CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
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EXHIBIT 10.85
FIRST AMENDMENT TO PELLET SALE AND PURCHASE AGREEMENT

This FIRST AMENDMENT TO PELLET SALE AND PURCHASE AGREEMENT (the “Amendment”) is
entered into, dated and effective as of December 16, 2004, by and among THE
CLEVELAND-CLIFFS IRON COMPANY, an Ohio corporation (“CCIC”), CLIFFS MINING
COMPANY, a Delaware corporation (“CMC”), NORTHSHORE MINING COMPANY, a Delaware
corporation (“Northshore”), CLIFFS SALES COMPANY, an Ohio corporation formerly
known as Northshore Sales Company (“Sales”; CCIC, CMC, Northshore and Sales,
collectively, “Cliffs”), INTERNATIONAL STEEL GROUP INC., a Delaware corporation
(“ISG”), ISG CLEVELAND INC., a Delaware corporation (“ISG Cleveland”), and ISG
INDIANA HARBOR INC., a Delaware corporation (“ISG Indiana Harbor”; ISG, ISG
Cleveland and ISG Indiana Harbor, collectively, “Steel”).

RECITALS

WHEREAS, Cliffs and Steel desire to enter into this Amendment to amend their
Pellet Sale and Purchase Agreement, dated as of April 10, 2002 (the
“Agreement”);

NOW, THEREFORE, in consideration of the premises, their mutual covenants and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1.The WHEREAS clause appearing on pages 1 and 2 of the Agreement is hereby
deleted and the following added as a new WHEREAS clause:

WHEREAS, Cliffs desires to sell to Steel and Steel desires to purchase from
Cliffs certain quantities of grades of iron ore pellets as follows: (i) such
grades of iron ore standard pellets being those produced at the [****] iron ore
pellet plant (“[****] Pellets”), located in [****] (“[****] Mine”); (ii) such
grades of iron ore flux pellets being those produced at the [****] iron ore
plant (“[****] Pellets”), located in [****] (“[****] Mine”); (iii) such grades
of iron ore standard pellets being those produced at the [****] iron ore pellet
plant (“[****] Pellets”), located in [****] (“[****] Mine”); (iv) such grades of
iron ore standard pellets being those produced at the [****] iron ore pellet
plant (“[****] Pellets”), located in [****] (“[****] Mine”); (v) such grades of
iron ore partial flux pellets being those produced at the [****] iron ore plant
(“[****] Pellets”), located in [****] (“[****] Mine”); or (vi) such other pellet
grades as may be mutually agreed to by the parties hereto (such [****] Pellets,
[****] Pellets, [****] Pellets, [****] Pellets, [****] Pellets, and other
mutually agreed upon pellets collectively being referred to herein as “Cliffs
Pellets”), all on the conditions contained herein.

2.    Section 4(c) of the Agreement is hereby deleted and the following added as
a new Section 4(c):

(c)    With respect to the tonnage of [****] Pellets which Cliffs will have
available for sale to Steel, on or before December 31 of each year Cliffs shall
notify Steel in writing as to the tonnage of [****] Pellets Cliffs shall sell to
Steel, which tonnage shall equal Steel's Annual Pellet Tonnage Requirements for
such year.

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3.    Section 5(c) of the Agreement is hereby deleted and the following is added
as a new Section 5(c):

(c)    The prices for the specific grades of Cliffs Pellets sold and purchased
in each of the years 2003 and 2004 for the Cleveland Works or other dock area
designated by Steel pursuant to Section 8(a), and the Indiana Harbor Works shall
be based on the [****] prices per iron unit as described in Section 5(a) (iii)
and 5(b)(ii) above ("[****] prices per iron unit for each of the Cleveland Works
and the Indiana Harbor Works"), which [****] prices per iron unit for each of
the Cleveland Works and the Indiana Harbor Works shall then be adjusted, up or
down, in the year [****] by an amount as determined in accordance with Section
5(d) below.

4.    Sections 5(g)(i)(1) and (2) of the Agreement are hereby deleted and the
following is added as new Sections 5(g)(i)(1) and 5(g)(i)(2):

(g)(1)    In [****], annual special steel pricing payments ("Special Payment")
shall be made, wherein Cliffs shall pay Steel or Steel shall pay Cliffs, as the
case may be, [****]. The amount of the Special Payment shall be determined as
follows:

(1)
If during [****], Steel's [****], Cliffs shall pay Steel an amount equal to: (w)
the amount [****], (x) multiplied by [****], (y) multiplied by [****], (z)
multiplied by [****].

