The Rising Influence of Rising Affluence

[DewDiligence]

Re: CLF—dispelled canards on today's CC

In case you don’t get around to listening to the CC, four canards that were dispelled (in addition to the one noted in #msg-107616785) are:

• A drop in the seaborne iron-ore price from the current level will not affect the benchmark price CLF gets from certain US buyers because the contracts with these buyers have a minimum price per ton that has already been reached.

• If CLF cannot find equity partners to develop phase-2 of Bloom Lake and thereby decides to shut down the mine, the shutdown liabilities will be quarantined in CLF’s Canadian subsidiary (which will simply declare bankruptcy) and will not affect the parent company.

• CLF’s coal business is cash-flow positive (although just barely) even at the current spot price. Thus, CLF will continue to operate these mines until a buyer can be found. (The prior management team had intended to idle CLF’s largest coal mine, but Goncalves rescinded the order.)

• CLF does not have a liquidity problem. The nearest debt maturity is in 2018 and CLF has no outstanding balance on the $1.25B credit line.