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Bad math needs to be publicly discussed since investors read and use these reports.
The exact same thing happened in 2018 with GS analyst Korn whose inflated share count turned an earnings hit into a miss resulting in a 6% drop that day.
Banks aren’t being held responsible for analyst reports. When Merrill Lynch analyst left this summer, all reports were deleted and clients told to ignore recommendations in them.
There is no systemic check and balance.
It is actually 30% (5 million tons annually out of 17 million total production). Chip shortage is creating auto demand lag and CLF has been building inventories that past two quarters. Also accelerating furnace shutdown maintenance into 2021 so they can run on all cylinders when autos reopen up.
LG noted that CLF has a roughly 33% share of auto market assuming 1 ton per vehicle and a 15 million auto per year run rate going forward.
That was certainly clear in spite of the fact LG has historically very effectively outlined their low carbon emissions initiatives. Even the current Indiana Harbor 45-day outage is to primarily achieve further reductions.
LD needs to do a steel ESG-focused interview, especially since ~8-9% of anthropogenic CO2 emissions are from steel production. The CLF IR site has monthly updated presentations that very effectively discuss this. China emits 2.5 times the CO2 per ton of steel than the US, which only emits 2% of global steel totals. Steel is a much greener material than Al and carbon fiber which emit 6 and 9.9 times the CO2 on a per weight basis.
https://d1io3yog0oux5.cloudfront.net/_ffddbcac9d3619e9a15daf63922e93ad/clevelandcliffs/db/1086/9970/pdf/CLF+Investor+Presentation+-+September+2021+9.2.21.pdf
CLF Undervalued, CEO LG on Mad Money tonight.
CLF Cash Redeems Preferred; 10% Diluted Share Count Reduction!
“ The buyback is done, and the total cash spent is less than the free cash flow we expect to generate this quarter.”
https://www.clevelandcliffs.com/news/news-releases/detail/527/cleveland-cliffs-completes-redemption-of-all-outstanding
July 28, 2021 1:00am EDT
CLEVELAND--(BUSINESS WIRE)-- Cleveland-Cliffs Inc. (NYSE: CLF) announced today that it has completed the redemption of the entirety of its outstanding Series B Participating Redeemable Preferred Stock held by an affiliate of ArcelorMittal S.A. for approximately $1.2 billion, or $21.18 per common share for the equivalent of approximately 58 million common shares. The redemption was completed with existing liquidity. The elimination of the preferred shares from Cleveland-Cliffs’ capital structure reduces the Company’s diluted share count by 10% on a pro-forma basis.
Lourenco Goncalves, Cleveland-Cliffs’ Chairman, President, and CEO, said: “Given the strength of our business fundamentals and where our common shares have been trading, the buyback of the preferred shares at an attractive price was a no-brainer, highly accretive deal for our shareholders. We actually believe this transaction is even better than a common share buyback, because we acquired the entire tranche at a 20-day VWAP without making any noise in the market. The buyback is done, and the total cash spent is less than the free cash flow we expect to generate this quarter.”
CLF could buy out half preferred next two quarters and still have cash to pay down ~$1 billion debt each quarter. This would retire 10% of outstanding diluted shares and bring long-term debt down to under $3.5 billion by year end.
CLF has paid $450 million debt in July during the first 20 days (in addition to the ~$400 million in long term debt reduced in Q2) according to CFO Keith Koci on today’s Q2 earnings call.
As predicted last month, LG also spoke about the possibility of cashing out the 58 million preferred shares in Q3.
“Lourenco Goncalves
Well, based on our current projections if we decide to do the pay down -- the payoff of the redemption of the entire tranche of preferred in Q3 that would delay our net debt zero accomplished by one quarter. So, we said that we would get net debt zero within 2022 that doesn't change. It might change might delay one quarter. So, instead of accomplished that by let's call Q3, will come in Q4. So what? Still in 2022.
That's the scale of things right now. But paying the preferred now and spending the $1.1 billion that you have just said it's just again LG not fighting the tape because if I try not to do it I will adapt to having the opportunity to do the same thing, instead of paying $1.1 billion, we'd have to pay $2.2 billion because if you believe that we are going to continue to trade at this ridiculous low price be my guest.”
CLF Reports Q2 EBITDA $1.4 billion, expects Q3 EBITDA $1.8 billion & FCF $1.4 billion.
