Feb 12 (Reuters) - The activist investor squaring off with Cliffs Natural Resources Inc named its preferred candidate for chief executive officer on Wednesday and said it plans to nominate enough new directors to form a majority of the iron ore miner's board.
Hedge fund Casablanca Capital, which owns about 5.2 percent of Cliffs, said it is backing Lourenco Goncalves, former CEO of Metals USA, to take the top job at hard-hit Cliffs.
Last month Casablanca publicly urged Cliffs to spin off its international operations and form a master limited partnership from its U.S. assets, but the fund declined to say what its next steps would be if Cliffs refused.
Cliffs, a relatively high-cost producer, has been battered by weak iron ore prices. Operational issues and worse-than-expected costs have plagued its Bloom Lake Mine in Quebec, once seen by analysts as a key growth project.
After months of uncertainty, the company said on Tuesday it has decided to indefinitely suspend a planned expansion at Bloom Lake, and idle Wabush, another Canadian mine, slashing capital spending and cutting some 500 jobs.
"The steps Cliffs announced yesterday are, in our view, a knee-jerk response to our call for change. We believe they are inadequate to address Cliffs' issues, including the need for dramatic cost savings," said Casablanca Chairman Donald Drapkin in a statement.
Cleveland-based Cliffs' shares were higher on Wednesday morning, but little changed from where they were trading in the premarket before Casablanca's announcement.
The company is set to report its fourth-quarter results after the close on Thursday.
The Cliffs campaign is Casablanca's first foray into mining. Founded in 2010 by former investment bankers Drapkin and Douglas Taylor, the fund is best known for pushing, along with activist investor Carl Icahn, for a board shakeup at electronic design automation company Mentor Graphics in 2011.
But Goncalves is a metals industry veteran - he led Metals USA for 10 years, until the steel service center operator sold to Reliance Steel and Aluminum Co last year.
Cliffs supplies steelmakers with iron ore, and has a smaller coal mining business.
The miner is in the midst of an unusual leadership transition. Its last chief executive, Joseph Carrabba, retired in November, and former Barrick Gold Corp executive Gary Halverson was named to succeed him.
But Halverson's current title is president and chief operating officer. While Cliffs executives report to Halverson, he is not yet chief executive.
Executive chairman James Kirsch has been helping with the transition as Halverson develops "a deep understanding of the business at an operating level" Cliffs said in October.
Cliffs shares were up 2.2 percent at $21.97 on the New York Stock Exchange on Wednesday morning.