I have a feeling you are going to be disappointed. Something happened this month with the company spending. The Tilden canceled many of the repairs they planned on doing on shovels before the end of the year and they are going into emergency cost cutting mode. I have a feeling the company is realizing it will be tough to finish the HBI plant and start producing product without maxing out the revolving credit facility next year. The ABPP drop and the hot roll coil drop is killing future profits. Plus IO is starting to fall too. Not a good combination.
To be sure, if we could have maintained the $113 a gross tonne sales price for the rest of the year and next year, everything would have gone as they planned. Unfortunately, spending the $300 million on the share buyback placed the company in a really bad position for the next 9 months. The company had $377 million in cash at the end of the 2nd quarter and this quarter I wouldn't be at all surprised if they make $0.50 a share in profits or $135 million so the total should be about $512 million. Earnings will most likely fall really fast into 4th quarter on for a little while. You have to remember the company had to make the final $44.2 million payment in August for the full ownership of the Empire. Plus they shelled out $27 million for the dividend so that's $71.2 million. Now you have to consider the big spending. While the shipping season is closed, the company will make about 5 million tonnes of pellets that will burn most likely around $60 a tonne in cash. So we are looking at $300 million without any sales. Plus, you have 2 million tonnes DRI that have to be produced and shipped without any recoup until made into HBI and Sold which will be another $70 a tonne to make and ship or $140 million. After that, you have another $35 a ton HBI so most likely $35 million here too. So the grand total in costs comes out to $546.2 million. If they continue to give a $0.06 dividend each quarter you are looking at another $48.6 over the next 3 quarters. Now the total is $594.8 million. So, this is all the spending they will have with no more additional profits coming in until second quarter 2020 and we still haven't added the HBI construction and start up costs of $540 million for the next 3 quarters or the interest payments on debt. Those will put them way over the revolving credit limit unfortunately.
I just don't like where this is heading for the next 9 months. After the HBI plant goes into production, things will get a lot better even with depressed pellet prices. It's going to be a long 9 months in my opinion.
