After a nearly five year fall in share from $100 to $1.20, it appears Cliffs finally bottomed out in January of this year. Since then Cliffs is up 150% from its low,with much more room to the upside.
Management has done what it had to in order to save Cliffs from what otherwise would have been bankruptcy. While still carrying a large debt load, management has been creative in reducing outstanding debt over the last year in the face of small or non existent earnings.
With the US government finally taking measures against foreign dumping of steel. The domestic steel industry is slowly beginning to heal. This healing will and is already helping Cliffs and will only make things better going forward.
As for the Essar issue, the Essar Project is now dead. Essar will be forced to unload this white elephant. Cliffs alone or with a partner is the likely acquirer of the project at a substantial discount.
Cliffs understands that they must begin to domestically start producing a 90% pure DRI pellet as feed stock for all the Electric arc furnaces in North America. The EAF make up 65% of the steel making capacity vs just 35% for blast furnaces that use standard IO pellets. As time passes this difference will only get wider.
The future for feed stock to the North American steel industry is the 90% pure DRI pellet. The company that gets there first will have a major advantage. For Cliffs the implosion of the Essar project is the opportunity I believe LG has been waiting for and believe he will capitalize on. To be able to step in and set up a DRI facility from mine to processing center at a highly reduced cost structure than had they attempted this from scratch.
Time will only tell. After 4 plus years of watching Cliffs stock decline, 2016 is looking like a good year to be long the stock and options.
Ferrous