(2)
If during [****], Steel's [****], Steel shall pay Cliffs an amount equal to: (w)
the amount [****], (x) multiplied by [****], (y) multiplied by the [****], (z)
multiplied by the [****].

5.    The following is added as a new section 5A:

5A(a)    The prices for specific grades of Cliffs Pellets sold and purchased in
each of the years [****] and thereafter for the Cleveland Works or other dock
areas designated by Steel pursuant to Section 8(a), and Indiana Harbor Works
shall be based on [****] Prices as described in Section 5A(b), below, which
[****] Prices for each of the Cleveland Works and the Indiana Habor Works shall
then be adjusted quarterly, up or down, in the year [****] and thereafter by an
amount as determined in accordance with Section 5A(c) below.
(b)    For purposes of this Section 5A, the [****] Prices per iron unit for
Cliffs Pellets shall be as follows:

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Cleveland Works
 
 
 
 

Grade

[****]
[****] Price
Expected
Natural
Iron Content
Estimated
Price
Per Ton
 
 
 
 
[****] Flux
$[****]
[****]
$[****]
[****] Partial Flux
$[****]
[****]
$[****]
[****] Standard
$[****]
[****]
$[****]
[****] Standard
$[****]
[****]
$[****]
[****] Standard
$[****]
[****]
$[****]
 
 
 
 
Indiana Harbor Works
 
 
 
 

Grade

[****]
[****] Price
Expected
Natural
Iron Content
Estimated
Price
Per Ton
 
 
 
 
[****] Flux
$[****]
[****]
$[****]
[****] Partial Flux
$[****]
[****]
$[****]
[****] Standard
$[****]
[****]
$[****]
[****] Standard
$[****]
[****]
$[****]
[****] Standard
$[****]
[****]
$[****]

(c)    In order to determine the adjusted prices to be paid during the years
[****] and thereafter for the Cliffs Pellets, the [****] Prices for each of the
Cleveland Works and the Indiana Harbor Works and each of the following
respective year's then-adjusted prices per iron unit for each of the Cleveland
Works and the Indiana Harbor Works shall be further adjusted, up or down, each
year for the year in determination as follows:

(1)
Divide (x) the numerator, which is the amount by which the [****] ("[****]") for
the calendar year in determination changes (up or down) from the immediately
preceding calendar year's [****]; by (y) the denominator, which is the
immediately preceding calendar year's [****], and multiply the result obtained
by [****]; and

(2)
Divide (x) the numerator, which is the amount by which the [****] (“[****]”) for
the calendar year in determination changes from the immediately preceding
calendar year’s [****]; by (y) the denominator, which is the immediately
preceding calendar year’s [****], and multiply the result obtain by [****]; and

(3)
Sum the results obtained in paragraphs (1) and (2) above and multiply that total
by [****]; and

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(4)
Multiply the results determined in (3) above by the preceding year's adjusted
prices per iron unit, which will then equal the current year's price adjustment
per iron unit; and

(5)
Add the result determined in (4) above to the preceding year's adjusted price
per iron unit for the Cleveland Works and the Indiana Harbor Works, which will
then equal the current year's adjusted prices per iron unit for the Cleveland
Works and the Indiana Harbor Works; and

(6)
Multiply the result determined in (5) above by the current year’s expected
natural iron content, which will then equal the current year’s estimated price
per ton for the Cleveland Works and the Indiana Harbor Works.

Those adjusted prices per ton shall then become the contract's year estimated
price for the Cliffs Pellets delivered to the Cleveland Works and the Indiana
Harbor Works for the year in determination.

(d)    The final price for all tons sold by Cliffs to Steel shall be based on
actual natural iron content shipped, as provided in Section 6 of this Agreement.

(e)    Attached as Exhibit 5 is an example of the adjustment formula applying
the provisions of Sections 5A(b) and 5A(c).

