The battle for Cliffs Natural Resources (NYSE:CLF) has just become more interesting, as Casablanca Capital revealed that it is on the verge of winning shareholders over in the battle for Cliffs' board.

Board battles
Casablanca is trying to gain control of Cliffs through its 5% shareholding, by pushing shareholders to elect a new board of directors. Cliffs and Casablanca have been slinging insults at each other for much of the past month, so far with little success. However, things are set to come to a head later this month, at Cliffs' annual general meeting. I've summarized the Cliffs saga here, for those readers who are not up to date.

The latest developments in this proxy battle concern Cliffs' management. Casablanca is demanding the replacement of Cliffs' entire board of directors, with its own nominees. Cliffs' board of directors tried to reach a compromise by offering Casablanca three of the company's board seats, an offer Casablanca immediately turned down.

What's more, Cliffs has accused Casablanca of putting candidates up for election without any recent mining experience -- a claim which made the company look extremely foolish.

Nevertheless, Casablanca has continued to press Cliffs' representation, and it has emerged within the past day or so that the activist hedge fund has won over many shareholders.

Hearts and minds
According to Casablanca, two leading proxy advisory firms, ISS and Glass Lewis have recommended that shareholders vote for four of its six board nominees. Two other Proxy Advisors are expected to release their reports in the coming days. If these advisors also recommend Casablanca's nominees, the fund has a chance to force through its demands. I should say that these recommendations do not guarantee the election of Casablanca's nominees, but they do make it more likely. 

That being said, Casablanca won't be able to take control Cliffs with only four board seats. While four board seats will be more than the three previously offered by Cliffs, there are nine board seats up for grabs in total.

Iron ore bull
Analysts at Credit Suisse have summed up the battle for Cliffs nicely:

[The current board's] 'hold the course' strategy is a rational one on long term iron ore price expectations in excess of $120/t, but on... ($100/t) long term price expectations the Casablanca proposals (shut down Bloom Lake, sell APAC iron ore) are each likely to be NPV accretive...At the end of the day the shareholder vote is pretty simple; vote for the Cliffs Natural Resources nominees if you an iron ore bull...but if you are more conservative on iron ore pricing then Cliffs Natural Resources' chances of survival increase under Casablanca's proposals...

In summary, the debate does come down to the pricing of iron ore. Indeed, as of yet Cliffs' actions to return to profit have not been enough, and the aforementioned wait-and-see approach is hardly a solid, watertight investing strategy.

The bottom line
Still, it looks as if Casablanca will get some seats on the board at Cliffs' at the end of this month. Hopefully, the board members nominated will be able to mix things up and create value for investors as well as saving American jobs. There is always the risk that Cliffs may not survive long enough for the company's wait-and-see approach to play out.

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Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.