and it is a Boolean Strong Buy.......look how it held up today - just outstanding. This fully demonstrated the degree to which the strong hands hold this stock and it will go much higher. Naysayers have no idea just how wrong they are OR......they are shorts who are now very very scared. Boolean.
That was indeed insightful. I was using $2.40 last evening to try to model at what price, if any, I would be a buyer of MSB. Unfortunately, the answer kept coming back below $30, which is out of the money at the present. I do appreciate the assist.
I think it's possible the two of you are talking at separate subjects.
Subject 1 is the schedule of royalties due to Mesabi Trust from Northshore and, in particular, the calculation of "Adjusted threshold price." The threshold defines the price point for bonus royalties and is adjusted quarterly for inflation. The last lease amendment was made when the Reserve Mining Company (Northshore's predecessor) went bankrupt, and I don't think the lease is likely to be amended again (in the absence of major business disruption).
Subject 2 is Cliff's contracts with steel companies. Cliff's contract with ISG was assumed by Weirton, which was assumed by Arcelor-Mittal. The original document can be found in CLF's 10-Q of 7/25/2002 http://www.sec.gov/Archives/edgar/data/764065/000095015202005679/l95280aexv10wa.txt and runs through 2016. At that time (2002) essentially all of Northshore's production went to ISG, and you could get a very nice picture of the state of affairs by comparing the quarterly reports of ISG, CLF, and MSB. The original Algoma contract dates to April 2002 http://www.sec.gov/Archives/edgar/data/764065/000095015202003333/l94042aex10-a.txt and also runs through 2016. Northshore has apparently only recently begun servicing Algoma, but the companies involved are now so complex as to make it somewhat difficult to follow.
Those filings are both redacted enough not to reveal the specific benchmarks. I believe there was a CLF 8-k sometime in the 2002-2004 window that laid out the impact on CLF's contract price of specific movements in benchmarks. Unfortunately, I have only my memory to go on for that, and I will only say that benchmarks included a measure of inflation (CPI or PPI), a measure of steel price, and the "international price" for iron ore. CLF has this same basic description on their website http://www.cliffsnaturalresources.com/Business/Customers/Pages/Default.aspx
The source of the disputes between CLF and Arcelor and Algoma is that, in 2010, negotiations between the big Chinese steel mills and the Australian/Brazilian iron mines went to quarterly pricing, thus causing one of CLF's contract benchmarks to cease being published. The replacement benchmark could be the quarterly price among the big Asia players, or it could be the Eastern Canadian Pellet Price that CLF uses for some of its other NA contracts. I haven't found where this Price is posted, but it's been around for a while. The ISG/Arcelor and Algoma contracts seem to predate CLF's use of the Eastern Canadian price.
CLF's quarterly indicates that they're realizing a price per ton around $110 ($865M revenues/7.6M tons), which is much better than the $76 they're paying Northshore. Some of those revenues may be shipping, but some of them may reflect the difference in CLF's contracts tied to ECPP vs "international." Since CLF expects revenues of $98-103/ton for 2011 at the same production level as 2010, it would be nice to see a little more of that $100/ton get to MSB.
I'm still making my plans based on royalty expectations of $2.30-$2.50.
The document that gmax is referencing can be found at this link.
It's certainly very informative, and I learned a couple of nuances that I wasn't aware of before. The issue that I was referencing was actually what Cliffs sells it's iron ore at to it's customers, mainly Arcelormittal and Essar Steel Algoma. From looking at 8-k's and 10-Q's I've been able to ascertain that the pellet price has recently been as high as $75-$76 a ton. The pellet price seems to be a function of two things, 1) the price that is set at the beginning of a contract (presumably a year or two year contract) with their customers, and 2)the contract price looks to be based of of a benchmark called the Eastern Canadian Pellet Price. I personally can't find where this price is published. If anyone can find a published rate please let us know.
This is the contract I was referring to in my earlier post. The prices here are changed every year, and arbitration can occur to discuss a "reopener" as to move the pellet price up or down.
There is actually a link on the Trust's website to this document. I scanned it as opposed to reading it, but dont see any provision for periodic changes. There is a built in inflation factor using CPI changes though.
Mesabi owns the rights to a mountain of iron ore in a world where societies are expanding over the long term.
Only desperate shorts are selling now - probably, trying to get back to their original sales prices in the high teens to low twenties.
Good luck, I'm holding long term and am enjoying the show.