Seeking Alpha: Is It Time To Bottom-Fish For Vale SA?

If your company produces significant quantities of iron, you've had a tough year in the stock market. If your company only produces iron, it's been a pretty ugly year. Diversification has helped Rio Tinto (NYSE:RIO), BHP Billiton (NYSE:BHP), and Anglo American (OTCPK:AAUKY), but Vale (NYSE:VALE) and Fortescue (OTCQX:FSUGY) have seen their shares weaken significantly (down about 19% over the past twelve months) as iron prices continue to test predictions of just how low prices can fall before finding a floor.

It's dangerous to assume that commodity prices can't continue to fall once they've crossed the threshold where many/most producers operate at a loss (ask investors in met coal or uranium mining companies), but Vale is one of the rare iron ore miners that can still make money at current prices. With low prices starting to lead to production cutbacks and deferred mine expansion plans in various parts of the world, maybe this is a time to consider Vale shares. Brazil's election cycle still represents a risk, as does China's economy and the significant amount of low-cost iron supply available in Australia, but these shares do seem to hold some upside here.

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Is It Time To Bottom-Fish For Vale SA?

Seeking Alpha: CSN's Highly Leveraged To Recoveries In Brazil's Economy And Global Iron Prices

Take all of the issues with the Brazilian steel industry, weakening domestic demand and increasing import competition in particular, and add on weakness in the iron ore market and a lot of leverage and you have the challenges facing Companhia Siderurgica Nacional (or CSN) (NYSE:SID) today. CSN does have some definite positives working in its favor, including strong share in the higher-value Brazilian galvanized steel market, high domestic prices, and low-cost iron operations, but plunging iron ore prices and a weak domestic steel market have largely overshadowed them.

As operating companies, I like Ternium (NYSE:TX) and Gerdau (NYSE:GGB) better than CSN. Both are more geographically diversified and have yet to reap the full benefits from upgrading their production portfolio and integrating their inputs. That said, recoveries often benefit stressed companies more and CSN could outperform if Brazil's recovery comes sooner (and/or stronger) than expected or iron ore prices recover.

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CSN's Highly Leveraged To Recoveries In Brazil's Economy And Global Iron Prices

Seeking Alpha: Silver Wheaton Still Looks Like A Quality Option

Investors have plenty of options for investing in silver, including silver miners like Fortuna Silver Mines (NYSE:FSM), Pan American Silver (NASDAQ:PAAS), and Coeur Mining (NYSE:CDE), bullion ETFs (as well as mining ETFs), physical bullion, numismatic silver, and so on. Amidst those options, I think streaming specialist Silver Wheaton (NYSE:SLW) remains a strong candidate, given its low fixed cost structure, attractive balance sheet/liquidity, and disciplined approach. Although weaker silver prices and producer missteps are both threats, weaker prices would at least potentially create more streaming opportunities to generate long-term value.

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Silver Wheaton Still Looks Like A Quality Option

Seeking Alpha: CEMIG Walking A Fine Line In A Challenging Market

Older investors can likely remember a time when those who wanted to invest in emerging markets had few choices outside of telecom, bank, and utility companies. Nowadays there is a much larger menu of choices and sectors like utilities have had to do deal with the same sort of regulatory and growth issues that affect their developed market peers.

In the case of CEMIG (or "Cemig") (CIG), Brazil's second-largest utility has the advantage of a sizable distribution and transmission business to offset risks in the generation business, but the company is looking at the loss of sizable generating concessions and a much more aggressive regulatory environment. It also does not help matters that Brazil's electricity sector appears to be moving toward oversupply and that management is willing to allocate capital to projects with IRRs only basically in line with the company's cost of capital.

That said, the market's valuation of Cemig already reflects a lot of these challenges. Moreover, even if the future isn't likely to be as profitable as the past, this is a company with a good history of free cash flow generation and returns on capital relative to its sector. Management seems committed to paying a healthy dividend and these shares don't look very expensive today.

