The Rising Influence of Rising Affluence

[DewDiligence]

CLF-webcast addendum—A few ancillary items mentioned during the Q&A are worth noting, even though they are do not affect CLF’s near-term sales and profits:

• CLF expects its production cost of Ontario ferrochrome to be less than $0.50/lb, which allows for a wide margin relative to the current market price of $1.30-1.35/lb.

• The JV between CLF and Kobe Steel in Michigan to make a “low emissions” iron product is on hold until the economical viability of the technology is proven by Steel Dynamics Inc. (one of CLF’s customers in Minnesota). The output from this process would be nearly pure (~96% Fe) iron nuggets that could bypass steelmakers’ blast furnaces (backgrounder: http://www.washingtonwatch.com/bills/show/ED_5498.html ).

• CLF has investigated Nucor’s direct-reduced-iron process, which employs (cheap) natural gas rather than coke to reduce the iron ore; however, CLF’s ore has too much silica to meet Nucor’s specs.

• The industry-wide labor contract that governs CLF’s US and Canadian mines is up for renewal in Sep 2012.

• Although the terms of new Australian federal and state mining taxes are not yet pinned down (e.g. it is not yet known whether the taxes apply to magnetite), CLF does not have any projects whose economic viability hinges on the outcome.

General comment: The analysts who follows mining companies such as CLF are a lot sharper, on average, than the analysts I’ve encountered in the drug/biotech sector.