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Mesabi Trust Message Board

  • jeepcreep111 jeepcreep111 Mar 27, 2013 11:49 AM Flag

    What is Liza's (lizahuang54321 ) Take on all this ??? CLF a buy now ???

    Most knowledgeable person here.

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    • "Most knowledgeable person here."

      I'm far from that, especially on the subject of iron ore markets.
      I have a good understanding of investing in trusts and MLPs but no special insight into the Iron Ore market.

      As for CLF, it's included in a watchlist I maintain just to watch the overall commodity stock trends (not as a purchase candidate) but I don't really follow it and don't have anything to add to those analyst downgrades which resulted in the most recent price crash. All I can suggest is the general observation that if you are interested in it, there is probably no hurry to acquire it (or you should at least scale in) as it's not unlikely that the price will decline further (one of the downgrades had a target of $10). On the other hand, it's not unlikely that the price will be higher in a few years (barring permanent global recession, which is also possible). So if you want to own CLF, my suggestion would be to scale in over the next year and only if you are thinking of a medium term hold (not looking for quick gain). But I can't offer you any specifics on CLF valuation as I really only follow the high yielding energy plays (trusts and MLPs).

      • 2 Replies to lizahuang54321
      • The world IR price is down substantially. My perception is that the IR marketing changed 3 years ago. It was based on individual contract agreements and became an index posted daily on several web sites. The world price went from $75 the metric ton prior 2010 to $200 per metric ton in less than 1 year. China was the biggest buyer with Rio Tento, BHL and VALE the main suppliers. Now China is not buying in large quantity and the IR price is down to $135.
        CLF own the Messabi IR mine. It is exploited as a US Royal Trust. The amount of IR sold by the trust has a yearly limit. MSB is not able to participate in the world price because it is land locked around the Great Lakes. Therefore MSB is subordinate to the steel production around the Great Lakes. To explain one of the drawbacks MSB and the US steel industry is the case of the new San Francisco Bay Bridge. The manufacture of the bridge was done in China and the assembly in San Francisco. The steel tonnage was made in China with Rio Tento, BHL or Vale Iron Ore and CLF to some extent.
        CLF has other mines in the US and Australia that can participate in the IR world market. CLF own also coal mines that are used in the making of steel. CLF split 3 times 2005, 2006, and 2008. In 2008 CLF was a $180 stock prior the 2 for 1 split. By the end of 2008 CLF was down to the $20s. This matches the closing of the Messabi mine. By 2011 CLF was back to the $90s. MSB sees the same pricing; in 2008 MSB was in the single digit around $9.00. By 2011 MSB was in the $40s.
        The IR business is a commodity that moves greatly with the economy. Contrary with O&G which has a large consumer base, IR moves with economic stimulus, not user base. I do not believe it is a good time to by CLF or MSB, the world price of IR is down.

      • An alternative to CLF common is their preferred. Pays 7.5% at face value of $25 and is trading at $20.40 right now for a yield north of 9%. Its a mandatory conversion in 2016 so if CLF common improves, you get some upside on the preferred.

 
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