral reserves requires management, with the support of management’s 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 recognizing that the price shall not exceed the three-year trailing average index price of iron ore adjusted to the Company’s realized price, production costs and capital expenditures, and (3) management’s mine plan for the proven and probable iron ore mineral reserves (collectively “the iron ore mineral reserve inputs”).

Changes in any of the judgments or assumptions related to the iron ore mineral reserve inputs can have a significant impact with respect to the accrual for asset retirement obligations, the impairment of long-lived asset groups, the amount of depreciation, depletion and amortization expense and the estimated fair value of mineral reserves established through the purchase price allocation in a business combination.

Changes in any of the judgments or assumptions related to the iron ore mineral reserve inputs can have a significant impact with respect to the accrual for asset retirement obligations, the impairment of goodwill and long-lived asset groups and the amount of depreciation, depletion and amortization expense.

The consolidated asset retirement obligation balance was $520 million as of December 31, 2022, of which $196 million related to active iron ore mine operations.

The total asset balance associated with the Company’s Steelmaking reportable segment was $18,326 million as of December 31, 2021, of which $1,622 million related to long-lived assets associated with the Company’s combined iron ore mine asset groups, and is inclusive of $231 million related to iron ore mineral reserves acquired through the AM USA Transaction.

The total goodwill balance associated with the Company’s Steelmaking reportable segment was $956 million as of December 31, 2022.

The total asset balance associated with the Company’s Steelmaking reportable segment was $18,070 million as of December 31, 2022, of which $1,559 million related to long-lived assets associated with the Company’s combined iron ore mine asset groups.

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Depreciation, depletion and amortization expense for the Company’s combined iron ore mine asset groups was $161 million for the year ended December 31, 2022.

Given the significant judgments and assumptions made by management to estimate iron ore mineral reserves and the sensitivity of changes to iron ore mineral reserve estimates on the Company’s recorded asset retirement obligations, long-lived asset impairment considerations, calculated depreciation, depletion and amortization expense and estimated fair value of mineral reserves established through the purchase price allocation of a business combination, performing audit procedures to evaluate the reasonableness of management’s judgments and estimates related to the iron ore mineral reserve inputs required a high degree of auditor judgment and an increased extent of effort.

Given the significant judgments and assumptions made by management to estimate iron ore mineral reserves and the sensitivity of changes to iron ore mineral reserve estimates on the Company’s recorded asset retirement obligations, goodwill and long-lived asset impairment considerations and calculated depreciation, depletion and amortization expense, performing audit procedures to evaluate the reasonableness of management’s judgments and estimates related to the iron ore mineral reserve inputs required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

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▪ Presentations to the Audit Committee.

▪ Information by asset group, asset retirement obligation valuation models, depreciation, depletion and amortization expense calculations and mineral reserve purchase price allocation valuation models.

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

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

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

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

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

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

▪ Understanding and testing the methodology utilized by management for development of the future iron ore prices recognizing that the price shall not exceed the three-year trailing average index price of iron ore adjusted to the Company’s realized price.

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

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

▪ Evaluated the reasonableness of management’s forecast for production costs and capital expenditures by comparing the forecasts to:

(1) historical results and (2) internal communications among management and to the Board of Directors.

◦ We evaluated management’s iron ore mine plan for the proven and probable mineral reserves as included in the Technical Report Summary, by:

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

▪ Comparing the iron ore mine plan to

• Presentations to the Audit Committee.

• Historical iron ore mine plan(s).

• Information by asset group, asset retirement obligation valuation models, depreciation, depletion and amortization expense calculations, and mineral reserve purchase price allocation valuation models.

▪ Asset retirement obligation valuation models, goodwill impairment analysis, information provided by asset group and depreciation, depletion and amortization expense calculations.

/s/ DELOITTE & TOUCHE LLP

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We have served as the Company's auditor since 2004.

105 | CLF 2022 FORM 10-K

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data