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NOTE 8 – DEBT AND CREDIT FACILITIES

The following represents a summary of our long-term debt as of JuneÌý30, 2011 and DecemberÌý31, 2010:

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(1) As of JuneÌý30, 2011 and DecemberÌý31, 2010, no revolving loans were drawn under the credit facility; however, the principal amount of letter of credit obligations totaled $66.6 million and $64.7 million, respectively, reducing available borrowing capacity to $533.4 million and $535.3 million, respectively.

(2) As of JuneÌý30, 2011 and DecemberÌý31, 2010, the $400 million 5.90 percent senior notes were recorded at a par value of $400 million less unamortized discounts of $2.1 million and $2.2 million, respectively, based on an imputed interest rate ofÌý5.98 percent.

(3) As of JuneÌý30, 2011 and DecemberÌý31, 2010, the $800 million and $500 million 6.25 percent senior notes were recorded at par values of $800 million and $500 million, respectively, less unamortized discounts of $9.9 million and $8.7 million, respectively, based on an imputed interest rate ofÌý6.38 percent.

(4) As of JuneÌý30, 2011 and DecemberÌý31, 2010, the $500 million 4.80 percent senior notes were recorded at a par value of $500 million less unamortized discounts of $1.0 million and $1.0 million, respectively, based on an imputed interest rate ofÌý4.83 percent.

(5) As of JuneÌý30, 2011, the $700 million 4.875 percent senior notes were recorded at a par value of $700 million less unamortized discounts of $0.7 million, based on an imputed interest rate ofÌý4.89 percent.

(6) As of JuneÌý30, 2011, $62.5 of the term loan was classified as Current portion of term loan based upon the principal payment terms of the arrangement requiring principal payments on each three-month anniversary following the funding of the term loan.

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The terms of the private placement senior notes and the credit facilities each contain customary covenants that require compliance with certain financial covenants based on: (1)Ìýdebt to earnings ratio and (2)Ìýinterest coverage ratio. As of JuneÌý30, 2011 and DecemberÌý31, 2010, we were in compliance with the financial covenants related to both the private placement senior notes and the credit facilities. The terms of the senior notes due in 2020, 2021 and 2040 contain certain customary covenants; however, there are no financial covenants.

$1 Billion Senior Notes Offering

On MarchÌý23, 2011 and AprilÌý1, 2011, respectively, we completed a $1 billion public offering of senior notes consisting of two tranches: a 10-year tranche of $700 million aggregate principal amount atÌý4.875 percent senior notes due AprilÌý1, 2021, and an additional issuance of $300 million aggregate principal amount of ourÌý6.25 percent senior notes due OctoberÌý1, 2040, of which $500 million aggregate principal amount was previously issued during September 2010. Interest is fixed and is payable on AprilÌý1 and OctoberÌý1 of each year, beginning on OctoberÌý1, 2011, for both series of senior notes until maturity. The senior notes are unsecured obligations and rank equally with all our other existing and future unsecured and unsubordinated indebtedness. The net proceeds from the senior notes offering were used to fund a portion of the purchase price for the acquisition of Consolidated Thompson and to pay the related fees and expenses.

The senior notes may be redeemed any time at our option at a redemption price equal to the greater of (1)Ìý100 percent of the principal amount of the notes to be redeemed or (2)Ìýthe sum of the present values of the remaining scheduled payments of principal and interest on the notes to be redeemed, discounted to the redemption date on a semi-annual basis at the treasury rate plusÌý25 basis points with respect to the 2021 senior notes andÌý40 basis points with respect to the 2040 senior notes, plus, in each case, accrued and unpaid interest to the date of redemption. However, if the 2021 senior notes are redeemed on or after the date that is three months prior to their maturity date, the 2021 senior notes will be redeemed at a redemption price equal to 100 percent of the principal amount of the notes to be redeemed plus accrued and unpaid interest to the date of redemption.

In addition, if a change of control triggering event occurs with respect to the senior notes, we will be required to offer to purchase the notes of the applicable series at a purchase price equal toÌý101 percent of the principal amount, plus accrued and unpaid interest, if any, to the date of purchase.

Bridge Credit Agreement

On MarchÌý4, 2011, we entered into an unsecured bridge credit agreement with a syndicate of banks in order to provide a portion of the financing for the acquisition of Consolidated Thompson. The bridge credit agreement, referred to as the bridge credit facility, had an original maturity date of MayÌý10, 2012. On MayÌý10, 2011, we borrowed $750 million under the bridge credit facility to fund a portion of the cash required upon the consummation of the acquisition of Consolidated Thompson. The borrowings under the bridge credit facility were repaid using a portion of the net proceeds obtained from the public offering of our common shares that was completed on JuneÌý13, 2011, and the bridge credit facility was terminated. The borrowings under the bridge credit facility bore interest at a floating rate based upon a base rate or the LIBOR rate plus a margin determined by our credit rating and the length of time the borrowings were outstanding. The weighted average annual interest rate under the bridge credit facility during the time the borrowings were outstanding wasÌý2.56 percent. Refer to NOTE 14 – CAPITAL STOCK for additional information on the public offering of our common shares.

