When you have CNBC saying that CLF's cost is $80 a ton, you don't have management coming out saying that is the cash cost of Canadian whereas the US is $70 and AP is $64. Furthermore management doesn't come out and say the US revenue is a little more than $100 a ton while spot prices are under $80. You have shorts talking bankruptcy while management isn't out there reinforcing their strong cash and inventory position. And the fact their nearest bond is not due until 2018. You have people saying CLF can't meet their interest payments while their income statement says something different such as building cash and income tax benefits due to increase amortization charges from the impairment charges earlier. I could go on but these message boards do not get the visibility that is needed and that is why management needs to address these and other issues in the mainstream media.
in cash and inventories as of the end of Q2, more than enough to pay their 2018 and 2020 bonds which leaves them one more due in 2020, one in 2021 and their last one in 2040. They are currently making all interest payments and continuing to build cash. Matter of fact, their tax benefit they get from the impairment charges is large enough to make all of their interest payments.
Per your quote:"There is no way CLF will be able to pay the lump sum payments when the debts are due."
You brought it up, you must know the answer. You know I know the answer and you don't want to own up that it is a $400 million bond due in 2018. And now we know the rest of the story.
I thought we had some buybacks and short covering, but it was Connell acquiring shares. CLF should be stepping in to buy back shares ahead of earnings. And I expect other big players stepping up at these prices.
You made the point when the debt is due, just wanted to know when that is and how much they need to have to cover it.
Thanks, I just get ticked off when people throw out Bankruptcy and give no quantifiable reasons for it. I expect it from the Sheep Dip, Snickerdoodle, jim, Orangoutang, and others like them, which all of them I never reply to. But when Solar throws it out in thin air, that really ticks me off. I know he is pizzed off, I am too, but I do not resort to throwing out half true statements.
Mike, ALL of Their Long Term Debt is at Fixed Interest Rates, so what is downgrading to junk going to do when they don't need to go to the bond market for a long time? They are sitting on over $300 million in cash and $700 million in inventories and they will add to that cash at the end of Q3. And if they do add to their cash in Q3, there is absolutely no way they can go bankrupt with building cash and iron ore is under $80. Now I can point out several other things that show they are financially healthy and it won't do a bit of good and here is the problem. Management is not correcting these mis-statements in the media, they just stay quite!
As long as CLF sells 20 million tons of iron ore pellets in the US per year ($500 million in profit), they will not go bankrupt. Plus, because of past impairment charges, they will see $80 million in tax gains per year.
Look for other large players to take that bet against short sellers. Right now it is a numbers game, take off enough shares and you will generate a short squeeze and that could come with Q3 earnings.
Yes you are probably right. If you took 3 people that are short CLF, one of them will not find shares to cover and George jumped out ahead of the group.
Now is the time for management to step up their defense against the shorts, they are leaning towards covering, just give them a little push.
Why not, China is a communist country and they are sitting on a huge amount of foreign reserves from their huge positive balance of trade. The housing industry is a great area to focus stimulus spending because it is an industry that can be found in every corner of the country.
I bought a truck for the company for $36,000 and under a 5 year depreciation schedule I can deduct $6,000 a year ($3,000 the first year, $6,000 for 5 years and $3,000 the last year). After 4 years that truck is now worth $25,000 book value and the IRS has a value of $15,000. Now if I sell the truck for $20,000 which is less than book, I have to show $5,000 in income.
The same applies to these mines CLF owns, it doesn't matter what the book value is, it is the tax value that is important. So if CLF sells the AP mine for $800 million which is under current book value, they may show income on the sale. The trouble for me, is I don't know what their depreciation schedule is for each asset.
On the other hand, if they sell an asset for less than the tax value on the books, they will then record a loss against income.
So book value is totally meaningless and shorts tend to drift towards meaningless data. What is important is if the sale generates income or losses against current earnings.
Remember those impairment charges, IRS code 197 allows those charges to be amortized into the future, companies cannot take an NOL against them and capture past taxes paid. Therefore that is the reason for the increased DD and A and also is the reason they get a tax gain on their income statement. That tax gain is about 35% of the amount extra in the DD and A.
The inventory build was not by design, it happen because of the weather. And the inventory issue accounts for their increased cost as they paid for that build in Q1 without having corresponding increases in revenue due to slow sales and can't ship the ore due to the frozen lakes. And I am not interjecting new pieces, I am looking at the whole picture, something you don't do.