Total long term debt at $5.368 billion at end of second quarter, down ~$400 million from end of first quarter. LG planning on huge debt payback over last two quarters of 2021 as balance sheet A/R, inventory, and pension adjustments from MT acquisition have required over $1.6 billion in cash the first two quarters of 2021.
“Steel demand remains excellent and, as we continue to negotiate our contract businesses with several clients in different sectors, it is progressively translating into substantially higher contract prices later this year and into 2022. Ultimately, we are set for a monumental debt reduction during the back half of this year, and the achievement of zero net debt in 2022."
https://www.clevelandcliffs.com/news/news-releases/detail/526/cleveland-cliffs-reports-record-second-quarter-2021-results
This is such a great fit for ongoing initiatives!
Highlighted relative CO2 emissions steel(1), Al(6), C-fiber(9.9), Mg(15)
Ended on a strong note for the steel industry focused the next decade on ROIC, use of NG, other nations adopting US model, and capital no longer being provided to GHG polluters.
CLF American Steel, the Environment & the Next Decade
LG gave plenary lecture today at awards breakfast. Well worth watching to understand trends and CLF’s position. His talk starts at the 1:19:00 mark and you have to register to watch.
https://event.on24.com/eventRegistration/EventLobbyServlet?target=reg20.jsp&referrer=&eventid=3052744&sessionid=1&key=F2DC010CB3E324FDA5C7EB752963F811®Tag=&V2=false&sourcepage=register
CLF: $10.42 Billion Cap, $6 Billion EBITDA 2021 now likely with HRC prices being contracted out for rest of this year.
At these low share prices, CLF could use the extra billion in EBITDA past $5 billion to take out nearly all 58 million preferred shares issued to MT. Their option to buy these back opened in June and would effectively be a 10% buyback of current diluted share count if all were reclaimed.
This would not deter CLF from reaching net debt 0 by summer 2022 assuming no major new CapEx before then.
CLF: $11.3B market cap, $5B EBITDA, $0 Net debt in 12 months likely, top leadership, more compelling bargain than ever.
CLF Announces $5 billion Full-Year EBIDTA 2021 Financial Guidance
This is based on orders and conservative estimate of HRC $1,175 average for remainder of year. This is a 25% increase increase from the $4 billion guidance (assumed HRC $1,100 price) issued during last earnings call.
http://www.clevelandcliffs.com/English/news-center/news-releases/news-releases-details/2021/Cleveland-Cliffs-Announces-Increase-to-Second-Quarter-and-Full-Year-2021-Financial-Guidance/default.aspx
CLEVELAND--(BUSINESS WIRE)-- Cleveland-Cliffs Inc. (NYSE: CLF) today provided updated financial guidance based on its most recent 2021 financial forecast.
The Company’s forecast includes the following expectations:
Second-quarter 2021 adjusted EBITDA* of $1.3 billion
Full-year 2021 adjusted EBITDA* of $5 billion
The full-year expectation is based on current contractual business and the conservative assumption that the US HRC index price averages $1,175 per net ton for the remainder of the year.
The Company will announce its full second-quarter 2021 earnings results before the U.S. market open on Thursday, July 22, 2021.
China emits 64% of world’s steel CO2 emissions; US emits 2%. On a per ton basis, China emits 2.5 times the CO2 than US which had the lowest steel GHG intensity in the world.
http://s1.q4cdn.com/345331386/files/doc_downloads/InvestorPresentations/CLF-Investor-Presentation-June-2021-for-website.pdf
Overall, steel industry emits ~8% of all anthropogenic CO2.
Today’s bump was primarily due to the HBI Toledo ribbon cutting ceremony. Amazing how LG’s vision matches so well with current issues of global warming, competing with China, and increased scrap prices.
IMHO, CLF is still at 50-60% of its underlying value by 2022E when net debt may well be 0 if HRC prices remain high….
CLF to redeem $396M 2025 Notes by June using cash flows from operations.
CLF is on track to pay the ABL and $2.05 Billion in 2025-2027 notes by the end of 2022. This would leave $1.263 billion debt ($1 billion 2029/2031 and $263 million 2040) and a 7 year runway.
From press release:
“The redemption of these notes using available liquidity, nearly four years ahead of their maturity date, represents the first step in our mission to achieve zero net debt. Going forward, deleveraging will remain our top priority.”
http://www.clevelandcliffs.com/English/news-center/news-releases/news-releases-details/2021/Cleveland-Cliffs-to-Fully-Redeem-5.75-Senior-Notes-due-2025/default.aspx
Essar will pull out all stops, but not likely to hold water with courts this time.
