I'm long, underwater here, not happy, enough said. But I have made my wealth over the last 2 decades in resources by buying companies with great assets selling at large discount to their share price.
It seems to me that the once dreaded over supply of iron ore in 2015 and beyond will not come to pass. All the majors and minors have cut their development plans by billions of dollars which equals 100 of millions of tons that won't see the market place for an additional 5-10 years. China is developing its reserves but the fact is the ore concentrate is only in the 20% range extremely costly and inferior to the imports available.
The producers of ore are and have been consolidating, for the majors its the only way to secure reserves.
The problem with the analysts is they assume every possible mine development will yield the tonnage that the operators speculate...its the same in the oil industry, 2 years ago all the so called analyst were crying oil will be in oversupply, $20 a barrel again...obviously they have never heard of depletion and the margin cost of each new unit to satisfy demand cost more to produce then the last unit. It's the same with oil, copper, coal, iron ore etc...I best cheapest ore has been mined globally.
India recognizes this. They are beginning to develop a steel foundry industry to compete with china and keeps some reserves in country for that purpose. So they wont experience the margin crush.
2014-2020 will be golden years for iron ore.
while I agree with almost all you say, it is what you don't say in the Macro view that still concerns me, the world economy is still struggling, oil and copper are about to break out =to low side which means economies are not improving, Europe remains in a coffin. CLF is not alone in the mining sell off, but it does have one of the higher BV percentages of most IO producers so why not buy one of the others with lower costs. Buy the best type scenario?? But I continue to feel that we have not seen the bottom even with the nice basing we are starting to see here. a subsequence poster talks about weakness of the dollar when actually we are strong and yet devaluing an unusual mix. Global currencies are devaluing rapidly making cash almost worthless to hold. This is a bullish situation for stocks but CLF is not participating, it is an extremely bearish situation longer term that could lead the world into a hyper inflationary depression. I am still trying to figure how to protect for that one. It has happened in countries but not world wide before. If it was just here I know what I would do but worldwide is another story, Cypress is starting down a horrendous path of confiscating bank depositors assets with a huge tax. This could destroy their banking system and start bringing down other countries. Yet the market continues up. very many mixed signals that are highly unusual and outcomes remain to be seen.
Jimjones - Thank you - a postful and (for the most part) rare post on the CLF board.
One subject you do not mention is the strength of our dollar. Given our fiscal situation, my hunch is that a weak dollar will continue to contribute to overall commodity inflation, including of course IO.
I'm a cautious buyer at or below $21.50 ... If management can restore some modicum of confidence on The Street in the decisions they are making we may then look forward to renewed, solid institutional buying for the long term.
I actually agree with you as far as the macro picture goes. The only thing I think that could derail that outlook is further collapse of the European Economy. Germany is a very large importer of ore and Europe more indirectly provides a large percentage of the capital involved in the expansion efforts of many large multinationals and nations (stock purchases and bonds).
I am curious as to what your price target for he 1-2 year range would be. After running my DCF I think somewhere in the $42 range is appropriate.
Sentiment: Strong Buy
my jan 2015 target is between 50-55$. Margins in Canada will continue to improve as more and more volumes are added. Plus by then the Chrome deposit will be on the front burner.
Bloomberg reported tonite that both Germny and Italy economies are improving. So there is ahope for Europe.. Besides I think CLF has found a botton unless the whole market tanks 200 to 300 points in a day.