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Joseph P. Porter
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I am a retired college faculty in Philosophy, with specializations in Ethics, Socio-political Theory and Rational Choice/Decision Theory. My teaching focus was on Business Ethics, Medical Ethics and Logic. After retirement I freelanced as a Grant Writer/Fund Raising Consultant. I have taught at... More
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Joseph P. Porter's Instablog
  • Updating The State Of Affairs For GNI 0 comments
    Dec 6, 2012 10:29 AM | about stocks: GNI, MSB, CLF

    If you've read my article on Great Northern Iron Ore Properties (NYSE:GNI), there is news that may be of interest for you. If you haven't read the article - shame on you! Click here to see what you missed.

    As I state in the article (written a month ago, on Nov. 7), one could expect a return of somewhat less than $45 per share over the next 2 1/2 years, after which GNI will no longer exist. That estimate was based on the assumption that business would continue along the lines of its recent history, which hasn't been that bad.

    Well, it may be getting bad.

    While researching a similar trust - Mesabi Trust (NYSE:MSB) - I noticed a tidbit of news about one of the companies that leases from them. (Note: Mesabi leases land in the same general area of Minnesota as does GNI>) The principal lessee for MSB is Cleveland Cliffs (NYSE:CLF), and that company has announced a significant cutback of operations in its Minnesota mines beginning in the second quarter of 2013. The cause for this action is a lowered demand for iron ore.

    Internationally, there is a diminished demand for iron ore as China - one of the largest purchasers of ore - has reduced its demands, as it seems to be currently interested in recycling scrap metals. While American analysts are claiming that the demand for ore is high in America, it seems unlikely that a company like CLF would be cutting back its operations unless it felt quite sure that there was a weak market in iron.

    If CLF is correct, then it would seem that MSB is in for a diminished return for its certificate holders.

    For GNI, this has rather sobering implications for its certificate holders: a reduction in mining activity in the Minnesota region will doubtless have an impact on them, and this could result in reduced payouts to its holders. My estimate of $45 might be too high, and the consequent value of its shares may be too high, as well.

    I wouldn't touch GNI for more than $30, and would look to pay in the neighborhood of $25.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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