kab60 Posted December 2, 2014 Share Posted December 2, 2014 LC, In my estimation, buying at below $13 will provide a margin of safety. While I had expected hiccups, it is somewhat more than even management had expected. I heard the conference call live, and thought that management sounded less energetic than in the past 3 conference calls that I have listened. In my case, I am in no hurry to buy back what I have sold after the conference call, because they have a large runway ahead of them if they resolve their latest issues. If they have to buy a new tank, it means more costs, and more delays. While I recognize that one pays a price for a cheery consensus, I hope to be in this company for the long haul, and so buying at 16/17 etc after they fix the problem will perhaps be rewarding as well. Just my 2 cents. Great input. The last conference call was the first one I heard live, so I don't know how they sounded before, but I was impressed with how they explained the technical issues in a pretty non-bs way. It did sound like they could maybe reconfigure a tank they already have to resolve the issue, no? Still, it might become more expensive, but that doesn't bother me much as long as things do get fixed and they can get going with their smaller optimization plans. In the long run, if things get going, I think it would make sense to do foreign JV's, but I'm not sure if management ever indicated that was a possibility. Link to comment Share on other sites More sharing options...
PhatKing Posted December 2, 2014 Share Posted December 2, 2014 My view of management is that they are straightforward, based on listening and reading all the conf call transcripts for a few years. So they were quite candid in their explanation of the problems. In my estimation, they were also saying that they don't have a clear cut path to the solution. But they were optimistic that they would be able to fix the problem. The question is how long will it take, and how costly will be the fix. Re-piping an existing tank is a quick way, and that may work. But perhaps they may judge it better to put a new tank in. And that will push breakeven into maybe late Q1 and early Q2. So if we are all lucky, and there is a downdraft in this name, then one can pick it up in the 13/14 range. Otherwise I am happy to add in the 16/17 range after they fix their issues. I am of the opinion, that when they master this new process, they will be a lowest cost producer. Then they can expand overseas etc, expand the Zinc oxide and nickel operations etc etc etc. and be quite a profitable/successful company. Link to comment Share on other sites More sharing options...
kab60 Posted December 3, 2014 Share Posted December 3, 2014 My view of management is that they are straightforward, based on listening and reading all the conf call transcripts for a few years. So they were quite candid in their explanation of the problems. In my estimation, they were also saying that they don't have a clear cut path to the solution. But they were optimistic that they would be able to fix the problem. The question is how long will it take, and how costly will be the fix. Re-piping an existing tank is a quick way, and that may work. But perhaps they may judge it better to put a new tank in. And that will push breakeven into maybe late Q1 and early Q2. So if we are all lucky, and there is a downdraft in this name, then one can pick it up in the 13/14 range. Otherwise I am happy to add in the 16/17 range after they fix their issues. I am of the opinion, that when they master this new process, they will be a lowest cost producer. Then they can expand overseas etc, expand the Zinc oxide and nickel operations etc etc etc. and be quite a profitable/successful company. They didn't sound like they knew exactly what solution would be the best, but the fact that they have various options - and that the problem is lowtech - was pretty much what I needed to hear. Not saying that there won't be more hiccups, there probably will, but I have added two times on the decent dips - last time yesterday around 15.10. It's my biggest position now, and cash is depleted, so I'll have to sit it out till the coffers are filled again. Really looking forward to the next update. Link to comment Share on other sites More sharing options...
Guest notorious546 Posted December 18, 2014 Share Posted December 18, 2014 Zinc is a ‘Top Pick’ for 2015. Prices strengthened in the second half of 2014, averaging US$1.03 per pound, with investors and commodity funds expecting zinc concentrates to move into a supply-side ‘deficit’ by 2016 alongside significant mine depletion. Century — the world’s third-biggest zinc mine — is expected to close in 2015:Q3 and Lisheen in Eire by late 2015 or early 2016. Prices remain resilient at US$0.96 in mid-December (9 US cents higher than a year ago), despite further signs that China’s economy is slowing. The Flash Purchasing Manager Index (PMI) for Manufacturing in December edged down to 49.5, slipping below the 50 demarcation line separating expansion from contraction (for the first time in seven months). This may reflect a lull over the winter months in China’s construction activity. While China has recently lowered benchmark interest rates, we would argue that further easing is warranted, in view of the downside risk for China’s economy http://www.gbm.scotiabank.com/English/bns_econ/bnscomod.pdf Link to comment Share on other sites More sharing options...
eburnside Posted December 31, 2014 Share Posted December 31, 2014 A nice note on the Zochem business published by RubberNews.com: http://www.rubbernews.com/article/20141230/NEWS/312159986/major-investment-helps-spur-growth-at-zochem Link to comment Share on other sites More sharing options...
moody202 Posted December 31, 2014 Share Posted December 31, 2014 Just curious as to what the bear case for ZINC would be in addition to the issues with the new plant. Link to comment Share on other sites More sharing options...