GPG/Essar is under investigation in Europe for bankrupting Greensill, all a house of cards, pulling the same stunts they did in MN by taking $1 billion in loans, spending it on other projects overseas, and then declaring bankruptcy.
CLF: MN [finally] axes leases for troubled Essar Nashwauk iron ore project [which started in 2003]..
Nashwauk may be back in play for CLF; US Steel also interested. Wouldn’t be surprised to see CLF issue shares as needed to take advantage of any opportunity at Nashwauk while current cash flow is used to pay down debt. This is the best ore on iron range; opens up several long-term possibilities.
https://www.startribune.com/state-axes-leases-for-troubled-nashwauk-iron-ore-project/600061579/
Minnesota DNR says Mesabi Metallics and its parent company Essar Global have not demonstrated credibility in their dealings with the state.
By Mike Hughlett Star Tribune MAY 26, 2021 — 4:48PM
LEILA NAVIDI, STAR TRIBUNE FILE
An iron ore project in Minn., that was first proposed in 2007 is still in limbo.
https://www.startribune.com/state-axes-leases-for-troubled-nashwauk-iron-ore-project/600061579/
A troubled and long-delayed iron ore project in Nashwauk has reached a new level of limbo — one that could tie up the mineral leases there even longer, or finally free them up.
The Minnesota Department of Natural Resources (DNR) terminated Mesabi Metallics' mineral leases Wednesday, seemingly washing its hands of the $2.6 billion project. But Mesabi Metallics, which is controlled by Essar Global, says it is moving ahead with plans to finish a half-built taconite plant.
The state gave Mesabi Metallics a last-chance lease extension in December, providing that the company meet a host of new provisions by May 1. On May 5, the DNR announced Mesabi had failed to meet those provisions, including having a requisite $200 million in hand.
Mesabi had 20 days to cure its defaults of the December agreement, but it did not do so.
"We have terminated the leases, so therefore they cannot mine state ore," said Jess Richards, assistant DNR commissioner. The agency will give notice to the company to remove any equipment it has on state mineral lands, he said.
While Mesabi also plans to mine ore on private lands, Iron Range players have said the project did not appear viable without the state leases. "Certainly, a large chunk of their mine plan involved state ore," Richards said.
But Mesabi's President Larry Sutherland said Wednesday "we are very optimistic" and "committed to moving this project forward."
About 25 workers are on site doing road work, and "all contracts are being finalized for construction work to complete the facility," he said. Sutherland, a 45-year steel industry veteran who retired from U.S. Steel in 2020, became Mesabi's president just two weeks ago.
Asked how the project could work without state mineral leases, Sutherland said Mesabi planned to continue working with the DNR.
The DNR has a differing opinion on the relationship.
"Mesabi Metallics and its parent company Essar Global have not demonstrated credibility in their dealings with the DNR," Richards said.
Sutherland also noted that Essar Global's co-founder Ravi Ruia publicly said last week during a visit to Nashwauk that the company will "take all necessary actions to protect its interest." In other words, a lease-related lawsuit against the state could be in the offing.
Mesabi Metallics on Wednesday took out a full-page advertisement in the Star Tribune, signed by Ruia, touting the project and its economic benefits for Minnesota.
Mesabi's state mineral leases are much coveted by other companies. Cleveland-Cliffs, the largest player on Minnesota's Iron Range, has long sought the leases. And within the last couple of weeks, U.S. Steel, long the Range's dominant company and now second to Cliffs, notified the DNR of its interest.
Both companies, like Mesabi Metallics, are looking to build a plant near Nashwauk that would further process taconite pellets into a purer form of iron, Richards said.
The state could put the erstwhile Mesabi leases up for bid or arrange a negotiated sale. "We have not made any decisions on how we will manage these state minerals in the future," Richards said.
By May 1, Mesabi Metallics had $100 million of the $200 million the state had earlier demanded. The company blamed the COVID-19 calamity in India for financing delays, saying it would have the money soon.
But in a May 19 letter to Mesabi Metallics, Richards wrote that "the COVID crisis in India was not the reason Mesabi failed to obtain $200 in immediately available funds by May 1. Rather, it was never Mesabi's or Essar Global's intent to meet this condition."
In an interview, Richards said Mesabi would put up the full $200 million only if the DNR would agree that the company had met all conditions from the December 2020 lease extension. The DNR wouldn't do so because the conditions hadn't been met, he said.
