My Fact: CLF sells iron ore pellets below the US spot price, key reason they have 45% of the US market, no one can get pellets to the steel mills for less and help steel mills meet tight inventory levels.
Energy cost will remain low as US shale oil drillers are hedged into 2016 and 2017. The low price of oil does not affect their bottom line, matter of fact it gives them incentives to produce more to capture those hedges. Then there is a shift to use compressed nat gas at the wells that will reduce their energy cost by 50 percent.
Not only will iron ore cost go down, the reduction in cost of iron ore pellets will even be greater!
Some days are good, some are not. Got in a little early today and the stock just bounces up to $7.26. The other day I got stopped out twice (20 cent stops). Anyway, today I will be happy with a 10 cent gain, pays the bourbon bill.
One more thing, as HK sells oil at $62, it sells a corresponding quantity of oil puts to give them $87 a barrel, they would be wise to buy back calls into the future to limit their exposure to a case where oil may be over $90 a barrel two years from now. With oil down at $62, those calls will cost them a fraction of what they sold them for.
With a wide swing in oil, HK is really in the driver's seat and their stock should not be following the price of oil.
HK bought $87 puts on oil which has a person that sold them that put which commits that individual to pay HK $87 upon demand or when the option expires. To pay for that put, HK sold a $90 call which HK will supply oil at $90 a barrel to fill that contract when the option expires. If oil is selling for $100 a barrel, HK will only receive $90. So if oil falls below $87, HK makes money on this hedge. If the price of oil goes over $90, they limit their price to $90 and leaves some profits on the table.
The market should be rewarding HK during this downturn in oil and punishing the companies that sold them those puts. The only thing I can think of is these companies took short positions in companies like HK to hedge their puts and working those shorts in the market and media.
Vip, I have no idea. It appears the stumbling block on any of these asset sales is that the buyer does not want to assume the liabilities of these assets. With the Chromite Mine, CLF should not have many liabilities and that should not be an issue. My guess is that CLF has turned down the original offer from KWG and now KWG is trying to line up partners to meet CLF's price which should be greater than $300 million. CLF's chromite assets are some of the richest in the whole Ring of Fire.
Based on the volume, looks to be some short covering with signs of stabilization of commodity prices. This afternoon will tell us if it is real or manipulation.
with next meeting, looks like HK's hedge protection will keep them in the black through this whole affair. Absolutely no reason for this sell off and look for shorts to cover.
We are talking about some large complex deals that take more time to put together. The direction may be determined but I don't see how anything can be finalized before the end of the year. In most markets, it takes 3 to 6 months to put together a sale on a house.
It comes down to how much you believe in Brazil, corruption, accounting and monetary policies should be looked at.