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Cleveland-Cliffs Investors, Set Your Sights on $31

Cleveland-Cliffs (NYSE:CLF) is now not just an iron-ore producer but a vertically integrated steel producer. It produced a stellar second-quarter earnings…

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This article was originally published by Investor Place

Cleveland-Cliffs (NYSE:CLF) is now not just an iron-ore producer but a vertically integrated steel producer. It produced a stellar second-quarter earnings report. As a result, CLF stock now has a good chance of rising to $31.28, up 31% from $23.91 as of Friday’s close.

Source: Pavel Kapysh /

The main reason I have to come to this conclusion is that Cleveland-Cliffs just reported its first quarter of free cash flow (FCF) in a little while. This is the main reason why the company will be able to lower its debt and increase its value over the next year.

Estimating Cleveland-Cliffs FCF

On July 22, the company announced its Q2 revenues of $5.045 billion, up from $1.093 billion a year earlier. Since then, the company acquired two steel producers and it is now the largest flat-rolled steel producer in the entirety of North America. Since CLF also produces its own iron ore, it was able to lower its steel-making costs quite significantly.

As a result, the company produced adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $1.36 billion in the quarter and $1.873 billion in the first six months of 2021. However, Cleveland-Cliffs produced $349 million in positive free cash flow (FCF) during Q2. This was the first time it has done this since September 2020, according to Seeking Alpha‘s page on the company’s cash flows.

This might be a little hard to see at first, given that the company did not specifically state its Q2 FCF performance. In fact, the six months Statement of Unaudited Condensed Consolidated Cash Flows shows that net cash provided by operating activities was just positive $132 million. And after deducting capex charges of $298 million, the six months FCF was actually negative $166 million.

So how can I say that the company made a positive $349 million in FCF? The answer is that this was the Q2 FCF performance.Q1 had a much higher negative FCF number, which can be seen in their Q1 earnings release. The difference with a much greater negative number (i.e., -$515 million) and a lower negative number (-$166 million) is positive $349 million. That means that Q2 had positive FCF.

Moreover, the $349 million in Q2 FCF represents 6.9% of the $5.045 billion in sales it made during the quarter. Analysts now project that the company will make $20.35 billion this year and $18.49 billion next year. So on average, its run rate revenue for the next 12 months will be $19.42 billion. If we multiply 6.9% to this number, the forecast FCF will be $1.34 billion over the next 12 months.

We can use that FCF estimate to value CLF stock.

What CLF Stock Is Worth

For example, if we use a 10% FCF yield to value CLF stock, its value works out to $13.4 billion. This represents a potential upside of 12.1% for the stock, putting it on a price of $26.80 per share, or 12.1% over its price today (Sept. 3) of $23.91 per share.

Moreover, given that the company could begin making positive FCF, the market is likely to give it a higher valuation with the FCF yield metric. That means the FCF yield number will be lower. So, for example, if we use a 7.5% FCF yield, Cleveland-Cliffs stock will have a value of $17.87 billion. That represents an upside of 49.55% or $35.76 per share.

So, on average we can estimate that CLF could be worth between $26.80 and $35.76 per share, or $31.28 per share. That represents an upside of 30.8% over today’s price of $23.91 (Sept. 3).

What Analysts Think

Analysts tend to agree with me. For example, Refinitiv‘s survey of eight analysts, as published by Yahoo! Finance, shows that their average 12-month price target is $29.59. Moreover, indicates that six analysts who have written up CLF stock in the last three months have an average target of $30.89. This represents a potential upside of over 29% and is close to my target price of $31.28 per share.

The fact is the company is now producing significant amounts of free cash flow and it might not be completely apparent to investors. This is because its Cash Flow statement still shows negative free cash flow on a cumulative basis, given that Q1 had negative FCF.

Moreover, analysts are somewhat leery that the company will be able to obtain high prices as it did during Q2. For example, its price per net ton of steel averaged rose from $900 in Q1 to $1,118 in Q2.

However, even if prices decline a bit, the company might be able to sell larger amounts of steel. For example, even with higher prices, its total volume rose 1.5% from 4,144 net tons to 4,205 in Q2. In addition, CLF was also able to significantly increase its average EBITDA margin by lowering its costs. In Q1, its adjusted EBITDA margin was 12.67% and by Q2 it had jumped to 25.9%. This leaves plenty of room for the company to make profits even if prices fall.