In its letter to Mesabi, the DNR said it was particularly troubled by financing for the project. A lender named Mark AB, which is apparently based in Dubai, "lacks the resources" for the $450 million term loan it's supposed to provide and "is not a credible lender for the project," the DNR letter said.
Sutherland declined to comment on the details of Mesabi Metallics' financing, which totals $850 million. But he said, "we have binding and enforceable agreements for our whole financial package."
Essar Global, a multinational metals and energy company owned by the wealthy Ruia family of India, was heralded back in 2007 when it bought out a moribund effort in Nashwauk to build a new taconite facility coupled with the Iron Range's first steel mill. (The latter later fell by the wayside.)
Essar Steel Minnesota started construction in earnest in 2011 with a planned 2013 completion date. But it ended up scrambling for cash, stiffing contractors and failing to reimburse the state for about $65 million in infrastructure improvements for the project.
In July 2016, after myriad missed deadlines, then Gov. Mark Dayton moved to terminate Essar's lease. Essar Minnesota responded by filing Chapter 11 bankruptcy.
By the end of 2017, the former Essar Minnesota — rechristened Mesabi Metallics — had financially reorganized with new owners, a new plan and a new lease agreement with the state of Minnesota. But Mesabi Metallics quickly became a shambles.
Essar re-entered the picture in January 2019 by buying up $260 million of Mesabi's outstanding debt and eventually what was left of its equity.
In December 2020, the state extended Mesabi's lease agreement over strong objections from Cleveland-Cliffs.
To get the extension, Mesabi Metallics and Essar on paid up on $24.5 million in debt owed to the state and ponied up another $11.5 million to cover previously owed rents and royalties to local governments.
DNR not buying Essar’s COVID in India excuse. Also identified other areas of noncompliance.
“In a letter to the company Wednesday, DNR Assistant Commissioner Jess Richards said the company's claim that its funder — Mumbai, India-based Essar — could only provide $100 million — half the required amount — in immediately available funds by a May 1 deadline because of the COVID-19 crisis in India was "a deliberate choice" and "not bad fortune."
https://www.duluthnewstribune.com/business/energy-and-mining/7037215-DNR-Mesabi-Metallics-lender-not-credibleso
DNR: Mesabi Metallics lender not credible
State agency says additional requirements not met, continues lease termination.
Written By: Jimmy Lovrien | 6:18 pm, May 20, 2021
Minnesota regulators reiterated their plans to strip leases from Mesabi Metallics, the proposed iron ore mine and half-built processing plant in Nashwauk, calling the company's lender not credible and discrediting its excuse for not putting up enough cash on time.
In a letter to the company Wednesday, DNR Assistant Commissioner Jess Richards said the company's claim that its funder — Mumbai, India-based Essar — could only provide $100 million — half the required amount — in immediately available funds by a May 1 deadline because of the COVID-19 crisis in India was "a deliberate choice" and "not bad fortune."
"It also fits Essar Global’s long-established pattern of showing up late, with less than what is required, and with illusory promises of financing that is unlikely to ever materialize," Richards wrote. "This is also exactly the type of intentionally deficient performance that caused the project to fail in 2015."
After years of missed deadlines and setbacks, the DNR last year amended Mesabi's leases one last time, giving it until May 1 to put $200 million into accounts, secure $850 million in equity and debt commitments for pellet plant financing, establish offtake agreements for 4 million metric tons of taconite pellets per year and place $24.5 million into an escrow account for missed rents and royalties and a Department of Employment and Economic Development settlement.
Mesabi maintained it had met all of the other requirements, minus only having half the required $200 million. But after further review, the DNR in its letter Wednesday said Mesabi had failed at meeting other requirements in the new lease as well.
Richards said Mesabi refused to provide redacted copies of operative documents, preventing the state agency from carrying out a review.
Additionally, Mesabi said it secured loans from "Mark AB," but Richards said Mark AB was a "not a credible lender for the project" and cast doubt on whether it could actually provide $450 million in financing since that would make up more than 40% of its $1.1 billion in total assets to the project. Mark AB had also not updated the "news" page on its website since 2012, Richards said.
There were also a number of contingencies from Mark AB that made its loan commitment "not a binding and enforceable debt commitment," Richards said. Most notably, it would not be required to advance funds if the project completion cost is less than $450 million.
