Iofina Share Discussion Threads

[woodpeckers] 30/8/2014 19:24

Which tells us that though the share price suggests that the market is not taking us seriously, the real market is, at last.

[superg1] 30/8/2014 19:18

Pods or plants, and the strategy.

I see many post about, 'when are they going to tell us about expansion'

At the AGM it was said they will try to match expansion to supply agreements.

I assume that all here are fully aware that IOF are currently have a number of end users looking to secure supply agreements with IOF.

So all I'm waiting for is how many and for how much iodine, when they have those signed off, they will add plants I suspect.

Hands up that are not aware that IOF ARE in talks with a number of customers for supply agreements.

That's not a rumour.

[woodpeckers] 30/8/2014 19:10

Think we just have to accept (or not if you prefer) that in this business everyone feels it's best to keep their cards close to their chests.
A certain amount of trust is therefore needed but info provided by SG and others helps.

[superg1] 30/8/2014 19:09

Cross

The nay sayers at the start of the year were going on about the high inventory, which was reported by IOF.

With much lower market prices IOF report near record monthly revenue.

August 2012

'For the month of August, IC had record sales of £1.74 million.'

So we know the record was at least £1.74 mill or greater. That's near $2.9 mill at the current exchange rate.

May production 40.5mt

'The Company had near record sales for the month which demonstrates good demand for our products'

June 30.6 mt

The Company had near record sales again for the month which demonstrates good
demand for our products.

July 24.5 mt

The Company had near record sales again for the month.

I assume some noticed the other bit......

'The Company had revenues for the Period of c.$2.7 million'.

Now go back to the original record of $2.9 mill (Aug 2012).

Thus I suspect they had revenues of around $2.7 mill per month May to July giving $7.1 mill.

Production was around 95mt or 95000 kgs, multiply that by a rate of around $40 per kg and you get $3.8 mill.

So either IOF are eating into their inventory or they are converting the iodine via derivatives into a value of around $75 per kg. So I suspect due to the figures and the inventory comments, they are eating into that early year excess inventory.

So when I make the comment about my thoughts on the subject, it's because I read the news releases in full. I consider from the available info that for sales to be at near record levels, they have to be selling very well, as in August 2102 the iodine price was $65 to $70 per kg v $40 now.

I hope that explains it.

[eap727] 30/8/2014 18:38

C... All the banter is about current and next quarter's raw iodine production, together with future water, helium, oil etc. I would like to see IOChem's sales projections for the next year or two. Theoretically, that market is big enough to absorb all of our raw idione. Given the expanded margins in the retail side, all the comparisons to the current producers in Chile could be moot. We just hear so little about IOChem, other than they are enjoying record sales on their own. Why don't they pull the sheets off and give us more of a good look?

[crosseyed] 30/8/2014 17:08

eap727,

I believe that internal sales (of raw iodine) are not explicitly reported though they would contribute to inventories in the accounts.

Revenues in the accounts are those generated from IOChem products, usually split between iodine and non-iodine products. Up to y/e 2013, there were probably no external raw iodine sales though that is no longer the case starting from this year. I would expect (hope) that they will be reported separately in future accounts.

Note that the quantity of raw iodine produced by IOSorb plants is reported in metric tonnes.

c

[eap727] 30/8/2014 15:45

Per Lance: "The Company had near record sales for the month which demonstrates good demand for our products."
"Demand".. What percentage of sales is "internal" (sold to our own chemical division for the retail markets) and what percentage is "external", (sold into competitive wholesale markets or otherwise?). Further can we extrapolate those figures and project future sales as to both? Lance did say that we are getting interest from customers looking for long term commitments, possibly by way of off-take agreements, I presume. Can we, and when can we, look forward to that dimension in our "sales"?

