What is your take on that $12 million claim. Must be for pellets of course. I figure the $60 million, or $90 million, from the court case in the US relates to the damages from the breach of contract. CLF should have shipped that much under the contract, but Essar balked. Since the $60 million in damages has yet to be awarded, then CLF can not submit it as a claim.
What do you think?
dude, short away. Load up on your short. Funny how I didn't see you post when the CEO bought basically twice as much stock as this guy sold just a short time ago.
Connell owns 12 million shares. He is a 13D filer with the SEC. Any trades he does in the shares has to be reported to the SEC until his holding fall below 5% of total company shares.
Well we all know that all work at Essar Minn has ceased. Contractors have pulled out. That means there is no money and they still have to repay the State of Minn $60 million, which they do not have. This is going to get interesting. Essar thought that it could build a pellet plant in Minn to provide a captive source of pellets to its Algoma steel operation in Canada. They would then sell excess pellets to other manufacturers, thereby subsidizing their own Algoma steel plant pellet costs. This is a flawed strategy as third party steel companies are not going to subsidize Essar's own pellet costs. In addition, Essar Minn pellets were going to cost a fortune if they ever got to start up. Essar Algoma would have either had to over pay for early batch pellets, or Essar Minn would have to take a massive financial bath in early years as it would not be able to compete with CLF's low cost base. I think that Essar Minn will not open and declare bankruptcy. CLF would be the only reasonable buyer as anyone trying to enter the business knows that there is an 800 pound gorilla (CLF) in the room competing with you. I do not think that it even pays for CLF to buy out Essar Minn in bankruptcy. CLF does not need another iron ore plant.
the way things look the damages on this disaster is going to be in the billions and billions. How do you even assess the environmental damages. This thing is going to be in the courts for years. The mine will be shut down for a long time and may never reopen.
That is a good point and I did not realize that issue. Nonetheless, CLF looks like it had been delivering about 60,000 tonnes of pellets per week on average to Essar under the 3 million tonne run rate level. As such, time is running out on Essar real fast.
This simply shows the power that CLF has in the marketplace. Every steel manufacturer is looking at this and saying "Wow!". The steel producers are also licking their chops as they see Essar's customers as low hanging fruit. Every single steel company's sales force must be calling on Essar's customers right now. Essar management and marketing people have to explain to customers now how they are going to survive operationally through the winter. The customers are going to say to Essar, "I do not care what your problem is with CLF. CLF won the court case and you owe them $60 million. You need to get iron ore from CLF by whatever means possible or you are not going to be able to meet my steel delivery schedule. And if you cant meet that schedule, I am going elsewhere for my steel".
That said, I am sure that every major steel user in the US and Canada has back-up second source steel suppliers. It is only good business to have back up suppliers. But that is bad news for Essar as customers will cancel order pronto and CLF will just ship ore to those steel producers that pick up Essar's customers.
This whole episode is indicative of the value of CLF in the marketplace. Sreu CLF has a debt issue that it is addressing from prior management's Bloom Lake fiasco. But that debt was unrelated to CLF's super valuable US business. Once the market sees that CLF has the debt issue under control, the stock will go through the roof in my opinion.
I agree that CLF has this 100% thought out. CLF knows the exact type of steel furnaces (continuous process furnaces) that Essar uses. CLF knows that if Essar does not have inventory of winter ore, it will cost Essar huge amounts of dollars to shut down and then reopen months and months later. In the meantime, their steel customers will disappear. And if anyone thinks that Essar is bleeding red ink now, wait until the plant shutdown. The situation is terrible for Essar and I am thinking that the whole enterprise will collapse, including Essar Minn. This is the very very reason why iron ore customers enter long term contracts with CLF. There are no alternative suppliers and the winter stockpiling of iron ore that is necessary means that you have to have long term supply contracts in place. Imagine if you were an iron ore customer of CLF and demand for steel was going full bore all year and through the winter, but you had no long term supply contract with CLF. Then in the winter when steel producers need to stockpile ore, it becomes a feeding frenzy and not everyone can get deliveries of the need iron ore. It would be bad for everyone. So to avoid this type of mess, the steel producers all enter long term supply contracts with CLF and those contracts require that the steel manufacturers take minimum iron ore quantities as it is not fair to CLF that when demand is huge CLF has to supply them at good prices and then when demand is weak CLF has to get crushed as everyone cuts their iron ore orders. Well, this is the road that Essar chose to go down. And now looks what is happening. Essar's survival in total as a business is at stake. And I do not mean survival as an ongoing operation in bankruptcy. I mean as an entity producing ANY steel for customers (in addition to bankruptcy.
