RE: RE: All the bad news are already factored in I've been saying that Cline at
.60 per share represents a great call option, and I said it at
.40, at
.30, and now at
.20!
Still, consider the following.
Since Cline is not currently in production and very likely won't be for the next 3-6 months, they might actually BENEFIT from spot coking coal prices tanking. Let prices keep falling! That would clear the decks for a stronger and more sustainable recovery. Of course, we need CC prices to bounce back to a minimum of $200 per tonne by mid-2013 or Cline is completely screwed, but in the meantime the spot price doesn't matter as much as some believe.
A lot of posts on this thread talk about running out of time. I think fears of a bankruptcy filing before the debt matures in early 2014 is way over blown. The cash burn is THE ONLY thing that matters right now, and that's running at $1.0-$1.5 million per month. I think that Cline has AT LEAST 6 months, but my gut is that they have up to 9 months.
The real risk is here continues to be a highly dilutive equity raise at
.20 cents per share or lower. Pro forma for a very painful equity raise, I think CMK has a floor stock price of
.10 per share. That means from today's price there's 50% downside, not 100%.
Before anyone screams at me for saying that I thought
.25 cents was the floor a few months ago, let's not forget what's happened to coking coal prices since then.
Back to the running out of time theme, at a certain stock price, there are plenty of companies who would take a flyer on Cline's assets. Yes, the company belongs to the banks if they can't refinance or repay in early 2014, but assuming that Cline's stock is worth zero in that case is overly simplistic.
Let's say that the banks lend another $25 million and are in for a total of $75 million at maturity in early 2014. At that point, any of Walter Energy, Peabody, Arch Coal, Cloud Peak, Alpha Natural Resources, Xstrata, Rio Tinto, Anglo American, Cliffs Natural Resources, Alliance Resource Partners, Glencore and Teck Resources could bid more than $75 million for 619 million measured and indicated resource tons, making the stock be worth greater than zero. And remember, the banks own equity and warrants in Cline, they would greatly prefer NOT to own Cline through bankruptcy, but to be repaid in full AND be able to sell their equity for greater than zero.