[crosseyed] 30/8/2014 15:02

che7win,

OK, thanks. I just wondered whether you had something more solid.
I have drawn the same conclusions in my own model though unfortunately the comments you quote are qualitative rather than quantitative - rather like last year's RNS info really though I do trust the current management more (but then I had no reason to distrust management last year)!
It would be nice if the Interims were to indicate inventory levels.

c

[che7win] 30/8/2014 14:47

Crosseyed,

I don't know figures either, but recent statements have been consistent on inventory and sales comments ( both positive ). Of course, that doesn't indicate margins of those sales so I don't know the complete picture.

Some recent statements:

July Production update comment from Lance:
"The Company had near record sales again for the month which demonstrates good demand for our products and lower inventory levels than other iodine producers."

June Production comment:
"We continue to have strong interest in long term supply agreements with multiple Iodine customers. These agreements would allow the Company a built in hedging mechanism from price volatility. The Company had near record sales again for the month which demonstrates good demand for our products."

3rd June RNS:
"The iodine market continues to be challenging, but the Company is pleased to be at low level inventory levels compared to other iodine producers. The Company had near record sales for the month which demonstrates good demand for our products. The Company will continue to manage this process as IO#5 and IO#6 production come online in coming months."

Whilst I tend to let the company just get on with things these days (I trust this management), recent company contact has helped me understand the importance of these statements. IOF have prepared well for the current iodine market, including SQMs strategy and I believe low inventory is one key factor.

Bocker,
I agree with you that one strategy to mitigate iodine prices falling is to reduce opex, another thing that Lance stated was key when he made the comment to the FT months ago. I believe margins will have improved these past few months, even with iodine prices having fallen (my opinion).

IOF as a company is improving all the time, that's one reason why H1 results next month are no reflection on where the business is, it's a moving target.

.

[bocker01] 30/8/2014 13:46

Be good to see our costs per kilo approaching 15 dollars for all of next year and a price that can easily average 65. Don't think we'll be worrying about much then! Roll on IOF! And for those only beginning to follow this share, we'll do 1000 plus tons next year with IO7 and a few PODS. And the only cold water being poured on anything will be worth 50 cents a barrel to us!

[crosseyed] 30/8/2014 12:15

che7win 29 Aug'14 - 19:27 - 24072 of 24077

...IOF have little inventory at this stage, so sales are going well.

You write that with some authority (though I have assumed the same). But is there any evidence of that? IOF don't publish inventories in the Interims so we presumably will not know definitively until the next annual report (around April 2015?).

c

[festario] 30/8/2014 11:33

Guar Gum is used in Rowntrees Fruit Pastilles, and the even more addictive, Sports Mixtures.Long may it remain in ready supply! Mmmmm

[engelo] 30/8/2014 11:31

SG: thanks again for continuing flow of quality info from Chile. All is in place for the endgame which only needs on forecast production figs for August and September to get IOF's tanks rolling.

Think most of SQM's answers are partly not answering the question and partly comfort speak, eg 'having the stocks near our customers' which is meaningless as you point out.

Same technique that all politicians use ;-)

[superg1] 30/8/2014 08:13

The SQM Question and answer (the very first question) which seems to sum up there plan about getting 30% of the market back.


Christine Monroe - Scotiabank

Hi, this is Christine Monroe calling in for Ben Isaacson. Thank you very much for taking my call. I had a question about iodine prices and iodine market. You mentioned that you were aiming to regain market share and you haven’t outlined whether there is a strategy to do that. I also wanted to know if you see a turning point for prices anytime in 2014.

Patricio Solminihac - EVP and Chief Operating Officer

Thank you, Christine. As we have stated that we want to get back to our market share of 30% more or less and the way we will do that and our strategy is to work on the quality of our product when you have more supply customers start to worry much about quality and service. So, we will continue to strength our position which is already very strong on the quality and stability and consistency of our product in the first place, second the service having the stocks near our customers and also the quantities on time when they need it.

On the other hand we’re doing a strong effort on the cost, we really are reflected in this first lower cost climate. We continue to have more ideas that we will continue to lowering our cost, so that is our main strategy. Given that what we see on the market, we feel that the price in the rest of the year would continue to be affected and we will see what happens then in the next year.