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CEMIG Walking A Fine Line In A Challenging Market

Seeking Alpha: Mount Gibson Iron Offers A Curious Twist On The Mining Sector

Australia's Mount Gibson Iron (OTC:MTGRF) (MGX.AX) offers investors a curious twist on the prevailing story among junior miners today. Instead of being a mining company with an attractive portfolio of prospective mining assets but insufficient capital and liquidity, Mount Gibson is long on capital and cash but short on mining properties. The extent to which Mount Gibson can add economical reserves at its existing facilities and/or deploy its cash to acquire shovel-ready projects has everything to do with the value of these shares.

I have some concerns about Mount Gibson, and it's not my first pick in the mining sector. I do believe the shares are a little undervalued today, and I do acknowledge the potential of the company's NAV heading higher if the company announces good news in exploration or value-adding deals. Compared to more established miners like Fortescue (OTCQX:FSUGY), Rio Tinto (RIO), and Vale (VALE), though, I don't find the value proposition to be compelling enough for my own funds.

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Mount Gibson Iron Offers A Curious Twist On The Mining Sector

Seeking Alpha: If There's Any Life Left In Iron, Fortescue Ought To Do Well

Is the commodity supercycle dead, or just sleeping? That's more than just a rhetorical question when it comes to Australia's Fortescue Metals Group (OTCQX:FSUGY).

On one hand, it seems hard to believe that China will re-accelerate its infrastructure and capital spending programs to such a degree as to bring back the commodity glory days of just a few years ago, not to mention there's a lot more supply online now to deal with it. On the other hand, Chinese steel mills still source a lot of their iron ore needs from high-cost domestic mines that simply cannot compete with Brazilian and Australian imports.

In the case of Fortescue, I believe there are multiple factors that should drive a higher multiple. The company has passed the point of peak spending and peak debt, and yet offers an attractive simultaneous one-two punch of rising output and falling costs. Fortescue also has a rich pool of resources that should continue to add to reserves, not to mention a strong owned and operated infrastructure network. Although the shares have already nearly doubled from the midsummer lows, I believe Fortescue could climb another 40% and still be undervalued relative to its larger peers in iron ore mining.

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If There's Any Life Left In Iron, Fortescue Ought To Do Well

Investopedia: Down In The Vale

As I've mentioned in other recent pieces on Investopedia, these are tough times for commodity producers as the incremental Chinese demand that pushed prices so far for so long has faded. With that, demand for steel inputs in particular (met coal and iron ore) has come into much better balance with supply and prices have weakened considerably.

Although high-cost iron ore suppliers are looking at some tough times in the coming years, Vale's (Nasdaq:VALE) low-cost assets should serve the company well. Investors don't really want anything to do with this giant iron miner today, but patient investors who can take the risk of conditions getting even worse in the short run may like the long-term potential offered by this company.

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http://www.investopedia.com/stock-analysis/062513/down-vale-vale-rio-bhp-fcx.aspx

Investopedia: Is Caterpillar Facing A New Normal In Mining?

For those investors who believed a year ago that Caterpillar (NYSE:CAT) had somehow outgrown its cyclicality, the past twelve months have been a painful reminder that it's never “different this time”. The real question now, though, is what the new normal will look like. Although there's good reason to believe that Caterpillar's power and construction businesses can do better, the longer-term outlook for mining isn't as robust anymore. There is certainly the risk that estimates head even lower, but Caterpillar shares are starting to look a little interesting in terms of value.

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Invetsopedia: Cliffs Natural Resources Needs Another Iron Ore Boom

By and large, it's good to have industry-low cash production costs in a commodity industry, but even high-cost producers can do well when prices shoot up. That's exactly what investors in Cliffs Natural Resources (NYSE:CLF) need to hope for in 2013, as this high-cost North American iron ore producer just doesn't look very compelling absent a big improvement in margins per ton.

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http://www.investopedia.com/stock-analysis/2013/Cliffs-Natural-Resources-Needs-Another-Iron-Ore-Boom-CLF-VALE-RIO-BHP0215.aspx

Investopedia: Rio Tinto Looks To Make A Fresh Start

Apparently there's only so much even a generally passive board of directors can take before it feels the need to do something. Rio Tinto (NYSE:RIO) has announced a large impairment charge for 2012 and the replacement of its CEO - both largely tied to unsuccessful and wasteful expansion /capital allocation strategies. Now it is up to new management to chart a new path and improve returns in a more uncertain commodity climate.

