Trump will be president. Hillary will get totally run over.
Trump will rebuild America's infrastructure and steel demand will be huge. CLF will be a primary beneficiary and the shares will make a massive up move.
I was surprised to hear on the conference call that US Steel Canada and Essar Algoma were CLF customers now. US Steel Canada is an interesting development as they are new to CLF and have either reduced or dropped US Steel US as an iron ore supplier. The CLF CEO said that he had already included in the 2016 projections the volumes from US Steel Canada. That means to me that the CEO must have already been negotiating with US Steel Canada at the time he made the 2016 volume projections. Nothing wrong with adding a new customer.
Regarding Essar Algoma, I am not sure how CLF could have anticipated shipping iron ore to them in 2016. CLF ceased shipments to Essar with their legal dispute. The CEO said that the Essar lawsuit had been settled, but he said that the settlement terms were being drawn up. I have to assume that CLF gets zero on their $60-90 million claim against Essar. Anyone have any thoughts on this? In lieu of that, maybe CLF negotiated a sole supplier contract with Essar, but who knows.
April 28, 2016
Essar Steel Algoma Settles Contract Dispute
Secures Long Term Iron Ore Supply
SAULT STE. MARIE - On Monday, April 25, 2016, Essar Steel Algoma settled its
contract dispute with Cliffs Natural Resources, in principle. The settlement, which
resolves all claims between the parties, is subject to documentation and requisite court
Pursuant to the settlement, the parties have agreed to re-instate the contract. Cliffs will
resume supply of iron ore pellets to Essar Steel Algoma for a portion of the company's
remaining 2016 requirements and then return to the contract's existing terms in 2017
Essar Steel Algoma Chief Executive Officer Kalyan Ghosh commented on the
settlement, “We are very pleased to have this litigation behind us, and are grateful for
the focused efforts of all involved in facilitating a speedy resolution. In light of the
current Sale and Investment Solicitation Process, this agreement provides interested
parties with assurance of supply of quality iron ore, and ensures Algoma can remain a
low cost producer.”
The interesting thing here is that CLF will resume its supply contract for "a portion" of Essar's 2016 requirements, but then return to the full contract in 2017. That is super bullish news. CLF got hit hard in late 2015 from the cancellation of the Essar iron ore contract, which is for 3.5 million tonnes per year, I believe. CLF is looking at all that volume coming back on line in 2017.
The Essar news from April also states that the company has received several bids as part of its Canadian bankruptcy restructuring. The CLF iron ore contract will allow the sale of Essar Algoma to reach completion. This, I assume, means that Essar India, will be totally out of the picture.
I am not sure what this all means for Essar Minnesota, though. Any thoughts?
CLF did not say much about Essar Minnesota in its recent quarterly conference call.
1. I do not think that Essar Minnesota has filed for bankruptcy, even though it has defaulted on the State of Minnesota loan and has failed to pay many contractors. Will the company file for bankruptcy?
2. There have been press releases from Essar indicating that it is looking for financing to complete the project. This means that the parent company, Essar India, will not be funding the project directly any further, at least as I interpret things.
3. How much money is required to finish the Essar Minnesota plant ($500 million, $1 billion, or more?).
4. Who would invest in the plant when it may be possible to take the business over in a bankruptcy restructuring?
5. There have been reports that CLF is interested in getting involved with taking over the Essar Minnesota operation, although they clearly do not have the money to do so. I would think that this would be a situation where CLF would be a part owner/full time operator of the plant in partnership with some steel company or companies. No analyst on the recent quarterly conference call asked about this.
Anyone on the chat board have any thoughts on the above?
Brazilian prosecutors filed a civil suit worth 155 billion reais ($43 billion) against Vale SA, BHP Billiton Ltd., and Samarco Mineracao SA for a November tailings dam burst that killed as many as 19 people and caused severe environmental damage, according to a document from the prosecutors office obtained by Bloomberg.
Management at Samarco is trying to get the mine reopened as fast as possible. Here was the news recently on that front.
The iron ore mine in Brazil that suffered a fatal accident in November could reopen by the end of the year. Roberto Carvalho, Samarco’s acting chief executive, said that he expected production at the mine to resume 60pc below its original capacity, for at least the next two to three years.
"All our focus is turning to the restart," Mr Carvalho told Reuters. "We have talked to our clients, they have given us all the help possible and are awaiting the return of Samarco."
BHP Billiton confirmed that Samarco had begun the process of seeking approvals to resume operations.
“Samarco’s operations will restart only when it is safe to do so, and when all regulatory approvals are granted and accepted by the relevant authorities and communities,” BHP said.
I would suspect that Samarco will not reopen this year as the approvals will probably be lengthy. Even if it does reopen, the stated indications are to operate at below 60% of capacity (I assume that means somewhere between 30-40% of capacity) for two to three years. Samarco produced 19 million tonnes of pellets per year if I remember correctly. At 35% of capacity, that means 6.65 million tonnes of production - a shortfall of 12.35 million tonnes from prior production levels.
CLF does not serve this pellet market as I believe that Samarco's customers are African and other Atlantic ocean based steel plants. Some other iron ore producers are clearly filling the Samarco gap in production. Nonetheless, it should be good for overall iron ore pellet prices in those markets.