That answer doesn't really explain how they will get back over 30% in terms of production increases, they just talk about reliability. I believe this is based on a few things.

Cosayach have seen disruption over the last 4 years, so they are not reliable.

Sirocco stopped supplying and have had plant issues so they are unreliable.

Algorta and Bullmine can't cope at prices these low, so have been pulling back.

SQM obviously lots some customers to cheap iodine, but it seems come 2015 the market will get tight. Those customers will turn to SQM (the biggest producer) looking for iodine. SQM then call the shots saying, "sorry, you left us, we could not give you cheap iodine as that extra production cost for the relevant mines is loss making, hence at this price we can't help you out, if you want to sign a long term agreement at X price for X amount we can help"

What customers know with SQM is for years they were never let down, but they also experienced the huge price hike in 2011/12 when troubles hit.


Part of an answer later on, tends to support the above.

"we can put much more volumes into the market and leave with the consequences on the price or we can allow some newcomers to put some more volumes and being much higher cost, we will then sell less volume."

As pointed out, if SQM added 2000mt the price could drop.

A $5 drop even with 2000mt extra equates to an added loss.

They are far better off letting a shortage arrive. For each $1 rise they gain $8 mill profit.

So it seems obvious what they should do, and they have hinted at it. Look after their customers, and increase their reliability. Those that went elsewhere, assuming a shortage next year (it looks highly likely) will be calling hoping for cheap iodine, but they won't get it.

The end user mentality will then be reliability not cheap prices. Those raw iodine buyers have end users too on derivatives, and if they don't satisfy those customers, they will be off elsewhere too. Probably to SQM derivative suppliers like Ajay.

The reliability issue from Chile suppliers, has already been in play this year I understand.

I have noted IOF's inventory going down but near record revenues in the last few months. That's at a time the price is significantly down, compared to the previous record, so it must mean they have been getting increased orders and sales.

There is no evidence at all that I can see, that the IOF chem div has ever let end users down. They have never reported any faltering there.

The only commitment so far for the production side, is to meet the demand of the chemical division, and they have done that.

If IOF get over 50mt per month as they move through H2, they will start to build and inventory, but most likely sell it on to end users.

If anyone wants a supply agreement, IOF can quickly create a supply through pod sites ready to go to match any supply agreement. They have the back up of the current forecast excess production.


SQM know they have cost rises coming, and that's probably why they are squeezing costs down as much as they can now, going for quality not quantity.

They have no need to chase customers the customers will come to them.

The one thing they didn't explain was this comment

"the service having the stocks near our customers"

They already have the derivatives outlet in the US, and operations in Belgium where much of their iodine passes through. They set up that web of supply years ago.

[woodpeckers] 29/8/2014 19:30

"Customers tend to hold off buying when the price keeps falling.....The opposite happens when prices start to rise."

A bit like PIs then.... they don't listen to Warren Buffet's tips obviously........

[che7win] 29/8/2014 19:27

Customers tend to hold off buying when the price keeps falling, producers also wind down inventory.

The opposite happens when prices start to rise. Customers will be eager to stockpile ahead of price rises, supply will lag increases in price.

IOF have little inventory at this stage, so sales are going well.

[superg1] 29/8/2014 16:33

Che

Re the inventories, that's what I've been looking to keep an eye on.

So far we know RB have gone from 800mt to 630mt. As you know they stopped supplying iodine for 6 months, hence the build up.

SQM. We now know that H1 sales probably included an inventory reduction as it would seem they are selling at a rate of 9000mt per year but producing near 8000mt (As detailed previously).

Bullmine.
No official media comments anywhere but in the industry it's suggested they stopped mining caliche a month or two back, and were simply leaching out existing heaps. If that is right then there will be no inventory, just sell all as they wind down.

