The Rising Influence of Rising Affluence

[Democritus_of_Abdera]

Bear case for CLF...

ghmm... I agree with Dew (#msg-77545299) that the major negative factor impacting CLF’s share price over the past 6 months is a fear of a “hard landing” in China..

With respect to the near term negative bias in the stock price, I for one fear that CLF will significantly reduce its projections for FY2012 in the upcoming CC next week. The important question, in my mind, is whether the expected cash from operations will cover the anticipated $1300M needed for planned CapEx and dividends.

For the record, the projections detailed in the April 26 FY2012 Q1 conference call were:

We are maintaining our expected sales volume for all of our reporting segments with the exception of Asia Pacific Iron Ore, but we are increasing our anticipated sales volume to approximately 11.4 million tons. In addition, we are maintaining our expected 2012 full year average spot price for seaborne iron ore of approximately $150 per ton delivered into China, and have narrowed our revenue per ton expectation range for all of our segments.

As I [Lauri Brlas, CFO] mentioned before, we are decreasing our full year North American Coal revenue per ton expectation to approximately $130 to $135 due to market conditions. Included within last night’s press release, you can find our expectations for all reportable segments, along with the outlook for Cliffs other reported minority interest.

We are maintaining our expected full year SG&A expense of approximately $325 million and our cash outflow expectations of $90 million related to global exploration. For our chromite project, we expect to spend approximately $75 million in 2012. We continue to make significant progress with this project, including constructive discussions with external stakeholders and government regulators. We anticipate advancing this project from the pre-feasibility stage of development, to feasibility this summer. We continue to be excited about the quality of the ... department (22:37) and the value it would generate. As we move into feasibility, we will share portions of the project economics, as well as other significant milestones achieved and expected, as we bring this project to fruition.

We expect a full year effective tax rate of approximately 5%, which includes the impact from the Australian MRRT. Excluding this and other discrete tax items, our effective tax rate would be approximately 23% for the full year.

We anticipate generating $1.7 billion in cash from operations, down slightly from our previous expectation of $1.9 billion, primarily due to our outlook adjustments in the full year business segments. Our revised expectation more than covers our anticipated CapEx of $1 billion for the year and our recently announced 123% increase to the quarterly cash dividend rate, which will result in a total 2012 payout of just over $300 million.

Greater detail concerning CLF’s projections can be found in the April 25, 2012 Form 8K: http://www.sec.gov/Archives/edgar/data/764065/000119312512184213/d340908dex991.htm