(f)(i)    Beginning in [****], a Special Payment shall be made in each year,
wherein Cliffs shall pay Steel or Steel shall pay Cliffs, as the case may be, if
[****]. The amount of the Special Payment shall be determined as follows:

(1)
In any contract year in which [****], Cliffs shall pay Steel an amount equal to:
(w) the amount [****], (x) multiplied by [****], (y) multiplied by [****], (z)
multiplied by the total tons of Cliffs Pellets which Steel [****] in the
contract year.

(2)
In any contract year in which [****], Steel shall pay Cliffs an amount equal to:
(w) the amount [****], (x) multiplied by [****], (y) multiplied by [****], (z)
multiplied by the total tons of Cliffs Pellets which Steel [****] in the
contract year.

(3)
For the purpose of estimating the Special Payment, a steel pricing payment
calculation shall be made by Steel following the end of each quarter, using the
formula provided for in Sections 5A(f)(i)(1) and 5A(f)(i)(2) above for each
quarter. This calculation (and payment, if any) shall be based on [****]. Within
30 days following each quarter Steel shall notify Cliffs in writing of the
amount (if any) payable by Cliffs to Steel or Steel to Cliffs, and a quarterly
payment, if any, shall be made by Cliffs to Steel or Steel to Cliffs, as the
case may be, within 45 days after the end of each quarter.

(4)
The final Special Payment calculation shall be made after the end of the year in
accordance with Sections 5A(f)(i)(1) and 5A(f)(i)(2) above which will reflect
[****] adjustment will be made to reflect any difference between the actual
year’s Special Payment and the quarterly estimated payments that were made
during

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the year. Payment due, from either party, as a result of the actual annual
calculation shall be made by February 15 of the year following the contract
year.

(5)
Attached as Exhibits 6 and 7 are examples of the calculations applying the
provisions of Sections 5A(f)(i).

(ii)    In the event that in any year [****] are less than [****], then Cliffs
and Steel agree to review the [****]. If the [****] are greater than or equal to
[****] of Steel’s [****], then the provisions of Section 5A(f)(i) shall apply
without further modification. If such [****] threshold is still not satisfied,
then Cliffs and Steel agree to substitute [****]. The [****] which are used for
the price ranges, as provided for in Section 5A(f)(i) above, shall be adjusted
as follows: (i) the [****] (ii) the [****], (iii) with the difference between
(i) and (ii) above being added to both the [****] to determine the revised
ranges for the [****] in order to determine the Special Payment.

(g)    Prices for Cliffs Pellets shall be adjusted on a calendar quarterly basis
based upon estimated and/or actual changes, as applicable, in the published
indices specified in Section 5A(c) (“Quarterly Price Adjustment”). Cliffs shall
calculate the Quarterly Price Adjustment and provide Steel with such Quarterly
Price Adjustment by the 15th day after the end of each calendar quarter, or on
such later date as may be mutually agreed between Cliffs and Steel. Cliffs shall
issue an invoice or credit memo, as the case may be, to Steel concurrently with
the Quarterly Price Adjustment, and payment from Cliffs to Steel or Steel to
Cliffs, as the case may be, shall be made by the 15th day following issuance of
the invoice or credit memo, as the case may be.

6.    Exhibit 1 is hereby deleted and a new Exhibit 1 is hereby attached to this
Agreement and incorporated in the Agreement by reference.

* * * END OF PAGE * * *

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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by
their respective authorized officers.

THE CLEVELAND-CLIFFS IRON
COMPANY

By:   /s/ William R. Calfee       
Name: William R. Calfee
Title: Executive Vice President Commercial

INTERNATIONAL STEEL GROUP INC. 

By:   /s/ Rodney B. Mott          
Name: Rodney B. Mott
Title:                  

CLIFFS MINING COMPANY 

By:   /s/ William R. Calfee       
Name: William R. Calfee
Title: Executive Vice President Commercial

ISG CLEVELAND INC. 

By:   /s/ Rodney B. Mott          
Name: Rodney B. Mott
Title:                  

NORTHSHORE MINING COMPANY 

By:   /s/ William R. Calfee       
Name: William R. Calfee
Title: Executive Vice President Commercial

ISG INDIANA HARBOR INC. 

By:   /s/ Rodney B. Mott          
Name: Rodney B. Mott
Title:                  
CLIFFS SALES COMPANY 

By:   /s/ William R. Calfee       
Name: William R. Calfee
Title: Executive Vice President Commercial
 

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