To handle Great Lakes cargo, a special type of vessel has evolved...the North American "laker," the largest being 1,013 feet (335 meters) long, capable of carrying up to 70,000 tons (70,966 tonnes) of iron ore or 1,700,00 bushels (45,552.5 tonnes) of grain in one trip.
I am also sure that Essar's steel customers are looking at alternative steel suppliers right now. This takes some lead time and the customers must be prepared with plans for different steel sources.
What are the possible outcomes.....
1. Essar can not force CLF to ship pellets and has to shut down operations for an extended period of time. Essar's customers buy its steel from other local producers and CLF must provide pellets to those stell producers.
2. Essar gets the courts to somehow force CLF to sell them pellets. CLF ships pallets and makes some money. Long term contract with CLF and back payments owed CLF get worked out.
3. CLF wins $60 - $90 million judgment from Essar but Essar can not pay as it is bankrupt. CLF become Essar creditor and tries to collect on the amount owed. How much it can collect remains to be seen.
4. CLF agrees to ship pellets to Essar for the winter stockpiling and gets a huge price for the pellets.
5. Essar closes permanently as customers go elsewhere and no agreement with CLF can be arranged for pellets at a price acceptable to both parties and Essar's iron ore mine never gets completed.
Any thoughts or other potential outcomes?
There must be a drop dead date for Essar on its required 600,000 tonnes of iron ore it needs from CLF. At some point those deliveries will not be possible. January 2016 is the date that Essar needs the ore in its winter inventory. That is 7 weeks away, give or take. Each ship can carry 70,000 tonnes as I understand it. That means ten deliveries are required. Essar was buying about 3 million tonnes per year from CLF. That is 58,000 tonnes per week. Looks to me like time is fast running out on Essar. If CLF can deliver 60,000 tonnes per week, that means the company must ship its full volumes to Essar every week starting almost immediately. I suspect that by December 1st, the die will be cast and Essar will not be getting its required inventory of ore. If this happens, look for Essar to cancel the purchases of iron ore from US Steel and Iron Ore of Canada. Why stockpile ore when you know that you will have to shut down and your customers will go elsewhere.
This whole thing is going to to be interesting. Essar has contracts with US Steel and Iron Ore of Canada to buy pellets equal to 2/3rd of the 1.8 million tonnes Essar needs by January 2016. Essar must be paying through the nose for these. However, they are still short 600,000 tonnes and CLF is the only place to get the ore from. So it is a catch 22 for Essar. They pay through the nose for ore from other suppliers but still have to shut down for extended period. What a nightmare for them. They really screwed up.
I made a comment about this yesterday. I see no way that a bankruptcy court can order anyone to ship any product to anyone. It is a contractual matter to be settle in the courts. The courts have already ruled in favor of CLF. So what is the bankruptcy judge going to do? He has no power to compel CLF to ship product. In all the bankruptcy cases I have seen, the bankrupt company uses the court to get out of contracts that they no longer want.
Now if CLF's actions of withholding iron ore from Essar was a breach of contract and that breach resulted in Essar going bankrupt, CLF could be on the hook for major damages in court. However, CLF won its contract case and the fact that Essar cant do this or that with their own operations is Essar's problem, not CLF's.