Change at the Top
While the phrasing of the press release from Rio Tinto was sanitized and generic, I don't believe it is a stretch to suggest that Rio Tinto chose to fire Tom Albanese, its CEO of nearly six years. Certainly, Albanese's performance during his tenure gave cause to make a move.

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http://www.investopedia.com/stock-analysis/2013/Rio-Tinto-Looks-To-Make-A-Fresh-Start-RIO-BHP-VALE-AA0124.aspx

Investopedia: Alcoa Has Improved, But It's Still In The Aluminum Business

American aluminum giant Alcoa (NYSE:AA) deserves credit for the internal operating improvements it has made in recent times. Unfortunately, the company is still in the business of selling aluminum and aluminum products, and that has long been one of the least attractive industrial metals for investors. While Alcoa does continue to look undervalued on the basis of historical valuation norms, this stock will probably be a value trap until and unless aluminum prices start picking up.

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http://www.investopedia.com/stock-analysis/2013/Alcoa-Has-Improved-But-Its-Still-In-The-Aluminum-Business-AA-VALE-CLF-FRX0109.aspx

Commodity HQ: A Deeper Look At China's Commodity Industry

Although the geographical size of China is perhaps not that difficult for North Americans to appreciate, their population is another matter. As China has become the second-largest economy in the world, it is without question transformed into an enormous force in the world’s commodity markets; so much so, in fact, that the recent commodity supercycle is now generally seen as a byproduct of China’s emergence.

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http://commodityhq.com/2012/a-deeper-look-at-chinas-commodity-industry/

Investopedia: BHP Billiton Hoping For A Better 2013

It's hard to imagine many metal miners who aren't glad to put this year in the rearview mirror. Worries about Chinese demand and inventory have investors worried about copper, iron ore and met coal prices, and the global economy offers little counterweight to that reliance on China. Although it's a well-run company that generally manages its capital well, BHP Billiton (NYSE:BHP) is still a prisoner of its markets - if commodities rebound in 2013, so too will the stock.

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http://stocks.investopedia.com/stock-analysis/2012/BHP-Billiton-Hoping-For-A-Better-2013-BHP-RIO-VALE-FCX0823.aspx

Seeking Alpha: Fear And Noise Creating Opportunity In Freeport-McMoRan

It may sound sarcastic or cynical, but if the news flow around copper miner Freeport-McMoRan (FCX) is terrible, it's probably time to think about a good entry price. Certainly, there are worries pushing down on valuation today -- worries tied to production costs, worries tied to global growth and implied demand, and worries tied to ongoing saber-rattling from the Indonesian government. The reality, though, is that this is what it looks and sounds like when companies like this bottom out. When the news turns positive, that may just be a signal to look for the exit.

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Fear And Noise Creating Opportunity In Freeport-McMoRan

Seeking Alpha: Summer Can't Come Fast Enough For Potash Corp

Most observers seem to agree that the potash market is going to get better as the year progresses, but just how much better is the $64,000 question for Potash Corp (POT) and investors in competitors like Mosaic (MOS) or Intrepid Potash (IPI). Nobody's talking about another repeat of 2009, but the market continues to play a game of chicken with shipment numbers and second-half restocking assumptions.

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Summer Can't Come Fast Enough For Potash Corp.

Investopedia: Rio Tinto Too Iron-Heavy, But Undervalued

Stocks, in general, seem to be doing well as investors feel more comfortable not only with the sovereign debt problems of Europe, but the overall global growth outlook for 2012. Curiously, mining stocks don't seem to be sucking up as much of the love as their leverage to global growth might suggest they should. With that in mind, investors who believe in a strong 2012 may want to consider adding Rio Tinto (NYSE:RIO) at these levels. (For more, see Earning Forecasts: A Primer.)

Earnings All About Iron  
Earlier in February 2012, Rio Tinto announced mostly solid results for the 2011 fiscal year. Full-year revenue rose about 7%, while underlying EBTIDA climbed about 10%. Although investors were a little disappointed that the company did not announce an increased share repurchase program, the company did boost the dividend by about one-third.