"This renders the commitment conditional, and exposes the state to the exact risk that the Master Lease Amendment was written to eliminate — that financing for the project will evaporate if the cost to complete the facility exceeds $850 million for any reason (a likely outcome given the history of this project)," Richards wrote.
In a statement to the News Tribune on Thursday, Mesabi's Patrick Hynes said the company disputed the DNR's legal claims and said the DNR was requiring it "to comply with different terms than those actually provided in the 2020 Master Lease Amendment."
"Mesabi Metallics also strongly disputes the mischaracterizations made about Mesabi Metallics' intentions related to the project. Mesabi Metallics has worked in good faith with the DNR and other parties to move this project forward so that construction can be completed on schedule and will continue to do so," Hynes said.
The DNR's letter came on Wednesday, the same day Mesabi held an event at its project site to thank supporters and introduce Larry Sutherland as its new president and chief operating officer.
Sutherland is a retired general manager of U.S. Steel's Minnesota Ore Operations at Minntac and Keetac and most recently CEO of the scram mining company Prairie River Minerals near Coleraine.
Wednesday's letter from the DNR to Mesabi was first reported by the Mesabi Daily News.
Free cash flow 'machine' Cleveland-Cliffs reinstated as Buy at BofA
CLF is finally starting to get the love from analysts with Steelmageddon Timna Tanners at BAC initiating coverage with a Buy rating and $25 target.
They model complete debt payoff by 2023E with reinstatement of dividend then. Using a conservative 2022 HRC average of $575/ton leads to $2.5 Billion EBIDTA while $775 HRC is predicted to generate $4.25 Billion in 2022.
This is a balanced, well-researched report except for the lack of any discussion on Nashwauk.
Don’t put MLPs in an IRA. You will deal with UBTI…
ET $2.4B Texas storm profit, blowout $5B EBITDA quarter. Reduced long term debt by $3.7 Billion using cash from operations. ET storm profit is as much as all other reporting companies combined.
https://ir.energytransfer.com/news-releases/news-release-details/energy-transfer-reports-first-quarter-2021-results/
“DALLAS--(BUSINESS WIRE)--May 6, 2021-- Energy Transfer LP (NYSE:ET) (“ET” or the “Partnership”) today reported record financial results for the quarter ended March 31, 2021.
ET reported net income attributable to partners for the three months ended March 31, 2021 of $3.29 billion, an increase of $4.14 billion compared to the same period the previous year. For the three months ended March 31, 2021, net income per limited partner unit (diluted) was $1.21 per unit.
Adjusted EBITDA for the three months ended March 31, 2021 was $5.04 billion compared with $2.64 billion for the three months ended March 31, 2020.
Distributable Cash Flow attributable to partners, as adjusted, for the three months ended March 31, 2021 was $3.91 billion compared to $1.42 billion for the three months ended March 31, 2020.
Results for the first quarter reflected the one-time impacts of the winter storm in February and reliable operations of ET’s flexible, well-maintained asset base, particularly its storage and transportation facilities in Texas. Prior to the storm, ET pre-deployed employees and specialized equipment to key assets, and added line pack to pipelines to serve as additional storage. During the storm, employees manned facilities 24 hours a day, ET's transmission lines remained fully operational and the Partnership did everything within its control to keep plants running and field compression idling so that ET would be prepared to deliver natural gas to facilities throughout Texas for residential consumption and power generation. ET was able to continuously provide energy to help meet critical needs throughout the historic storm, due to years of significant capital investments, strategic planning and a dedicated workforce.”
“assuming that at this time the saga will come to an end, Cleveland-Cliffs is ready to step in and do what we have been doing for decades, by developing Nashwauk and generating a big number of good paying middle-class union jobs for the people of the Iron Range."
-Lourenco Goncalves
Yes, same saga, Essar doesn’t comply, MN finds a way to let them off the hook and they retain rights to develop Nashwauk. This has literally been going on since 2008…wouldn’t be surprised to see this happen again.
This is Essar’s statement; they are blaming the COVID in India for their noncompliance in MN this time..
“On May 1 Mesabi Metallics provided the DNR with documentation that met six of seven preconditions laid out by the Master Lease Agreement. Also on May 1 Mesabi Metallics deposited $100 million into an operating account that was immediately accessible to pay for contractors and materials. As the DNR noted in its recent statement, the MLA required deposit of $200 million by May 1st. Because of the unprecedented COVID crisis in India the deposit of the remaining $100 million has been delayed."