shalab Posted January 1, 2015 Share Posted January 1, 2015 The company's Dec presentation shows - ebitda of about 100 mil no impact by zinc price movement looks like the company is fully valued from ev/ebitda stand point what is the bull case? Link to comment Share on other sites More sharing options...
kab60 Posted January 1, 2015 Share Posted January 1, 2015 The company's Dec presentation shows - ebitda of about 100 mil no impact by zinc price movement looks like the company is fully valued from ev/ebitda stand point what is the bull case? The new plant is expected to add 90-110m of incremental ebitda. There are some good writeups at seeking alpha. The bull case is rising zinc prices and different optimization projects but personally that's just cherry on top. That said there might be better entry points; in the presentation it says they expect the new plant to approach capacity in 2015. Link to comment Share on other sites More sharing options...
shalab Posted January 1, 2015 Share Posted January 1, 2015 Thanks - given that EBITDA is about ~12 million this year, if one takes the low end of the company guidance ( 90m ) looks like 100m is a good conservative number. In addition, the debt on the balance sheet has increased and debt/equity has gone up. The number of outstanding shares has also increased by ~40% since the 2007 peak. The seeking alpha folks dont do valuation necessarily and just throw in some opinions. At this time - it seems the bull case for this is: - company's estimate is low and conservative - zinc price goes up a lot and hedging is only to the downside ( which is what they have done ) cheers! The company's Dec presentation shows - ebitda of about 100 mil no impact by zinc price movement looks like the company is fully valued from ev/ebitda stand point what is the bull case? The new plant is expected to add 90-110m of incremental ebitda. There are some good writeups at seeking alpha. The bull case is rising zinc prices and different optimization projects but personally that's just cherry on top. That said there might be better entry points; in the presentation it says they expect the new plant to approach capacity in 2015. Link to comment Share on other sites More sharing options...
kab60 Posted January 2, 2015 Share Posted January 2, 2015 I think there's a good reason to be conservative, but according to management you need to add 90-110m ebitda to whenever their closed Monaco facility was running, and it was closed at the end of Q1 or beginning of Q2 I believe, so ttm ebitda is probably very low. That said, there's a risk that the new facility will never run at full capacity, so it's better to be safe than sorry, I suppose. Anyway, I wrote with management, and they expect cf breakeven of the new plant to be 0.4-0.5$ pr. pound of zinc whereas when operating the Monaca facility they were at approximately $0.75 per pound. At full capacity, and zinc prices around 1$, that's ebitda around 170m (with O&M costs of 0,5$/pound). Then there's a bit from Zochem and Inmetco and lead/silver recovery unit due mid 2015. Capex from new plant is expected at approximately $12m per year versus roughly $18m per year when operating the Monaca facility. EV/Ebitda of 12 doesn't sounds too compelling, but with the potentiel upside I'm okay with that. I think they've carved out a pretty unique niche; here's hoping the can monetize it. Link to comment Share on other sites More sharing options...
kab60 Posted January 7, 2015 Share Posted January 7, 2015 Latest presentation: http://www.streetinsider.com/SEC+Filings/Form+8-K+Horsehead+Holding+Corp+For%3A+Jan+06/10141279.html Ramp up continuing albeit still with issues (from 4,300 in Q3 to nearly 12,000t i Q3 and more than 5000t in december. Still a long way to go) Notable points: - targetting cf breakeven of Mooresboro 1/15 2015 (we'll see how that goes) - seems like they can extract more silver than previously thought (sounds positive) - seems like Zochem can add $15-20m to ebitda - also, CEO received 20k shares and sold 15k (I'd prefer he was buying, but he has around 300k shares and maybe his credit card was maxed out after Christmas) Link to comment Share on other sites More sharing options...
moody202 Posted January 7, 2015 Share Posted January 7, 2015 Few additional points - New facility is still expected to realize a 90-100M EBITDA - Zochem $15-20M EBITDA is on a $32M investment - With new EAF Steel plant investments and consolidation, management sees and opportunity for another EAF dust recycling facility! Latest presentation: http://www.streetinsider.com/SEC+Filings/Form+8-K+Horsehead+Holding+Corp+For%3A+Jan+06/10141279.html Ramp up continuing albeit still with issues (from 4,300 in Q3 to nearly 12,000t i Q3 and more than 5000t in december. Still a long way to go) Notable points: - targetting cf breakeven of Mooresboro 1/15 2015 (we'll see how that goes) - seems like they can extract more silver than previously thought (sounds positive) - seems like Zochem can add $15-20m to ebitda - also, CEO received 20k shares and sold 15k (I'd prefer he was buying, but he has around 300k shares and maybe his credit card was maxed out after Christmas) Link to comment Share on other sites More sharing options...
