764065--2/21/2006--CLEVELAND_CLIFFS

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Our sales and earnings are subject to significant fluctuations as a result of the cyclical nature of the North American steel industry. If steelmakers use methods other than blast furnace production to produce steel, or if their blast furnaces shut down or otherwise reduce production, the demand for our iron ore products may decrease, which would adversely affect our sales, margins and profitability. Natural disasters, equipment failures and other unexpected events may lead our steel industry customers to curtail production or shut down their operations. We operate in a very competitive industry. Capacity expansions could lead to lower global iron ore prices. Our sales and competitive position depend on the ability to transport our products to our customers at competitive rates and in a timely manner. If a substantial portion of our term supply agreements terminate and are not renewed, and we are unable to find alternate buyers willing to purchase our products on terms comparable to those in our existing term supply agreements, our sales, margins and profitability will suffer. We depend on a limited number of customers, and the loss of, or significant reduction in, purchases by our largest customers would adversely affect our sales. Changes in demand for our products by our customers could cause our sales, margins and profitability to fluctuate. The provisions of our term supply agreements could cause our sales, margins and profitability to fluctuate. We may have contractual disputes with our customers or significant suppliers of energy, materials, or services that could significantly impact our sales, revenue rates, production or operating costs. Mine closures entail substantial costs, and if we close one or more of our mines sooner than anticipated, our results of operations and financial condition may be significantly and adversely affected. We have significantly reduced our ore reserve estimates for the Empire mine and may close the Empire mine sooner than we had anticipated, which could materially and adversely affect our results of operations and financial condition. We rely on the estimates of our recoverable reserves, and if those estimates are inaccurate, our financial condition may be adversely affected. The price adjustment provisions of our North American term supply agreements may prevent us from increasing our prices to match international ore contract prices or to pass increased costs of production on to our customers. Our ability to collect payments from our customers depends on their creditworthiness. Our change from a manager of iron ore mines on behalf of steel company owners to primarily a merchant of iron ore to steel company customers has increased our obligations with respect to those mines and has made our revenues, earnings and profit margins more dependent on sales of iron ore products and more susceptible to product demand and pricing fluctuations. We rely on our joint venture partners in our mines to meet their payment obligations, and the inability of a joint venture partner to do so could significantly affect our operating costs. Unanticipated geological conditions and natural disasters could increase the cost of operating our business. Many of our mines are dependent on a single-source energy supplier, and interruption in energy services may have a significant adverse effect on our sales, margins and profitability. Our mines and processing facilities have been in operation for several decades. Equipment failures and other unexpected events at our facilities may lead to production curtailments or shutdowns. We are subject to extensive governmental regulation, which imposes, and will continue to impose, significant costs and liabilities on us, and future regulation could increase those costs and liabilities or limit our ability to produce iron ore products. Our expenditures for postretirement benefit and pension obligations could be materially higher than we have predicted if our underlying assumptions prove to be incorrect, if there are mine closures or our joint venture partners fail to perform their obligations that relate to employee pension plans. We are a related party to certain companies that were operators and are required under the Coal Industry Retiree Health Benefit Act of 1992 (the Coal Retiree Act ) to make premium payments to the United Mine Workers Association Combined Benefit Fund (the Combined Fund ), and our obligations to the Combined Fund could increase if other coal mine operators file for bankruptcy protection or become insolvent. Our profitability could be negatively affected if we fail to maintain satisfactory labor relations. Our operating expenses could increase significantly if the price of electrical power, fuel or other energy sources increases. Equipment and supply shortages may impact our production. We may encounter labor shortages for critical operational positions, which could affect our ability to produce iron ore products. Our profitability could be affected by the failure of outside contractors to perform. Our profitability could be affected due to uncertainties related to the appraisal of acquisitions and the related allocation of purchase price to the acquired assets and assumed liabilities. Our profitability and liquidity could be adversely impacted by a failed auction in the securities market.

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764065--2/21/2006--CLEVELAND_CLIFFS_INC