Mesabi Metallics is currently spending money from this account in support of the construction project and there will be over 40 new workers on site this week. We are confident that the additional funds will be in the operating account within the next few weeks. The $100 million currently in the account is sufficient to keep the project on schedule."
Mesabi Metallics understands that there are those who believe that the entire project should not go forward because of this delay. We strongly believe that it is in the best interest of Minnesota for the Nashwauk project to be allowed to commence, and have demonstrated our strong commitment to the project by making $100 million immediately available.
Mesabi Metallics has binding commitments of $650 million for the project, as well as a binding and enforceable off-take agreement for 4 million tons of pellets per year. The only piece of the puzzle outstanding is the deposit of the remaining funds in the operating account."
CLF DNR starting to terminate Mesabi Metallics leases at Nashwauk. They have 20 days to deposit another $100 million in its accounts or termination of Nashwauk leases will take effect. The saga continues…
https://www.wdio.com/mining-news/mesabi-metallics-dnr-mineral-leases-mining-range/6097550/
“The DNR said they are beginning the process of terminating the mineral leases with Mesabi Metallics. Back in December, the executive council had approved a lease amendement for certain requirements, with the deadline of May 1st.
Now, on May 5th, the DNR said certain requirements were not met, and that means the amendment is no longer in effect. One of those requirements not met include failure to demonstrate that the company had $200 million immediately available in its accounts.
The DNR said in a statement, "While the DNR is continuing to review all of the documents submitted by Mesabi, this failure to meet a fundamental requirement warranted notification that the amendment is not in effect. As outlined in the DNR’s letter, the project remains subject to the lease terms that were in place immediately prior to the 2020 amendment, which included minimum payment and performance requirements."
And finally, the agency said Mesabi Metallics has 20 days to cure the lease defaults or the termination action will go into effect.
CLF with less debt than before buying AKS&MT by late 2022 at these prices.
“we believe our estimates supporting $4 billion of adjusted EBITDA for the year are conservative relative to today's forward curve.”
-Keith Koci, EVP & CFO
$5 billion EBITDA is more likely; the stated $2.3 billion of Free Cash Flow for 2021 is undoubtedly going to be much higher as well.
From earnings call, clawback achieved with 20 million shares recently issued ($326 million) to pay back 35% ($334 million) of the 9.875% Notes worth $955 million they issued in April 2020 as insurance and to pay down other notes that saved $181 million in principal at the time.
They missed the original deadline for using CARES loans proceeds to do this and issuing new equity was the only other clawback option available.. they had to pay 109.875% of principal to do this and have $621 million remaining on the 9.875% notes which can be paid back after October 2022.
From Notes 8K in April 2020
“Lastly, at any time and from time to time on or prior to October 17, 2022, the Company may redeem in the aggregate up to 35% of the original aggregate principal amount of the Notes (calculated after giving effect to any
issuance of additional notes) with the net cash proceeds of certain equity offerings, at a redemption price of 109.875%, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, so long as at least 65% of the original aggregate principal amount of the Notes (calculated after giving effect to any issuance of additional notes) issued under the Indenture remain outstanding after each such redemption”
Pre-owned car market is currently by far the hottest it has been in decades according to a local major dealer.
Cleveland-Cliffs Inc. Completes Acquisition of ArcelorMittal USA
CLF becoming a powerhouse in cash production: $1.7 billion EBITDA combined + $121 million I/N Kote & Tek + ~$300 million HBI Toledo once it ramps up by mid 2021.
http://www.clevelandcliffs.com/English/news-center/news-releases/news-releases-details/2020/Cleveland-Cliffs-Inc.-Completes-Acquisition-of-ArcelorMittal-USA/default.aspx
CLEVELAND--(BUSINESS WIRE)-- Cleveland-Cliffs Inc. (NYSE: CLF) today announced that it has successfully completed the acquisition of substantially all of the operations of ArcelorMittal USA LLC and its subsidiaries (“ArcelorMittal USA”), forming the largest flat-rolled steel producer in North America. On a full-year 2019 basis, the combined Company generated pro-forma revenues of approximately $17 billion and combined adjusted EBITDA of approximately $1.7 billion, including previously disclosed expected synergies.