kab60 Posted January 7, 2015 Share Posted January 7, 2015 Few additional points - New facility is still expected to realize a 90-100M EBITDA - Zochem $15-20M EBITDA is on a $32M investment - With new EAF Steel plant investments and consolidation, management sees and opportunity for another EAF dust recycling facility! Good point. Just want to correct 1) as it's 90-111m ebitda. Not really sure how significant 3) is - it doesn't seem like they lack EAF dust and Mooresboro has a maximum capacity anyway, so can they really benefit from MORE dust? (obviously it's fundamental with access to dust, so it's a good sign nonetheless). Thoughts? Link to comment Share on other sites More sharing options...
cmlber Posted January 8, 2015 Share Posted January 8, 2015 Yes, they can benefit from more dust. At "Max" capacity they would currently need to purchase some additional feedstock, I think around 20%. Substituting purchased feedstock with more dust would be very positive. They also need more dust to eventually expand from the 155k tons to 175k tons. Link to comment Share on other sites More sharing options...
Haasje Posted January 9, 2015 Share Posted January 9, 2015 cmlber's description is how I understand the situation as well. The company had already some ideas to put its hands on more dust (overseas and JV) but this is probably a better and faster way to achieve it. Imo the competitive advantage lies in tying up the EAF dust supplies with long term contracts which makes it very hard for competitors to enter the market, while Horsehead remains the lowest cost producer. Link to comment Share on other sites More sharing options...
moody202 Posted January 9, 2015 Share Posted January 9, 2015 I don't disagree with cmlber but here's exactly what the presentation says 'management sees and opportunity for another EAF dust recycling facility!' Link to comment Share on other sites More sharing options...
rsmehta Posted January 21, 2015 Share Posted January 21, 2015 http://www.businesswire.com/news/home/20150120006583/en/Horsehead-Holding-Corp.-Announces-Public-Offering-5000000#.VL_Jd0fF80o They are selling 5,000,000 shares. Why would they do this right now??? Link to comment Share on other sites More sharing options...
Guest notorious546 Posted January 21, 2015 Share Posted January 21, 2015 i bet more spending on the plant :( Link to comment Share on other sites More sharing options...
widenthemoat Posted January 21, 2015 Share Posted January 21, 2015 i bet more spending on the plant :( Unfortunately I would tend to agree. Management has shown to be good capital allocators and I don't believe they would pull something like this without a pressing need for the cash. Link to comment Share on other sites More sharing options...
rsmehta Posted January 21, 2015 Share Posted January 21, 2015 i bet more spending on the plant :( Unfortunately I would tend to agree. Management has shown to be good capital allocators and I don't believe they would pull something like this without a pressing need for the cash. You think this is directly related to not ramping up as per schedule??? Link to comment Share on other sites More sharing options...
moody202 Posted January 21, 2015 Share Posted January 21, 2015 i bet more spending on the plant :( Unfortunately I would tend to agree. Management has shown to be good capital allocators and I don't believe they would pull something like this without a pressing need for the cash. You think this is directly related to not ramping up as per schedule??? Wish the press release for more specific rather than being vague! Link to comment Share on other sites More sharing options...
kab60 Posted January 21, 2015 Share Posted January 21, 2015 I haven't read it all, but prospectus here. Nothing new on Mooresboro it seems: http://www.sec.gov/Archives/edgar/data/1385544/000119312515014819/d838569d424b3.htm But a bit more colour on the possible new zinc recycling facility: We are currently considering the addition of a fifth dust recycling facility in the U.S. of a size similar to our three current two-kiln facilities, to increase our production capacity in response to third party growth in EAF steelmaking capacity and to reduce transportation costs for us and our customers. We also believe there is potential to gain additional market share from existing customers as a result of industry consolidation. And this (re: equity raise due to startup issues): At this time, we have not specifically identified a significant single use for which we intend to use the net proceeds, and, accordingly, we are not able to allocate the net proceeds among any potential uses in light of the variety of factors that will impact how such net proceeds will ultimately be utilized by us. As a result, our management will retain broad discretion over the use of the net proceeds from this offering. Link to comment Share on other sites More sharing options...
spartansaver Posted January 21, 2015 Share Posted January 21, 2015 They continue to state in the report that the new zinc facility has no material bottleneck problems so this does not seem to be the issue. It seems like they may be putting it towards another recycling plant. As much as it sucks to be diluted, they continue to strengthen their competitive advantage by taking any excess capacity off of the market for possible entrants. Link to comment Share on other sites More sharing options...
valueyoda Posted January 21, 2015 Share Posted January 21, 2015 Would be seriously be talking about this company, were it not for the involvement of Pabrai? I don't think so. It has managed capital better than most peers, but somehow it feels that investors are giving this company the halo effect for the wrong reasons. Link to comment Share on other sites More sharing options...
spartansaver Posted January 21, 2015 Share Posted January 21, 2015 Also for reference the most recent recycling facility finished in 2010 cost approximately 65M, definitely in line with the issuance. Link to comment Share on other sites More sharing options...
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