Algorta
It's suggested they have pulled back due to the price, due to Toyota having a 25.5% stake, if there is any tightening of the market I anticipate Toyota would take any inventory they have.

Cosayach have been selling like mad to frustrate SQM so I doubt there is much in the locker there. 38 wells shut down just a couple of months back, so I don't see them as having anything significant.

On the face of it of the ones we know.

Sirocco have sold more than they produced this year, so have SQM.

Then if we turn to IOF, they had a high inventory earlier in the year and that has been stripped back too.

SQM/RB total should be no more than 2000mt. RB will be desperate to offload to keep the cash rolling for the lithium side.

Demand should be up by 1000mt for the full year

So on solid rumours, combined with facts and figures their should be a shortage in 2015. One that SQM may well be manufacturing to get the price up.

A $5 per kg rise to them, is worth 2000mt extra production, without having to do a damn thing, or spend 1 peso.

[brucie5] 29/8/2014 16:00

Boggle, wow. You are very honest about your mistakes, which makes me still more interested in your reasoning for holding here! I will be reading your download with interest.. I can see the upside... but maybe i'm paranoid.. I also want to examine the possible downsides.. Thanks very much indeed.

[flyingbull] 29/8/2014 15:45

The September challenge is on!!! ;-)
Entries for the September oil stock competitions are accepted until midnight this Sunday.
Good luck!!!

[che7win] 29/8/2014 15:45

Boggle,
you expect these 6 plants running up to speed by Q2 2015?
Isn't that a bit long?

Personally, I expect the average to take a step jump with plants 5 and 6 from September. I agree with you, some caution required but we have to be surprised to the upside at some stage!

I would reckon we meet 40MT plus this month provided fracking disruption has quietened down.

I think we should have a 50% jump per month from those two, so our average will be much higher than last quarter with potential peaks of 50-60 MT.

We also don't know how good IO2 will be after the changes this month (SWD) and don't forget IO4 will now have brine supply well beyond it's capacity.

All in all, looking forward to September.

[brucie5] 29/8/2014 12:43

Boggle and Superg, thanks so much. Boggle, look forward to seeing the document. I'm also long on QFI thanks to you. One irritating question, though I don't intend it as such:you bought at £2..! given your knowledge in depth, what did you overlook..!!?

[che7win] 29/8/2014 12:29

Superg,
re wages, thanks for that.

These things are important, because it helps mitigate the currency devaluation, that feeds into iodine prices needing to rise.

By the way, any of our rivals holding iodine inventory really have been foolish, they have lost 20% of the asset by not selling in the last year.

[superg1] 29/8/2014 12:24

Brucie

We don't yet know the full costs for IOF for IOF.

However it did seem clear that IOF up to now have treated the two divisions separately.

As it was explained to me, the production side supplies the chem div side and charge for the supply of iodine, there will be accounting and other reasons for that.

So the way it currently stands, any comment about opex in theory, relates to the all-in cost on the production side of the business, and doesn't include costs on the chem div side.

EG

They produce iodine at the chemical division via recycling, but that figure never gets added to the production updates we see.

Recycling was explained to me as sporadic , due to the nature of waiting for the bulk arrival of waste material to be recycled.

The guidance for an average was 5 mt per month. That does not get quoted in any production update.

The recycling side is just back-up to keep them going while they built plants, it's more expensive than plant production, and was said to be something they will ditch once they have moved on into consistent excess production.

Maybe they did no recycling last month, maybe they did 10mt, maybe they have stopped altogether.

The point is it's the chemical division side.

So when they say low high teens as a target, that imo will be purely the io plant side, and relates to the raw iodine.

We have not got to any material excess yet, but once we do, the opex will be an all-in cost for raw iodine sales, which in truth, is all current production as they 'sell' it to the chemical division.

Obviously they can enhance the returns from that, if they gained derivative customers for the excess.

Some probably think royalties are based on the iodine price we see, but I don't believe they are. I believe they are linked to a long-standing US export rate, which is below the current price.