I think the exit now is a mistake. I like the optionality and mgt fees on these, and don't care on GAAP losses. Nor does anyone who has the size to move this stock over medium to long term.
The move strikes me as capitulation at exactly the wrong time. Hold them for option value Scott! you're getting paid management fees to wait, and as far as I know they cost you nothing! Meanwhile there may be costs associated with an exit.
And clearly the markets not impressed either.
"U. S. Steel has decided not to pursue an expansion of its iron ore pellet operations at Keetac in Keewatin, Minn. The expansion would have increased the facility's production by 3.6 million tons annually to a total of 9.6 million tons, and included upgrading and restarting an idled pelletizing line, as well as upgrading the mining, concentrating and agglomerating processes at Keetac. The permits required for this expansion expire this month and will not be renewed."
I don't have time to watch that (its 1 hr)? Can you give a two line summary? It appeared to be a general evolutionary discussion, not about investing.Thanks
I calculate the price between $78 and $79. CLF negotiates one to two year contracts I believe, so the price will have less near term volatility than global market. That said, the prices on renegotiation will have some correlation to global price trends. There may also be some adjusters in the contracts for very large swings in global pricing - I don't think CLF discloses its contracts at this level of detail though.
So it's all over for the global iron ore industry? You better give Rio Tinto a call so they can fire their 50,000 or so employees working on extraction.
As it happens though, there has been some ongoing discussion of adding direct reduction capability to the Northshore processing facility, which would add the possibility of supplying electric furnaces and thereby expanding the customer base.
that said, as long as the integrated producers have existing capacity and cost efficient transport to the end users, I think substantial share loss (from here) probably isn't in the cards - I just haven't seen much evidence of appetite for large capital investments in areas that are already oversupplied - if you've seen evidence to the contrary, please pass it on - we'd all like to see it!
Not unusual for trading companies to carry a lot of cash, so wouldn't get too excited about that, nor about book value, given low ROE
EV/EBITDA and free cash flow yield are the relevant metrics in my opinion. On those, MIL looks cheap, but not crazy cheap. If they can get their commodity EBITDA margin to 2% to 3%, and can maintain good profits at Compton, this name almost certainly works - if not, doubt there is a lot of downside, unless they have another significant write off.
Yes - note this comment from MWD also to the EIR.
Chromium 6 levels are 14-16 μg/L, well above the Office of
Environmental Health Hazard Assessment (OEHHA) Public Health
Goal (PHG) of 0.02 μg/L. The Project water quality would not be
acceptable for pumping directly into the CRA without treatment. The
Final EIR must identify and analyze the environmental impacts of
constructing and operating the treatment facilities required to
introduce the Project water into the CRA.
4.9-55 The water quality analysis in part relies on faulty reasoning. The
Draft EIR assumes that “all of the water would be further treated at
the water purveyor’s treatment facilities,” however, deliveries are
made from the CRA to other groundwater basins without treatment
(e.g., Metropolitan delivers Colorado River water to Coachella
Valley Water District by releasing water for storage in groundwater
basins in the Coachella Valley).
btw Debbie, your comment regarding the delay signing new agency deals is incorrect. It is at the agencies option/discretion when they enter into an arrangement (see page 13 of 10-Q filed today), and the payment terms have been pre-defined.
If you figure IRT gets to the 2 bil portfolio they are targeting over a few years, its about 20 mil annual management and property mgt fees for RAS I believe (going on memory I think they get a 0.75% asset mgt fee plus some additional property mgt revenue through their prop mgt company) - not a bad recurring income stream for a company currently valued at 640 mil - these fee/mgt rev tend to trade at higher multiple than RAS' other businesses -
also, you mentioned rising $/acre/ft - I don't doubt that's true, but what are you basing on specifically? Do you have any numbers on current pricing?
the other board was getting cluttered
"However, it is again wrongheaded to believe that the right-of-way is a binary outcome for the company."
How do you figure? I mean, true, it doesn't mean the project is dead, but it's another year of doing nothing, with additional risk of denial, right?
it is a sizable amount of water - the real question is whether the project ever gets approved, and what conditions MWD would set for carrying the water - Bureau of Land Mgt ruling on a 'rail right of way' claim is still pending, and MWD has made no indication of whether it would carry the water but has made some cautionary statements about the water purity and likely need for an expensive filtering plant
at the end of the day, a lot of it probably comes down to cost - every $150 mil in plant cost represents $100/acre/ft in incremental cost above the base fee for water - if they can build the plant and filtering for under $300 million (creating $200/acre/ft cost) perhaps they can eventually get agency and then MWD participation -
that said, even if they eventually got approval from BLM and deal with MWD, could still take a couple years, and then a couple years build time - could be another five years before any revenue - that's at least another $50 mil of debt which is non-reimbursable, as well as probably some more equity dilution.
and then there's always the possibility they can't complete the build at price levels which make the water economic for the districts - if that's the case there is very likely no value here.
PS - I guess I should add though that I always thought CDZI would more likely than not prevail in the lawsuits - see them as more of an expensive nuisance - and would think they would prevail again on appeal, although would take another year -
the bigger issues are the water purity, cost, MWD, and BLM
don't you think it's strange that more than a year after you and I first discussed agency deals there have been no new announcements?
So you have a favorable court decision that will likely be appealed and drag on for another year and you still have the BLM decision pending, as well as no new agency deals since SMWD was announced more than a year ago, and you still have a very strained relationship with the required carrier of any CDZI product, MWD. In the meantime, CDZI's generous board and executive comp continue to burn through cash.