In connection with the acquisition of ArcelorMittal USA, which includes the interests of ArcelorMittal USA of 60% in I/N Tek L.P. and 50% in I/N Kote L.P., Cleveland-Cliffs also acquired Nippon Steel Corporation’s remaining interests of 50% in I/N Kote and 40% in I/N Tek, for a total consideration of approximately $183 million. With this additional transaction, Cleveland-Cliffs becomes the sole owner of 100% of I/N Tek and I/N Kote, which generated a combined $121 million of adjusted EBITDA in 2019.
Lourenco Goncalves, Chairman, President and Chief Executive Officer said, “The acquisition by Cleveland-Cliffs of ArcelorMittal USA, boosted by our buyout of Nippon Steel from the I/N Tek and I/N Kote joint ventures, opens a new chapter in the history of the steel business in the United States. The assets we have acquired will be combined with our existing footprint, including AK Steel, Precision Partners, AK Tube, several mining and pelletizing facilities, our Research & Development Center, and the most modern Direct Reduction plant in the world, which we have just started to operate in Toledo, OH. Our new footprint expands our technological capability and enhances our operational flexibility, elevating Cleveland-Cliffs to a prominent role as a major player in supporting American manufacturing, American future investments in infrastructure, and the prosperity of the American people through good paying middle-class jobs.”
Mr. Goncalves added, “We are also excited with the addition of the re-rolling plant co-owned by ArcelorMittal and Nippon Steel in Alabama as a very important long-term client of Cleveland-Cliffs for automotive grade slabs.”
CLF strikes out at Nashwauk; Mesabi awarded amended leases.
https://www.wdio.com/mining-news/amended-leases-mesabi-metallics-dnr-mining-/5939714/
“During testimony during the meeting, the CEO of Cleveland-Cliffs made his case for the leases. Lourenco Goncalves said that he would put the same amount of money into escrow Wednesday, that Mesabi Metallics has. Goncalves said access to the ore in Nashwauk will save the 750 jobs at Hibbing Taconite, which is facing a limited mine life. They only have 3.5-4 year left, he said. Plus, he said they would build a second HBI plant in 2-3 years. Their first HBI facility started producing on Thanksgiving last week.”
Cliffs sent a statement later on Wednesday: "Today the Minnesota Executive Council approved an amendment to the Nashwauk State mineral leases that will, yet again, extend lease terms and grant other concessions benefiting only Essar/Mesabi Metallics. Through over 13 years of involvement in this project, Essar has failed to live up to its obligations and has left nothing but unpaid bills and broken promises in its wake. Today’s decision escalates Hibbing Taconite’s life of mine crisis as the amended lease impedes access to Cleveland-Cliffs’ ore reserves at the Nashwauk site. Cleveland-Cliffs stands ready to extend Hibbing Taconite’s mine life and pursue HBI development in Minnesota but first needs a willing negotiating partner in the Minnesota DNR."
IMO, this questionable decision by MN DNR and politicians kicks Nashwauk down the road and prevents CLF from having to divert capex to the Butler mine while it whittles down acquisition debt. Mesabi still has to find a buyer to sign a 4 million ton pellet off-take agreement by May 1, 2021. It does jeopardize Hibbing lifespan and apparently limits CLF access to its Nashwauk ore. The Nashwauk saga continues..
Meanwhile, CLF SP rose another 5% today.
From CLFs 8K filed today
“In addition, until 120 days after the issue date, the Company may redeem in the aggregate up to 35% of the original aggregate principal amount of the Notes (calculated after giving effect to any issuance of additional Notes) with the net cash proceeds of any loan received pursuant to a debt facility entered into pursuant to the laws, rules or regulations of the United States promulgated under the Coronavirus Aid, Relief and Economic Security Act or any other legislation, regulation, act or similar law in response to, or related to the effect of, COVID-19, at a redemption price (expressed as a percentage of principal amount thereof) of 103%, plus accrued and unpaid interest, if any, to, but excluding, the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), so long as at least 65% of the original aggregate principal amount of the Notes (calculated after giving effect to any issuance of additional Notes) remain outstanding after each such redemption.”
Is Cleveland-Cliffs the first borrower to structure a debt raise with a CARES claw? Company will look to redeem up to 35% of today's new issue using proceeds of CARES act loan... $CLF #highyield
— Jakema Lewis (@JakemaLewis) April 15, 2020
Someone on twitter mentioned this could be structured debt prelude to CARES act loan to claw back up to 35% on notes.
Dividend elimination, CEO pay cut, notes all happened quickly and simultaneously...otherwise why the rush to get this bloated rate?
