* Halves dividend to 4 cents, cuts salaries across board

* Iron-ore pellet producer will sell 12 million shares

* Eyes Michigan civil penalty for environmental violation

* Shares down 7 percent (Adds CEO quote, cost savings, byline)

By Braden Reddall

SAN FRANCISCO, May 12 (Reuters) - Cliffs Natural Resources Inc (CLF.N: Quote, Profile, Research) watched its shares tumble 7 percent on Tuesday as it unveiled pollution penalties and a big share offer, while halving its dividend and cutting staff benefits.

Shares of the U.S. iron-ore pellet producer, which reported a first-quarter loss due to the recession-led slump in demand at the end of April [ID:nN29459428], are now down more than $5 from their four-month high of $32.14 hit last week.

The past year had already seen Cliffs go through a boom and bust in commodity prices, an aborted acquisition of coal miner Alpha Natural Resources (ANR.N: Quote, Profile, Research), as well as a name change.

That was all prior to Tuesday's flurry of news, which included an anticipated civil penalty for pollution in Michigan as well as dividend, salary and retirement benefit cuts that were expected to save a total of $37 million a year.