MalboroD,

Your post says: "I believe that a takeover attempt which uses a share swap rather than cash, might actually be effective. Face it, Cliffs is on the very of a cash crunch. Taking out KWG could cost upwards of $250m. But if a takeout was structured as a share swap, the good thing is that the market might forgive Cliffs (to some extent) for their idiocy in the recent past. Issuing an extra $200m+ in shares may not matter. It is possible that some sort of resolution to the KWG issue could cause the market cap to go up enough that the SP after a hostile takeover, on a per share basis, works out to a increase in value per share.

Another problem is that Cliffs NEEDS to have KWG as a Canadian owned front company. They can't just fold KWG into their operations and expect the FN to suddenly cooperate. They may have to keep KWG operating as a virtual stand-alone entity, in which case, they need to keep KWG management in place and promoting the Cliffs' agenda."

I have something to add to the above 2 points:

1. Cash + CLF share could be a more attractive for CLF since this would minimize dilution (in the eyes of their investor), but in return they would get KWG holdings (including 20%BD plus RR priviledge + goodwill). One scenario would be $200M cash + $380M equivalent in shares = $580M. This is extra cost to CLF since they already has 17% of KWG. Total price of TO $580M/0.83 = $700M = $1.00/KWG share. Sounds good and fair so far? Could someone check my math, since I am doing it with my $1 calculator while typing.

For CLF $380M/21/CLF s = 18M shares / 153 M = 12% dilution which would be acceptable to their shareholders considering the loot.

One xtreme case would be to have a share swap, 700/21= 33M CLF shares for the entire KWG. Even with 33M shares the dilution would not be that significant (about 21%). This would conserve the cash and $200M could be used for something else (currently, CLF is cash strapped). There are other arrangements, but if CLF wants KWG it has a good chance to acquire this key piece in the RoF, as long as Frank is happy. For me $1/share is reasonable. I would tender my shares and walk away from this mess.

2. Agreed that it would be to CLF's advantage to keep KWG as a public company (Canadian subsidiary, so it can call the shot) due to its accessibility to Fed and Prov money. Also, they would want to retain Frank for his expertise and vast connections with the key players, including the FNs and PM Harper.

Not sure about the Premier of Ont. (and her Minister responsible for Northern Development) for her/theirpush for this potential mega opportunity in the RoF. Just listened to her speech at the Canadian Club and there seems to be "no fire in the belly" in her reply to a question near the end of the audio recording. Just blah, blah...no concrete plan. Perhaps, the private section just get together and do the thing themselves. The Fed support alone would be good enough. What about the Prov?... It can waffle until the cows come home.

goldhunter