Term Loan

On MarchÌý4, 2011, we also entered into an unsecured term loan agreement with a syndicate of banks in order to provide a portion of the financing for the acquisition of Consolidated Thompson. The term loan agreement provides for a $1,250 million term loan. The term loan has a maturity date of five years from the date of funding and requires principal payments on each three-month anniversary of the date following the funding. On MayÌý10, 2011, we borrowed $1,250 million under the term credit facility to fund a portion of the cash required upon the consummation of the acquisition of Consolidated Thompson. Borrowings under the term loan bear interest at a floating rate based upon a base rate or the LIBOR rate plus a margin depending on the leverage ratio. The weighted average annual interest rate under the term loan wasÌý2.05 percent for the period of MayÌý10, 2011 through JuneÌý30, 2011.

Short-term Facilities

On MarchÌý31, 2010, Asia Pacific Iron Ore entered into a A$40 million ($42.9 million) bank contingent instrument facility and cash advance facility to replace the then existing A$40 million multi-option facility, which was extended throughÌýJuneÌý30, 2011 and subsequently renewed until JuneÌý30, 2012. The facility, which is renewable annually at the bank's discretion, provides A$40 million in credit for contingent instruments, such as performance bonds and the ability to request a cash advance facility to be provided at the discretion of the bank. As of JuneÌý30, 2011, the outstanding bank guarantees under this facility totaled A$24.3 million ($26.1 million), thereby reducing borrowing capacity to A$15.7 million ($16.8 million). We have provided a guarantee of the facility, along with certain of our Australian subsidiaries. The facility agreement contains customary covenants that require compliance with certain financial covenants: (1)Ìýdebt to earnings ratio and (2)Ìýinterest coverage ratio, both based on the financial performance of the Company. As of JuneÌý30, 2011, we were in compliance with these financial covenants.

Consolidated Thompson Senior Secured Notes

The Consolidated Thompson senior secured notes were included among the liabilities assumed in the acquisition of Consolidated Thompson. On AprilÌý13, 2011, we purchased the outstanding Consolidated Thompson senior secured notes directly from the note holders for $125 million, including accrued and unpaid interest. The senior secured notes have a face amount of $100 million, a stated interest rate ofÌý8.5 percent and were scheduled to mature in 2017. The transaction was initially recorded as an investment in Consolidated Thompson senior secured notes during the second quarter of 2011; however, upon the completion of the acquisition of Consolidated Thompson, and consolidation into our financial statements the Consolidated Thompson senior secured notes and our investment in the notes have been eliminated as intercompany transactions. Refer to NOTE 5 – ACQUISITIONS AND OTHER INVESTMENTS for additional information.

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Consolidated Thompson Convertible Debentures

Included among the liabilities assumed in the acquisition of Consolidated Thompson were the Consolidated Thompson convertible debentures that as a result of the acquisition were able to be converted by their holders into cash in accordance with the cash change of control provision of the convertible debenture indenture. The convertible debentures allowed the debenture holders to convert at a premium conversion ratio beginning on the 10^th trading day prior to the closing of the acquisition and ending on the 30^th day subsequent to the mailing of an offer to purchase the convertible debentures, which was the cash change of control conversion period as defined by the convertible debenture indenture. On MayÌý12, 2011, following the closing of the acquisition, Consolidated Thompson commenced the offer to purchase all of the outstanding convertible debentures in accordance with its obligations under the convertible debenture indenture by mailing to the debenture holders such offer to purchase. Additionally, on MayÌý13, 2011, Consolidated Thompson gave notice that it was exercising its right to redeem any convertible debentures that remained outstanding on JuneÌý13, 2011, after giving effect to any conversions that occurred during the cash change of control conversion period. As previously disclosed, Consolidated Thompson received sufficient consents from the debenture holders, pursuant to a consent solicitation, to amend the convertible debenture indenture to give Consolidated Thompson such a redemption right. As a result of these events, no convertible debentures remained outstanding as of JuneÌý30, 2011. Refer to NOTE 5 – ACQUISITIONS AND OTHER INVESTMENTS for additional information.

Consolidated Thompson Letters of Credit

In conjunction with our acquisition of Consolidated Thompson, we issued standby letters of credit with certain financial institutions in order to support Bloom Lake obligations. As of JuneÌý30, 2011, these letter of credit obligations totaled $48.7 million. We issued additional standby letters of credit of $14.3 million to support Bloom Lake obligations in July 2011.

Debt Maturities

Maturities of debt instruments based on the principal amounts outstanding at JuneÌý30, 2011, total $31 million in 2011, $94 million in 2012, $395Ìýmillion in 2013, $156 million in 2014, $524 million in 2015, $375 million in 2016 and $2.4 billion thereafter.

Refer to NOTE 7 – FAIR VALUE OF FINANCIAL INSTRUMENTS for further information.