What to Do With CLF Stock

So now might be a good time to take an initial stake in CLF stock, given that it has just turned FCF positive. Keep in mind that even if revenue falls over the next year, the stock could still rise as investors appreciate its powerful FCF performance.

In fact, I suspect that over the next year, FCF will turn positive for four quarters. That will likely raise CLF stock’s valuation to $31.28 per share, or 31% higher.

On the date of publication, Mark R. Hake did not hold any position, directly or indirectly, in any of the securities mentioned in the article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Mark Hake writes about personal finance on and runs the Total Yield Value Guide which you can review here.

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Bastion keen to kick off drilling at San Juan – the missing piece in its Capote gold play

Special Report: Gold explorer Bastion Minerals is gearing up to start drilling at its Capote gold project in Chile. … Read More
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Gold explorer Bastion Minerals is gearing up to start drilling at its Capote gold project in Chile.

Last month the company secured an option to acquire the previously producing San Juan project which sits in the centre of the Captote land. 

And earlier this month a $2.2 million placement was finalised, with the aim to kickstart an aggressive exploration program as soon as possible.

Bastion Minerals (ASX:BMO) executive chairman Ross Landles said the company held all the land around San Juan and the option agreement secured the “missing piece of the puzzle”.

“Our strategy is to identify, acquire and explore high-grade gold districts that have been locked up for decades – and potentially have missed any modern exploration methods,” he said.

“San Juan produced about 700,000 ounces at about 52 grams per tonne up to the late ‘60s.

“And these initial funds will assist us in looking at the old workings and work out a drill program that goes beyond where the old miners tended to mine – which was only down to about 400m.”

Exploration planned at other Chilean projects

While the company is focused on its Capote gold play, it’s also planning drilling at the Garin gold-silver project and the Cometa copper project – also in Chile.

“We’ve done preliminary work on all the assets in the portfolio, and we’ve been pretty encouraged by the results from both Garin and Cometa,” Landles said.

“Rock chip samples and geophysics and mapping at our copper project has confirmed where we should drill, and the preliminary work at Cometa has also given us several defined targets.

“As soon as we put some holes into the Capote gold project, we will be straight into the other two almost immediately. We should be drilling on both of those projects before the end of the year.”

Pic: Bastion Minerals’ Chilean Project Portfolio.

Exploring where the majors don’t operate

Landles said the company is now in a sweet spot with its landholding in Chile.

“We’re looking for high-grade gold in a range of around 1-3 million ounces in an area where the majors tend to not operate,” he said.

“The majors are looking for things that are 5 million ounces and above, so we seem to be in a reasonable sweet spot where we’ve got – we think – a higher likelihood of discovering some high grade and reasonable sized resources.”




This article was developed in collaboration with Bastion Minerals, a Stockhead advertiser at the time of publishing.


This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

The post Bastion keen to kick off drilling at San Juan – the missing piece in its Capote gold play appeared first on Stockhead.

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Natural Gas Prices Soar On Worldwide Basis; Margins Expected To Be Impacted Across Variety of Industries

Over the last few months, investors have increasingly focused on supply shocks caused by COVID-19 and the effects of worldwide
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Over the last few months, investors have increasingly focused on supply shocks caused by COVID-19 and the effects of worldwide easy money policies causing inflationary pressures to seep into traditional industries. A more basic problem could be looming which could crimp industrial output and profitability on a worldwide basis for some time to come: a global shortage of natural gas. 

This problem could become even more acute if this upcoming winter in North America and Europe proves to be colder than normal.

European natural gas prices have soared since early April. First, a cold winter left storage levels well below the pre-pandemic five-year average. Then, economies and natural gas demand rebounded as most European countries eased COVID-19 restrictions. On top of this, liquefied natural gas (LNG) demand from Asia and South America is increasing, and, for some still-unclear reason, Russia began to pipe smaller amounts of natural gas to Europe starting around early August. All this has caused European and U.S. natural gas prices naturally to increase around 250% and 125%, respectively, since January.

