InvestED: The Rule #1 Investing Podcast · Phil Town & Danielle Town

FROM THE VAULT: What Happened to Horsehead Holding?

·45 min·3 clips

Horsehead filed Chapter 11 after missing a $1.5 million payment on a $30 million Macquarie loan.

1. InvestED: The Rule #1 Investing Podcast revisits Horsehead Holdings, a zinc producer built around EAF steel dust and a new Mooresboro, North Carolina plant. 2. Danielle Town hosts Phil Town, and Phil speaks as the investor who bought Horsehead and later lost money on it. 3. The episode asks how a company that looked cheap, asset-backed, and well researched still ended up in bankruptcy. 4. Phil Town says he started with GuruFocus-style filings and saw Mohnish Pabrai and Guy Spier buying Horsehead shares. 5. He then read Horsehead’s 10-Ks from the most recent filing back through five prior years to see the business history. 6. He also used Seeking Alpha transcripts, analyst writeups, and quarterly conference-call questions from Goldman Sachs and J.P. Morgan to understand the company. 7. Horsehead’s core business was converting toxic EAF steel dust into zinc slurry and then higher-purity zinc. 8. Phil says the new plant was supposed to move production to 99.9% pure zinc and create a price premium. 9. He describes the company as a commodity producer competing with Mexican, Canadian, and Chinese zinc businesses. 10. Phil argues that a low-cost producer is crucial in commodities because prices can fall until higher-cost mines shut down. 11. He says the finished plant could have added $90 million to $110 million of EBITDA and that mining companies often trade at 8x to 10x EBITDA. 12. That valuation led him to estimate a future company value around $1.2 billion to $1.3 billion and about $20 a share. 13. He also says every $0.10 increase in zinc price could add about $20 million of EBITDA. 14. Phil notes that Mohnish Pabrai called the position a "free lottery ticket" because the upside was large relative to the then-current price. 15. Management looked acceptable on paper, especially CEO Jim Hensler’s Princeton degree and industry experience. 16. Phil also notes a major red flag: Horsehead had gone bankrupt before because of weak zinc prices and too much debt. 17. Phil and Danielle discuss how the company later filed Chapter 11 after missing a $1.5 million payment on a $30 million Macquarie loan. 18. They describe the equity committee, the bankruptcy process, and a judge who later accepted the restructuring deal while saying the debt exceeded the business value. 19. The tone is reflective, self-critical, and explanatory, with Phil repeatedly walking through numbers, filings, and valuation logic. 20. Listeners who study value investing, commodity cycles, and bankruptcy risk would get the most from this episode, while listeners wanting a light market update may skip it.

As heard by us

A candid look at a zinc-plant thesis and how the valuation case can unravel.

This episode returns to a zinc-plant investment that seemed persuasive on paper and turns it into a study of how valuation stories can take hold.

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Why you'd press play

You want a blunt postmortem on a stock that looked cheap on paper and forced a hard lesson.

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