This Essar Algoma is the litmus test for Great Lakes iron ore. Algoma is unable to secure pellets. Iron Ore of Canada and US steel can not ship them enough by rail. The pellets from Iron Ore of Canada can not be sent down the St. Lawrence. It is either too costly or their are no suitable boats. Essar is now basically begging CLF to ship them pellets after stiffing them for $60 million. Essar is also paying a monstrous premium for the US Steel and Iron Ore of Canada pellets. Now they will have to pay CLF the same price. Essar is now only getting pellets from these other suppliers by rail. Essar will have to pay the same "delivery" price to CLF as they are to the other suppliers. That meas CLF gets a massive margin on its shipments to Essar. Add to all of that, the Essar Minn pellet plant work has been halted in total. Contractors have walked off the site as they are clearly not being paid. The contractors will not return until Essar makes good on what it owes these contractors.
And then if Essar Algoma has to shut down its operations, this will absolutely kill Essar Minn plans as Essar will first have to focus on getting Algoma back on track. Essar Minn pellet plant will have no captive buyer for pellets and no money to finish its construction, which as the CLF CEO pointed out is just a prayer at this point. And where is Essar Minn going to get the $60 million it owes to the state of Minn. The state wants that money back. They are probably not going to ever see any of it. I figure that Essar Minn will file for bankruptcy too in order to get out of what it owes everyone. That bankruptcy will be much different than the type in Canada as the bankruptcy laws here are much tougher on shareholders than in Canada.
Essar Algoma is totally non-economical without CLF pellets. The CCAA filing basically says so. Procuring pellets from US Steel and Iron Ore of Canada is a stop gap measure which will not prevent major losses and plant shutdown.
The short pumpers are yaking away about a family trust associated with Casablanca has sold a whopping 600,000 shares of CLF. All this useless blabbering.
What is even more hilarious is that these same short pumper morons did not make a single comment about the world's largest iron ore pellet mine (producing 30 million tonnes per year) being shut down for four years or more, Essar Algoma losing its case in the US for defaulting on its pellet contract, and Essar Minn basically shutting down its pellet plant construction. These are the important fundamental developments, not the sale of some small number of shares.
Are you kidding. Casablanca has been the contra indicator on this stock. Now that they are selling, shares are going to go much higher.
I agree. The problem is that Essar knows it owes CLF a ton of money. It also knows that CLF will require upfront payment plus "spot pricing". I take "spot pricing" to be at the same price that Essar is paying US Steel and Iron Ore of Canada for their pellets. If Essar is willing to buy pellets from those suppliers at those prices, why cant CLF sell to Essar at the same price. I ma not sure how a bankruptcy court could ever think otherwise. Furthermore, bankruptcy courts I do not believe ever enforce contract, they actually break onerous contracts.
I just see no way that the bankruptcy court can compel CLF to ship the company any pellets. Essar is already getting pellets from other suppliers and is building its own pellet plant.
Can you imagine if a bankrupt retailer cold force a clothing manufacturer to ship product to them. Never heard of anything like it ever before. Product scarcity does not mean that anyone has to ship a product to anyone.
Essar is crying in its soup over CLF not supplying pellets. Essar did not pay for pellets under the agreed upon contract. $60 million large is owed to CLF. CLF went to the US court ans won in a Summary Judgment, which means that the case was so straightforward that no trial was necessary and the judge ruled in favor of CLF immediately. The only trial left now is to establish the damages the Essar owes CLF. CLF is asking for $90 million.
In the meantime, it looks like Essar is trying to use the CCAA to somehow get the court to compel CLF to resume shipping iron ore. Well, the Canadian CCAA court can opine all it wants, but there is no way that they can force a US company with operations only in the US to ship anything to another country as I see it. Forcing CLF to ship pellets from the US to Essar in Canada can only be achieved through the US court system. Alas, Essar lost that case badly. Essar is in deep trouble.