Again, I am going to keep this simple, Share holder equity increased by $1 billion from Jan 1, 2013 to the end of Q2. Debt is not a problem, their financial condition is good and world economies are expanding.
The only time debt is bad is when you are not making money. I don't care how you spin it, the bottom line is the bottom line and profits are good.
For the Longs the consideration should be where the balance sheet is going. Year-to-date (6-30-2013) cash provided by operating activities was $388.9 million and cash spent on the purchase of property, plant and equipment was $501.2 million - for a net cash outflow of -$112.3 million. This cash outflow was covered by the issuance of preferred and common stock during the period. CLF is budgeted to spend another $500 million during the remainder of 2013, much of it on the Bloom Lake mine. If $500 million cash is not provided from operating activities, CLF will have to borrow the difference.
Much of the past and future purchases of property, plant and equipment are related to the Bloom Lake mine Phase II expansion. However, the completion of the concentrator and load-out facility has been indefinitely delayed by management- basically preventing the delivery of expanded production. Bloom Lake’s phase II expansion program was planned to take production capacity from 7.2 million tons per annum to 14.5 million tons per annum. Production from Bloom Lake is sold primarily into the seaborne trade to Asian steel producers.
Through June 30, 2013, approximately $1.3 billion of the total capital investment for the Bloom Lake expansion project had been committed, of which a total of approximately $1.1 billion had been expended. Of the remaining committed capital, expenditures of approximately $205 million are expected to be made during the remainder of 2013.
In summary, CLF needs to start realizing increased cash flow/production from the Bloom Lake mine expansion project to return value to the shareholders. Unfortunately, due to the delay in completion of the Bloom Lake expansion project, the share price will only reflect the cost of this endeavor and not the benefit.
This is a great post, thank you so much. People like surf just pump the stock thinking airborne sea pricing is the only way Cliff's stock will go up or down. I also saw over $200 million reserved for the Decar Project, Henry Sur, and the Ring of Fire Projects this year. But the Ring of Fire is delayed so it looks like the only projects going forward are the Decar and Henry Sur Project. Correct me if I am wrong but the company seems to be delaying projects until a new CEO is on board.
The Henry Sur Project might be a hidden gem. It is a huge amount of land.
I trust w999surf and I enjoy to read all his postings. Look at AAPL, I endured and suffered so much pain since last September (9/2012) when shorts took over AAPL and short this stock from $709 to $380. Until Carl Icahn said AAPL was undervalued and invested 1 B in Apple then AAPL stock price finally broke $500 again.
I had a similar situation in FB, until FB has a good strategy with mobile device so FB is $42 now.
Right now, a few big shots such as Goldman, Morgan Stanley & CS were shorting CLF, so we (long) are suffering but things are changing very fast. We all know Iron ore price is going up and CLF is making a lot of money again, so CLF stock price will be back at least $30 again.
The most important thing: the debt of CLF is decreasing every qtr.
The fact: CLF is making a lot of money and EPS was $0.80 last qtr and this qtr the projected EPS will be ~ $1.40. If we apply P/E ratio 10 then CLF will be $30 now.
Last night, I got a lot of dividend from CLF, so I will buy a few more CLF stocks.
Sentiment: Strong Buy
this surf poster cannot be trusted and is not credible regarding financial analysis - please see thread on the post "CLF: high debt + more writedowns = more sellers"
Barring another equity offering, CLF currently generates very little free cash flow and will be unable to pay down any material amount of debt near term. This, among other issues, is exactly why there is pressure and overhang on the stock
CLF would be generating plenty of cash flow if not for the substantial capital investments they are making to bring their new production facilities on line. Free cash flow is reduced by capital investment spending. Were CLF to feel pressure to reduce debt faster than they are now they could slow down capex and boost funds allocated to debt reduction. Obviously that is not happening at this time. IO and Met Coal prices holding up nicely in the middle of the price range ($130's - $140's) which makes CLF nicely profitable barring any more large non-recurring expense write downs, which i find unlikely.