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Investopedia: Vale Still All About China

In some respects, Brazilian iron giant Vale (NYSE:VALE) should be sitting pretty. After all, it controls huge iron ore reserves, has a pretty compelling cost structure and has successfully grown a non-ferrous business centered around nickel and copper.

On the other hand, there's just not enough demand from the Brazilian steel industry to change the fact that Vale rises and falls with Chinese demand. Making matters worse, the Brazilian government has not been shy about influencing (some might say "interfering") the company's internal operations. Although Vale's valuation is not really that extreme today, investors need to appreciate the risks that go with this name. (For more, see Earning Forecasts: A Primer.)

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http://stocks.investopedia.com/stock-analysis/2012/Vale-Still-All-About-China-VALE-BHP-RIO-CLF0221.aspx

Seeking Alpha: Can Much-Maligned Mechel Outperform?

Although the rally in steel stocks has cooled in February, investors are still generally optimistic on the outlook for domestic names like Steel Dynamics (STLD) and Nucor (NUE), as well as global plays like ArcelorMittal (MT). That enthusiasm has not extended out to Russia's Mechel (MTL) to the same degree, as analysts are concerned not only about the company's higher-cost steel operations, but also its over-leveraged balance sheet and its unimpressive history of organic growth.

Can Integration Pay Off?
As the largest producer of coking coal in Russia (with well over 20% share), and a large iron ore miner as well, Mechel is well-covered for its own steel needs, and it's the second-largest long steel maker in Russia (behind Evraz). Unfortunately, this level of internal integration hasn't necessarily always paid off for shareholders.

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Can Much-Maligned Mechel Outperform?

Investopedia: Still Waiting For Alcoa To Work

As aluminum is an economically sensitive metal, it is probably no great surprise that Alcoa (NYSE:AA) stock has underperformed amidst growing worries that the U.S. will trip over into recession. On the other hand, there are a lot of secular positives for both aluminum and Alcoa, that argue in favor of the thought that this stock should work at some point. The question, then, is whether patience can really pay large enough dividends to make Alcoa worth the time and trouble.

A Fixed Third Quarter   
Alcoa missed the earnings estimate for the quarter and that's certainly disappointing. It also isn't quite as bad as it may seem. Revenue rose about 21% from last year, but declined about 3% from the prior quarter. Performance was fairly consistent across the company's operating segments, but Alcoa did see a slowdown in demand from automakers and heavy truck manufacturers. On the profit side, ATOI (after-tax operating income) rose 41% from last year, but dropped 27% on a sequential basis.

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http://stocks.investopedia.com/stock-analysis/2011/Still-Waiting-For-Alcoa-To-Work-F-AA-RIO-BHP-ACH-BA-GE-AKS-WHR1017.aspx

Investopedia: Peabody Tries Again To Get Macarthur Coal

Give credit where credit is due - Peabody Energy (NYSE:BTU) does not give up easily when management sees a valuable asset that could improve its business. In this case, the company is trying again to acquire Australian metallurgical coal miner Macarthur Coal (OTCBB:MACDY). While the price that Peabody is offering is a little high, it is not too out of line with recent deals, and the operating leverage that Peabody has should allow the company to make a decent return even at these levels. 


A New Bid for an Old Target
Peabody has been interested in Macarthur Coal and its 175 million tons of attributable coal reserves for some time now. About a year ago, Peabody bid A$15 a share for the company, but ultimately found rejection from the target's board (and its large shareholders).

Now Peabody is trying again, but this time it's bringing a buddy. ArcelorMittal (NYSE:MT) already owns about 16% of Macarthur and was previously not in favor of selling out to Peabody. Now Peabody wants the company to be a partner, and the companies have launched a joint 60/40 bid for the company with Peabody as the projected controlling partner.


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http://stocks.investopedia.com/stock-analysis/2011/Peabody-Tries-Again-To-Get-Macarthur-Coal-BTU-MACDY-MT-PKX-XSRAY-VALE-TCK-WLT-ACI-PVR0712.aspx