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Leucadia National Corporation Message Board

  • granicus007 granicus007 May 21, 2012 2:02 AM Flag

    INMET

    Inmet sure had gotten cheap too. The Cobra de Panama property has proven to have even more reserves than originally estimated. One interesting aside is that this property's proven gold reserves keep rising. Short term all the miners are sucking air, but long term this is a world class property. And Inmet is now selling for not much more than at the market bottom in early 2009.

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    • Market is very risk adverse and taking a very short term approach. I bought some Inmet a couple weeks ago and I think this could provide a great entry. But it carries plenty of risk and will likley be a wild ride with plenty of setbacks.

    • "Inmet Mining Corporation (TSX:IMN) (Inmet) today announced the closing of its previously announced offering of US $1.5 billion aggregate principal amount of 8.75 percent senior unsecured notes maturing 2020 (the "Notes"

      This was a few days ago. Isn't 8.75% pretty high? LUK actually bought back 8.5% notes saying they can only exceed that return hurdle rate by such a small amount that it's not worth investing with debt. If Inmet's project is so high return, LUK should sell everything and own only Inmet stock!

      • 2 Replies to besterman2006
      • That pricing (8.75%) sounds good for a non-investment grade issuer that is developing a high-cost mining project.

        One thing about LUK's insight on debt. As everybody knows, LUK has NOLs to last 10 years or more. Because LUK has NOLs, LUK receives no current tax benefit for interest expense. A corporate taxpayer that borrows at 8% has an effective current interest rate of 4.8% (8% minus 40% tax savings for interest expense). LUK is in a weird position -- its cost of debt is not currently subsidized -- the interest expense adds to the NOL position and won't be used until 10 or 15 years down the road.

        This clearly impacts the way that LUK views deals. Other things being equal, a deal is going to have a higher PV for a current-cash taxpayer than for LUK because the former receives an effective tax subsidy for its debt expense.

      • 8.75% even if unsecured sounds outrageously high in light of an 8 year maturity.

    • All of LUK's holding are traddng substantialy below their 12 month highs. This is a point too many ignirant or loud mouth posters on this Board are willing to accept as the principal reason the share price has declined.

      Need proof. Just look at the idiot post asking why the big upside move in the stock today.

    • Everything LUK owns gets cheap for the last 5 years

 
LUK
25.42-0.32(-1.24%)Sep 19 4:04 PMEDT

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