Seeking Alpha

Cliffs sees two Casablanca nominees joining its board

  • Cliffs Natural Resources (CLF) says it expects at least two nominees proposed by Casablanca Capital will be appointed to the company's board at its annual meeting set for July 29.
  • CLF says that based on discussions with various shareholders, its board believes it is in shareholders' best interests for a slate of nine directors to be nominated for its 11-person board.
  • Tensions between CLF and Casablanca have been high since the beginning of the year, as the 5% shareholder has issued proposals to enhance value for CLF shareholders and sought to seek control of CLF's board.
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Comments (11)
  • chunghk
    , contributor
    Comments (339) | Send Message
     
    CLF-Good decision by Gary & board. Glad see fight fading; Dropping too ambitious & greedy; crazy & brainless. $53 per share-who buys? Ask Mr Buffet if he buys, @$14.45 today, what a handsome profit! I'll sell my small house & car and reap a truckload of easy money. Thanks.
    10 Jun 2014, 06:36 PM Reply Like
  • KayKay0314
    , contributor
    Comments (41) | Send Message
     
    On January 28th, 2014, Casablanca filed a 13D disclosing their 5% position in CLF along with a letter. The letter explains the actions that they believe should be taken. However, that does not mean that those actions will be taken.

     

    The whole set of actions that must take place according to Casablanca all hinges upon the company getting split into two entities: Cliffs International and Cliffs USA.

     

    Cliffs International would be valued at $15 based on a Bloom Lake valuation of $2B at an earnings multiple of 6.0x. I'm not sure how many shares of CLF would be spun off to the new international company. I can only guess it would be a 50/50 split based on current market cap. This scenario seems reasonable to me and it implies that overall Cliffs is valued at $30 a share, right now. If Buffett were to invest, Bloom Lake is where he would do it.

     

    Cliffs USA (formerly CLF) would then be required to become an MLP and double their dividend. This scenario seems incredibly unlikely to me. The reason is that I cannot find any MLPs, even diversified MLPs, that deal in Iron Ore. They all seem to revolve around Energy (Oil, Gas, Coal, etc.) Production/Exploration... or Real Estate. Are there any MLPs dealing with non-precious metals? If there are, I can't seem to find them.

     

    Finally, Cliffs would have to improve their overall expenses and cost of exploration. If this can be done exactly as planned, this is valued at $5/share.

     

    Even IF they spin off half the company to an international division, don't expect the full $15/share. Maybe $7 - $10 share at first until they can fix the monetary bleeding at Bloom Lake.

     

    Based on likely scenarios, Cliffs could be valued at $35/share, at best, but I have a feeling that the only considerations as of this moment are cost cutting measures and crossing their fingers that iron ore prices rise above $100/ton. In my opinion this means Cliffs might see a more likely $27 - $30/share in two years if iron ore prices don't continue to fall and only if they take action.
    12 Jun 2014, 11:02 AM Reply Like
  • WPSPIKER
    , contributor
    Comments (1158) | Send Message
     
    Wondering what this will do to the preferd shares of (CLF) (CLV) Been watching & looking at those sharp edges spinning around... I've had plenty of band-aids on my fingers in past trying to catch falling knifes & bit wondering now on this one.

     

    m
    12 Jun 2014, 09:32 PM Reply Like
  • chunghk
    , contributor
    Comments (339) | Send Message
     
    CLF-My property $700,000; @$14.45 per share =48,440 shares x $53=2,083,000. Big mansion in Sacramento, California. Failing it find me in homeless team lunch & dinner @ St Vincent de Paul or Salvation Army. Thanks.
    10 Jun 2014, 06:54 PM Reply Like
  • WPSPIKER
    , contributor
    Comments (1158) | Send Message
     
    lol@ Chung

     

    This is a good point I will be buying in AM, this is just like (CHK) 2 years ago when A.M. was kicked out. (CHK) is 10 points higher today, that is 24 mo profit for me... (CLF) in 2 years will be probably 20 points in same time frame...

     

    Mark
    10 Jun 2014, 07:47 PM Reply Like
  • Douglas E. Johnston
    , contributor
    Comments (1781) | Send Message
     
    not really - the biggest players are actually expanding (lower cost) production and its a lot easier to shutter nat gas rigs than stop a huge capex project.....
    11 Jun 2014, 10:49 AM Reply Like
  • myztiX
    , contributor
    Comments (47) | Send Message
     
    Iron ore price is still the issue. They need to find new use for iron ore to increase demand. They can't force growth with current global economy.
    10 Jun 2014, 09:03 PM Reply Like
  • myztiX
    , contributor
    Comments (47) | Send Message
     
    This is not limited to just clf, but rio and Bhp hold responsibility because they are the ones who participated in the ramping up on production. Hope they had a good hedge for their stupidity
    10 Jun 2014, 09:04 PM Reply Like
  • sethmcs
    , contributor
    Comments (3487) | Send Message
     
    Little early, I sold CLF June $18 puts @ $1.75 awhile back. So I expect to be assigned the shares @ $16.75. To which I will add after expiration. When trying to catch falling knives its best to scale into positions on the way down. That way the highest cost shares are the first lot which ultimately will be the first to be sold down the road.

     

    To assume that iron ore will stay low is to assume there will be 1) no global growth and 2) no inflation. If you believe that you might as well buy bonds
    11 Jun 2014, 12:42 AM Reply Like
  • Douglas E. Johnston
    , contributor
    Comments (1781) | Send Message
     
    its not just economic growth and inflation - its supply and demand and how long it takes to come into balance.
    11 Jun 2014, 10:38 AM Reply Like
  • chunghk
    , contributor
    Comments (339) | Send Message
     
    CLF-Calculation should read - 48,440 shares x $53=$2,567,000. Enough to buy house @ Hillsborough. Isn't good bet? $53 stock price set by Casa's Dropping. Good & rare opportunity. Thanks.
    11 Jun 2014, 12:34 PM Reply Like
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