Really? Good earnings, sale of assets, changing leadership - none of that going to drive the shorts out. The only way CLF is going to achieve that is to take the shorts on one on one. That means fighting short interest with stock buy backs, dividend increases, media blitz… something that actually takes the sell side off the table.
The whole market went down, something other than the CEO announcement is in control.
Guess the vote has been certified. Goncalves will now be using CLF letterhead for press releases and now we will see what he will do.
You may want to buy some puts like Jan 15 $5 for 38 cents. Sell off enough covered calls to pay for those puts. Before doing it, you should consult with an expert in options hedging where you can sell covered calls and buy puts.
TCK went another direction and invested in oil sands with Sunoco when they could not work out a deal on an iron ore mine in Canada. Those obligations to develop the oil project does not leave them much cash to buy anything. And Norcroth (I know the spelling is wrong), will not pay anything near $500 million for the chromite mine, my guess is they would pay $200 million. CLF would be better off keeping the property until Ontario builds the transportation network and then sell it for billions.
CLF would be better off spinning off the assets and $1.5 billion in debt in an IPO. If all CLF got was $1 a share, they would be better off than selling them individually at huge discounts. Or they would be better off taking on JV's with a respectable entry fee and split the CapEX.
If you look at the last income statement you will see their cash cost was $94.75 and their revenue was $92.38. Part of their cash cost was driven up by higher Wabush cost. So you go to their 2014 outlook and their cash cost for BL will be in the $80 to $85 range as Wabush is completely shut down. In 2015 their cash cost will be in the $70 to $75 range. Cash cost excludes the depreciation, depletion and amortization cost of around $23.
Asia Pacific is making good profits and BL is now cash positive. These assets should not be sold at discounts. Their ring of fire assets should not be sold until the transportation network is under way.
Once the vote is certified, all board members have signed a standing resignation if they fail to get re-elected.
From CLF's Corporate Governance:
"Resignation on Failure to Obtain Majority Vote. The Board will nominate for election or re-election as a Director only those candidates who have submitted or agreed to submit a standing conditional resignation, in the form set forth on Annex B, that will be considered by the Board in the event such candidate fails to receive the vote of a majority of the votes cast by shareholders at a meeting for the election of Directors."
Casablanca needs to concentrate on getting the shorts out. Selling assets will not do it, they need to get cash now and the fastest way to do that is to sell off that $600 million + in inventories and finalize the sale of Wabush which should be for at least $500 million. With $1.1 billion, they can increase the dividend or buy back stock which will directly impact the shorts. Get them out of the picture and the stock will be in the $30 range.
Board members usually don't hang out at the company and they meet like once a month to review and adjust the direction of the company. My guess is once the vote is certified, then the board will call a meeting to start the process. In order for Casablanca to take control of the day to day operations, they need to replace Halverson with their own man. My guess is we are looking at a month or more before we see changes. But Casablanca can work with Halverson now to keep the Wabush deal on track as well as putting Gonglaves in to be brought up to speed with the CEO job.
On spinning off the assets as an IPO, they can send over $1.5 billion in debt with it. That way they could get $1 a share and would be ahead of selling off the assets one at a time.