Well, hopefully maybe Barron's piece can light a little fire under this stock.
After reading the article and your comments I have many questions and comments. There seems to be many assumptions.
Bloom Lake is a world-class asset and (unless iron-ore prices crash) CLF will eventually make very good money from it, propelling the share price or instigating a buyout offer.
I'm not sure what you refer to as 'crash' but CLF's cost structure is so out of whack that it could be priced out of the market. I/O's current price is still over 100% greater than its 10 year average while most other commodities (except gold and oil) have all retreated to the 50% -80% range. Why should I/O be different?
In the past two years, a slowdown in China has clobbered the price of iron ore.
While China's I/O demand is in the upper 40% of worldwide use, you still need the other 50% to partake. They're not and they won't be anytime soon.
That makes Cliffs, which closed Friday at $18.45 the worst performer this year in the Standard & Poor's 500.
There's nothing more to say.
Cliffs was laid low, in large part, by its $5 billion acquisition in January 2011 of a Canadian iron-ore miner, whose Bloom Lake mining project has proved a huge disappointment
Management failure
In recent months, a dilutive equity offering and a large dividend cut
Management failure
As Cliffs' management shows improved execution at Bloom Lake in the next year,
Assumes Management success. When was the last time management succeeded?
[I’ve posted on numerous occasions that CLF shares have a built-in 50% discount for management’s prior ineptness, so Gambardella and I are basically on the same wavelength.]
What's changed to assume management failure is in the past? What's changed that they now will run on all cylinders?
Bringing the mine online has taken longer and been costlier than expected. Management is targeting production of 14 million tons at Bloom Lake by 2015.
Management failure
On an annualized basis, based on December production, the mine produced seven million tons of ore, below the company's previous target of eight million.
Management failure
Expected production costs this year of $70 to $75 a ton compare with the original target of $40 to $45 a ton.
Management failure
A credit ratio triggered a violation of a debt covenant late last year.
Management failure
To shore up its balance sheet and proceed with Bloom Lake, Cliffs restructured some debt, raised more than $900 million by selling equity,
Ouch, the street took a beating on this one so far.
The downside for Cliffs could be limited,
It's only limited because it's a lot closer to zip.
I guess I really would like to know why management is any better today than the last couple of years?
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