Harbinger labelled the proposed $US10 billion acquisition of Alpha “too much, too fast”

“We have supported the company's expansion into metallurgical coal mining operations, but believe that the mixed results of the company's efforts to date and the operational challenges inherent in coal mining demand a measured approach,” Harbinger said in a letter to Cleveland-Cliffs shareholders on Friday.

Harbinger said while Cleveland-Cliffs was a company with “tremendous intrinsic value”, it was “gravely concerned” by the company's decision to acquire Alpha, believing it was a “radical, transformative transaction” that represented unacceptable risk for shareholders.

To block the move Alpha has asked shareholders to vote on October 3 to authorise its acquisition of up to one-third of the voting shares of Cleveland-Cliffs.

If approved, the acquisition does not guarantee Harbinger will be successful in stopping the Alpha deal with several other hurdles in its way, including the ability for Cleveland-Cliffs under Ohio law to remove a two-third voting requirement.

Late last month the US Federal Trade Commission approved the purchase of Alpha Natural Resources by Cleveland-Cliffs, but the deal is still subject to shareholder approval.

If given the go-ahead a new combined company, Cliffs Natural Resources, will hold a portfolio including nine iron ore mines and more than 60 coal mines in North America, South America and Australia.

“[A] significant position in both iron ore and metallurgical coal will make it a major supplier to the global steel industry, as well as provide a platform for further diversification both geographically and in terms of the mineral and resource products it sells,” Alpha and Cleveland said last month.

The two companies estimate Cliffs Natural Resources will have a combined pro forma revenue for 2008 of approximately $6.5 billion. Revenue for 2009 could reach $10 billion.