The Dutch TTF hub is the European benchmark for natural gas trading.
U.S. natural gas prices, in U.S. dollars per million British Thermal units

As natural gas prices rise, heavy users of natural gas like glass, cement and fertilizer manufacturers may decide to raise prices of their products further.

China plays a role in this too. It has decided to limit electricity to electricity-intensive industries like steel manufacturing to achieve green goals (one of which could be blue skies at the Winter Olympics Beijing will host in February 2022). The country is also facing a coal shortage. If gas were to be diverted to be a power source for residential consumption, global gas demand and prices could get a further boost

One way to play the strong worldwide demand for natural gas could be Cheniere Energy, Inc. (NYSE: LNG), a full-service LNG provider headquartered in Houston, TX. Cheniere provides LNG liquefaction, transportation and delivery services for clients located throughout Europe and Asia.

Cheniere‘s liquefaction facilities are about 90% contracted over the next 15+ years. It has about US$6 billion of revenue fixed via annual fixed-fee or take-or-pay style agreements. Cheniere has delivered LNG cargoes to clients in 35 countries.

(in millions of U.S. dollars, except for shares outstanding)2Q 20211Q 20214Q 20203Q 20202Q 2020
Operating Income$146$1,064$276$72$937
Adjusted EBITDA$1,023$1,452$1,052$477$1,393
Cash – Period End$1,806$1,667$1,628$2,091$2,039
Debt – Period End$32,030$31,806$31,658$31,978$31,628
Shares Outstanding (Millions)275.0274.9273.1252.2252.2

While Cheniere seems to be a natural choice for investors who want exposure to rising international natural gas prices, one issuance is its reasonably full valuation. It trades at an enterprise value-to-estimated 2021 EBITDA ratio of nearly 12x. We do note, however, that the company raised its own EBITDA projection a number of times throughout 2021.

Natural gas prices seem destined to remain “higher for longer” on a worldwide basis. These higher prices could reduce profit margins in a number of industries. One way an investor could participate in a potential strong and enduring natural gas price trend is through Cheniere.

Cheniere Energy, Inc. last traded at US$96.01 on the NYSE.

Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post Natural Gas Prices Soar On Worldwide Basis; Margins Expected To Be Impacted Across Variety of Industries appeared first on the deep dive.

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IAMGOLD (TSX:IMG) Makes Huge Commitment to Net-Zero GHG Emissions by 2050

Mining companies have become some of the biggest companies to make sweeping, rapid changes to their business models, operations, and social responsibility…

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Mining companies have become some of the biggest companies to make sweeping, rapid changes to their business models, operations, and social responsibility charters in the last five years. With net-zero emissions goals being set around the world for the developed world from anywhere from 2030 to 2050, companies will need to keep up. 

The mining industry’s renewed commitment to ESG (environmental, social, governance) principles has meant that a new operational standard is in place. For many, that means reducing emissions to zero. 

Canadian gold mining company IAMGOLD (TSX:IMG) is taking the pledge to achieve net negative greenhouse gas emissions (GHG) emissions by 2050 at the latest. This is a challenging task, but one that can be accomplished with the right amount of investment and commitment. 

Gordon Stothart, President, and CEO of IAMGOLD (TSX:IMG) said on Monday, “In our view, reversing the effects of climate change does not mean stabilising emissions; it demands that we reduce the total volume of greenhouse gases going into the atmosphere and the world’s oceans year over year. We know that we are losing habitat at an unsustainable pace.”

The company’s strategy will be two-pronged, with the first target focused on GHG reduction from scope 1 and scope 2 emissions. This largely focused on heavy and light vehicle fleets and power generation and supply. This is the easiest to accomplish because the technology exists, and investment will only be needed for implementations. 

The second prong of the strategy includes the second target of GHG removals. This is done by supporting the effects of climate change by supporting net positive biodiversity and protecting carbon sinks. To do this, IAMGOLD (TSX:IMG) will use nature-based solutions, creating habitat for flora and fauna at a faster rate than it disturbs. This net-zero approach will ultimately cancel out any of the effects of disturbance in local habitats from mining operations. 

