Replies to post #5625 on The Rising Influence of Rising Affluence

[DewDiligence]

CLF—Given the current iron-ore price slump does industry M&A become more or less likely?

Someone less likely, IMO, because prospective buyers are more concerned with their balance sheets and credit ratings now than they are when commodity prices are higher.

Do you know what percent total US iron ore consumption, CLF provides?

About 40%. CLF’s 2012 guidance for its US iron-ore production is 22-23 million tons (see #msg-77907633, about 2/3 of the way down), and total US production in 2011 was 54 Mt (http://minerals.er.usgs.gov/minerals/pubs/commodity/iron_ore/mcs-2012-feore.pdf ). This 54Mt figure includes production by the “captive” mines of US-based steel companies, so CLF’s market share of non-captive US production is somewhat higher than 40%.

Note that CLF’s Eastern Canada iron-ore production is for seaborne export.

[DewDiligence]

M&A factoid: The median value paid in acquisitions of iron-ore companies worth $100M+ has been 2.6x book value, according to Bloomberg (http://www.bloomberg.com/news/2012-10-05/iron-ore-bear-market-leaves-arrium-with-low-bid-real-m-a.html ). There are 70 such deals in the dataset.