I have to think that the outlook for 2017 is massively improved. The loss of the Essar Algoma business from October 2015 to present was a tough blow. Company statement indicate that the new Essar Algoma agreement will have CLF back to full volumes with Essar Algoma in 2017. We also have US Steel Canada as a new customer for all of 2017, as opposed to just part of the year.
The terms of the Essar Algoma settlement should be published soon also. I do not expect CLF to be getting anything regarding the $60-90 million legal judgement that CLF was looking for from Essar, but in settling that claim, Essar Algoma may have given CLF decent terms for their new iron ore contract (ie a decent multiyear duration contract).
The battle lines were drawn at the last conference call. The CEO said that he intended to crush the short sellers in CLF. I think that the CEO feels that CLF has been abused and maligned by the short sellers since he arrived at the company. Sure, CLF shares should have fallen from $100 based on what has happened fundamentally with Bloom Lake, the US steel industry, etc. But the CEO is clearly ticked of at all the abuse that CLF has taken in the past 6 months, during which time the management team had done an amazing job. I do not think that the CLF CEO would make such a statement unless he felt that he had the company fundamentals to run the shorts out of town over time. The Wall Street analysts have been shills for the short sellers and have given CLF absolutely zero respect, although I did see that the Cowen analyst raised his price target from $3 to $6 recently.
The long term chart of CLF looks amazing. The stock has collapsed, bottomed, based, and started to turn up. A move to $20 based on how the chart looks is clearly possible.
Braindead short term traders are blowing out of positions. They all jumped in for a quick gain when shares were going up sharply. As soon as it appeared that the move had reached a stall point, these clowns all start to sell. These are lousy shareholders. We do not need them. They have no interest in anything other than CLF as a trading vehicle and probably do not even know what CLF does in its business. . They get out and look for some other stock to trade.
NUE shares and X shares are flat today. BHP is -6%, but that is because of the large civil lawsuit filled in Brazil. CLF share are down MORE than BHP today!
Fundamentals are not "the same". Fundamentals are dramatically improved. Essar Algoma and US Steel Canada are customers and Essar will return to full buying volumes in 2017. US government put huge steel tariffs in place so demand for steel in the US will go up significantly. Essar Minnesota is basically shut down and bankrupt, so the threat of this new potential competitor has fully disappeared. These three things alone should have clf shares much much higher.
CLF needs long term shareholders, like this guy Bob Connell. The company does not nee these short term day trader types who have no commitment to anything. These are the worst types of shareholders. It is like having a different business partner everyday. You show up at the office and who knows who will be sitting at the desk.
I have to say that I am more than a bit mystified. The company posted a great earnings report. And shares rallied on the news. Then a day later the shares go down 10% a day three days in a row on no news? The steel stocks have not fallen at all and the other iron ore players aren't nearly down as much - maybe 10%. CLF is the only domestic iron ore stock so the traders probably just beat up on it when the opportunity strikes. I would also add that CLF got analys upgrades, one with a target of $6.
Earnings report and other fundamentals were fantastic. Essar Algoma shipment resumed with full slate of production in 2017. US Steel Canada a new customer. Pellet prices up. Costs down. More debt retired. No issue regarding liquidity. Bond prices up and rallying. If there were any kind of liquidity crisis, there is no way that the CEO would be talking about crushing the short sellers. And his whole tone on the conference call would be different. Best quarters of the year are coming just as steel dumping tariffs are taking effect.
Everyone knows that the founder and owner of Casablanca died months ago. CLF was Casablanca's only shareholding. It is no surprise that Casablanca would close down and liquidate its holdings (ie CLF). It is good that they finally got out as their shareholding in CLF was simply an unnecessary overhang on the stock. Casablanca lost a lot of money in its CLF investment as their cost was in the mid $20's I believe. As an investment partnership focused on activist investments, Casablanca's business is to make money through its investments and collect 20% of the profits it makes. Since the CLF position was a significant loss, there are no 20% of profits to be collected and with the founder and sole owner having died, I am sure that his estate must liquidate and distributes any assets that Casablanca holds. In a week or two, no one will even remember that Casablanca was involved in CLF. I haven't even heard the Casablanca name mentioned regarding CLF in months.
The 2018 bonds have staged a massive rally...up nearly 5 times in value. This assumes of course that the morningstar bond price data is correct. Last sale on the bonds was $624.40. There has been no decline in the bond price in conjunction with the recent share price decline. Looks to me like the bond holders are not in the least bit concerned about the share price move.
Cliffs Natural Resources Inc. (NYSE:CLF) kept in active run as it closed at $3.02 by felling -13.96% with session volume was recorded 24.23 Million. Casablanca Capital LP released on Friday that it has agreed to close following the death of its founder, Donald Drapkin, and to sell its stake in Cliffs Natural Resources Inc. (CLF).
“In connection with that wind down, we have exited our position in Cliffs Natural Resources Inc., held by funds or accounts managed by Casablanca, entirely. Casablanca held 7.3 million shares, or 4 percent, of Cliffs, according to an April 27 filing.
This is a great sign.
1. CEO has confidence to put his own money to work in buying shares.
2. He clearly knows that bankruptcy is not in the cards for CLF.
3. He believes that the shares of CLF are greatly undervalued.
4. He knows that there is no way to figure out where CLF shares will trade in the next day, week or month, but clearly the CEO believes that the shares are worth significantly more than their current price.