AKS purchased HBI from Orinoco in multi year contracts that ran during the 2000-2009 period and earlier. Orinoco sued AKS in 2001 over AKS wanting to pay global HBI price and not the higher contracted price.
There are still nearly 7 million tons of annual HBI plant production in Venezuela, but operating at 10% capacity since no way to get product out of country...
They are going to use HBI immediately at Middletown as noted by LG in the merger call. HBI will be used in blast furnaces to replace coke, lowering CO2 emissions.
Don’t think there is any plan to use HBI at Ashland to make pig iron. Steel makers will increasingly use a mix of pig iron and HBI as scrap quality and availability declines and to meet demands for higher quality steels.
CLF's AKS acquisition addresses issues they are facing.
The recent (and beyond their control) drops in the Atlantic pellet premium and in HRC dramatically reduced CLF ore margins being realized at the very end of the third quarter. The $30 drop in pellet premium and $100 drop in HRC noted on the 3Q call lowers their gross margin to ~$20 per ton from the $40-$45 or higher margins being realized earlier in the year. Going forward they are annually diverting 3 million tons of pellets to feed HBI Toledo. That leaves them with ~$340 million (down from ~$800 million) in expected pellet gross margin over the next 12 months with the remaining 17 tons of production. The continuing viability of AKS, a major customer, is of concern, particularly given what has occurred with pellet pricing, and the dramatic drop in cash flow that could result if low realized pellet prices continue well into 2020. The acquisition helps to address this immediate issue.
CLF will be investing $540 million in CapEx over the next 12 months with ~$150 million for 4Q 19 and ~$270 million remaining to be invested in HBI in 2020. They also have to fund a ~$100 million increase in working internal unsold pellet inventory to support Toledo. At the end of 3Q 19 they had $400 million in cash and an untapped $450 million ABL facility. If low realized pellet prices continue, most of that will be needed to get through the next three quarters of rough waters.
Also, In spite of being 6-7 months away from Toledo HBI operational startup, there still have been no announced pellet off-take agreements, in contrast to Voestalpine that had their entire 60% external HBI production pellet off-take in place well before startup of their Corpus Christi facility. Toledo HBI will be the world's first plant with MidRex adjustable carbon technology (ACT) that allows adjustment of carbon content across the 1%-3% range. Time will be needed to test and optimize this process for specific customer applications. The AKS merger provides an immediate customer for HBI pellets and reduces start-up risk.
The acquisition would also meet longer term needs; probably most importantly, this would pave the way for movement on Nashwauk. The acquisition will increase expected cash flows in several ways and the proposed financing provides a four year runaway of CapEx resources to invest in Nashwauk for a mine, HBI faculty and pellet plant. They will have the cash flow to invest $1.5-$2 billion in CapEx while paying off $1 billion in debt across the first four years. This move also puts Empire into play as a possible source of new pellets.
Overall, this merger gives the company more degrees of freedom moving forward to address risk and to maximize profit as the US ore and steel market dynamics increase. One long-term option would be to spin off the automotive steel portion down the road with an embedded long-term off-take agreement for CLF pellets to capitalize the investments CLF has made.
CLF has quickly become a longer-term investment value; 2020 will be filled with a great deal of uncertainty. The outlook for 2021 and beyond has become even brighter.
CLF bought back another 4.6% of outstanding stock in Q2. Since the beginning of the repurchase program, 30 millions shares have been acquired, reducing total count from 300 million to 270 million as of June 30, 2019.
“During the second quarter, Cliffs repurchased 13 million common shares at a cost of $129 million”
CapEx for 2019 has also been increased by $100-150 million to $650-$700 million to accelerate Toledo HBI startup; the total HBI budget has not changed.
BAC announces ~11% stock buyback, dividend increase +20%. Economy booming + tax bill; low rates apparently not a concern...
http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-newsArticle&ID=2402563#fbid=mF64A42GxCz
The Board approved plans for the company to return as much as $37 billion to common stockholders over the next four quarters through an increased quarterly common stock dividend and common stock repurchases, based on the company’s current number of outstanding shares and share price. The company plans to increase by 20 percent its quarterly common stock dividend, to $0.18 per share, beginning in the third quarter of 2019. It has been authorized to repurchase approximately $30.9 billion in common stock from July 1, 2019 through June 30, 2020. The buybacks would include approximately $0.9 billion in repurchases to offset shares awarded under equity-based compensation plans during the same period.