Stothart continued, “Absolute reductions form a critically important part of IAMGOLD’s strategy in actively combating climate change, with investments in nature-based carbon offset projects supporting greenhouse gas removals.”

Mining companies are held to a much higher standard these days, and reporting is necessary at every step of the process. In 2022, an external verification will be completed on its emissions reporting, the company will develop and announce medium-range time targets for reductions and removals for targets 1 and 2, and publish a solid roadmap and timelines for how the company will achieve its ultimate goal by 2050 of net negative emissions. 

How the Industry is Adapting

The mining industry is adopting ambitious and ambitious sustainability targets to promote safer and more sustainable mining activities that will have a positive impact on society. It is cutting CO2 emissions as fast as possible for projects, with the aim of increasing their overall value to society.

Most companies have targets set for 2030, and 2050, that create a step-by-step process for achieving net-zero or net negative emissions by those dates. Many companies are reducing emissions and compensating for CO2 emissions that can’t be avoided to create a sustainable world for future generations. The best way to help the mining industry meet its emissions targets is to improve its operational efficiency in the short term and invest in renewable energy sources in long term.

The need for change is increasingly permeating the mining sector and technological advances offer miners opportunities to reduce their direct and indirect emissions. Looking to the future, feasibility studies of new and existing mine extensions will be assessed according to the impact on emissions and the way in which mines can achieve sustainability.

Electrification of the plant and other operations is a crucial way to reach zero in mining, processing, and transport. Many of the hardest-to-electrify heavy industries and mining processes have emissions that are difficult to eliminate and are part of the energy mix over which miners have no direct control. Consider the steel industry which over the next 20 years must eliminate 17 billion tonnes of direct and indirect CO2 emissions. This is a challenge, but one that the industry is taking on, head-on.    

Removing 6.1 billion litres of diesel from copper mines per year – equivalent to 105,000 barrels per day – would reduce a quarter of all greenhouse gas emissions produced. The copper mining industry is pushing hard for net-zero emissions, as a metal that can be used for electric energy storage and transportation. This green technology metal is critical to the future of net-zero emissions, and so mining companies are committing to making the production process green as well.

Most diversified miners have set bold net-zero targets in oil and gas. The major benefit of all of these goals is that miners can provide the supply growth and demand for the energy transition they need to decarbonize their own sector. Mining is the key to the refinement of metals that can be used in wind, solar, electric vehicles, storage, and transmission, and will be essential if the world is to achieve the Paris target of net emissions by 2050.

For them, the route to eliminating their own operational greenhouse gas emissions by 2050 is feasible if not attractive. The world’s largest mining companies by market capitalisation, BHP Group (ASX:BHP), and Rio Tinto (ASX:RIO), have espoused ambitions for net-zero emissions, as has been noted in previous analyses of mining companies as serious and feasible targets. 

As a result, many mining companies have set ambitious carbon emissions targets that are consistent with the Paris climate agreement from 2015 and strive to attain net emissions zero. 

Net CO2 emissions occur when greenhouse gas emissions released by an organization are offset by an equivalent amount of carbon capture from the atmosphere. For many mining companies, this means determining a baseline level of GHG emissions and then looking for ways to reduce these emissions, commonly called decarbonization.

Although there are practical limits to how much GHG emissions can be reduced in mining, several innovative approaches that will be explored in the future are promising. New technologies, better use of data and smart automation are helping mining companies to become more energy efficient around the world.

Vale, one of the world’s largest mining companies, has been outlining its greenhouse gas reduction commitments for some time. Having the industry giants committing to this goal is a signal to the rest of the industry, no matter what size company, that it is a real and possible target.

The World Bank estimates that the transition to a net-zero emissions economy will require demand growth of up to 500%. On an individual raw material basis, demand for cobalt is estimated to increase by 20% by 2040. Copper, nickel, and other metals necessary for electric technologies for infrastructure and in particular EVs will share in that demand growth as well. If demand grows by many multiples as predicted, then this trend is one that will grow to be unstoppable in the near term, and perpetually inevitable in the long term.



The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

The post IAMGOLD (TSX:IMG) Makes Huge Commitment to Net-Zero GHG Emissions by 2050 appeared first on MiningFeeds.

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