Monday, February 11, 2019 11:57:15 AM
Their mining and pelleting operations have an $800 million sustainable gross margin (20 M tons, $40/T margin) and net ~$500 million annually ($100M Interest, $100M SGA, $100M Sustain CapEx & Misc Expenses). WIth a PE of 8 this part of the business has a $4 billion value ($13-14 per share).
Their HBI operation should net ~$300 million annually starting in 2021 with the recent expanded production design. A PE of 12 with this growling line values this part of the business at $3.6 billion (~$12 per share). The world has been moving to DR iron for quite some time.
Overall CLF has a $7.5-8 billion capitalization value ($25-30 per share) assuming no further growth.But they will be growing.
The increase in ore prices for the next couple of years and tax refunds are providing most of the capital to re-open Empire whose production will replace the BF pellets no longer being made at Northshore with their 2019 conversion to DR-grade pellets for HBI production. Empire will further expand pellet production by another 3-3.5 M tons annually (15-17%).
If they build a second HBI, the profits from the Toledo HBI alone will be sufficient to fund all the CapEx for this. A second HBI would add several more billion ($10-12 per share) to overall company value.
Their long-term goal is to build a mine at Nashwauk to replace Hibbing which only has several years of ore left. LG has also stated plans to build HBI and then pellet plants there once the mine is open. This will require a good deal of CapEx and would not be surprised to see them partner there as they are doing at Hibbing now. Alternatively, by then, they may be so flush with cash that there would be no need to partner.
There is also an adult in charge of the company who knows what he is doing and who is aggressively moving to grow the company. Their allocation of capital has been truly superb with investments in growth, addition of a reasonable dividend, buyback at reasonable levels to not compromise investment, and continued retirement of outstanding debt.
CLF is still at firesale prices. As LG has noted, this is a simple business and these facts are all well known. Hard to believe this has being missed by so many analysts for so long. There is imminent risk of buyout and of being taken private at these levels.
Recent CLF News
- Form SD - Specialized disclosure report • Edgar (US Regulatory) • 09/20/2024 08:23:00 PM
- Cleveland-Cliffs Announces Shareholder Approval of Arrangement to Acquire Stelco • Business Wire • 09/16/2024 08:15:00 PM
- Cleveland-Cliffs Reaffirms Commitment to Middletown Works Decarbonization Project and Ongoing Partnership with the U.S. Department of Energy • Business Wire • 09/16/2024 06:15:00 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 09/13/2024 08:33:33 PM
- Cleveland-Cliffs Successfully Amends Asset-Based Lending Facility • Business Wire • 09/13/2024 12:31:00 PM
- Cleveland-Cliffs Commends President Biden’s Reported Decision to Block Foreign Ownership of U.S. Steel by Japan’s Nippon Steel • Business Wire • 09/05/2024 08:46:00 PM
- Cleveland-Cliffs Announces Promotion of Michael Hrosik to Senior Vice President, Commercial • Business Wire • 08/21/2024 04:16:00 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 08/16/2024 09:17:13 PM
- Cleveland-Cliffs’ New 4-Year Labor Contract with the UAW Ratified at Dearborn Works • Business Wire • 08/16/2024 05:38:00 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 08/13/2024 09:14:47 PM
- Cleveland-Cliffs Inc. Announces Upsizing and Pricing of an Additional $600 Million Senior Guaranteed Notes due 2032 • Business Wire • 08/13/2024 08:11:00 PM
- Cleveland-Cliffs Inc. Announces Proposed Offering of an Additional $500 Million Senior Guaranteed Notes due 2032 • Business Wire • 08/13/2024 01:07:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/01/2024 07:12:56 PM
- Form 10-Q - Quarterly report [Sections 13 or 15(d)] • Edgar (US Regulatory) • 07/24/2024 08:19:46 PM
- SAP Shares Surge 6%, NXP Declines 8% on Lower-than-Expected Profits, and More Earnings Highlights • IH Market News • 07/23/2024 10:02:34 AM
- Form 8-K - Current report • Edgar (US Regulatory) • 07/22/2024 08:47:27 PM
- Cleveland-Cliffs Reports Second-Quarter 2024 Results • Business Wire • 07/22/2024 08:05:00 PM
- Cleveland-Cliffs Announces Its New State-of-the-Art Electrical Transformer Production Plant in Weirton, West Virginia • Business Wire • 07/22/2024 11:00:00 AM
- US Index Futures Advanced, Oil Prices Inch Higher • IH Market News • 07/22/2024 10:06:47 AM
- Match Group Soars 8% Amid Potential Sale Pressure; Deutsche Bank Anticipates 2Q Loss, and More • IH Market News • 07/16/2024 10:10:09 AM
- Form 8-K - Current report • Edgar (US Regulatory) • 07/15/2024 09:00:49 PM
- Cleveland-Cliffs Announces the Acquisition of Stelco • Business Wire • 07/15/2024 10:00:00 AM
- Cleveland-Cliffs to Announce Second-Quarter 2024 Earnings Results on July 22 and Host Conference Call on July 23 • Business Wire • 07/01/2024 06:38:00 PM
- Cleveland-Cliffs Posts Press Conference and Q&A with U.S. Senator Sherrod Brown and USW International President David McCall on Website • Business Wire • 06/26/2024 07:09:00 PM
- Cleveland-Cliffs to Host U.S. Senator Sherrod Brown and USW International President David McCall at Cleveland Works • Business Wire • 06/24/2024 08:49:00 PM
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