Iofina Share Discussion Threads

[patrich2] 04/10/2014 16:19

post 25270

[bogg1e] 04/10/2014 16:04

che the water is estimated at $20,000 to $60,000 per day net for 80,000 bpd. Loads of dos,. Where did you get the half hot water from? Can you show the post number so i can read it myself, i must have missed it with the huge number of posts that have come out. Thanks.

[spike_1] 04/10/2014 15:49

Once we get past the public notice phase (successfully) water can be factored into the company's value for brokers notes and therefore II's.

Assuming we JV, that will happen almost straight away IMO since all the forward planning / permissions / build need to be agreed with the JV, and it would seem a very substantial part of that was necessary for the licence application anyway.

Depending on how hungry the partner is, they may well be willing to put cash upfront almost immediately in return for a piece of the action.

Obviously there will be the due diligence phase first, but I'm guessing a lot of that would have had to surface during the application examination process.

Yes the actual bricks and mortar may well not be until the spring but IOF may well demand a cash 'bung' upon signing a JV.

Edit. Just seen che7win - much better put than I just did.

Edit:
However not at all sure about the share price explosion. It would need brokers / II's to understand the US fracking water business, and know the quantities involved which may not be widely known in the very short term.

[che7win] 04/10/2014 15:40

Boggle,
I'm expecting an explosive reaction to the share price, the water business could dwarf iodine over the next couple of years.
I wouldn't like to say what I think it's worth, you might think I'm crazy :-)

The news keeps getting better, half the water will be hot, that's incredible.

Cyber,
The reason why I think we should go the JV route is:

1: we are not expert in the field, let's team up with an expert who knows the water business inside out. I grant you, it's a simple business, selling water.

2: water is booming right now and going to get better, but over time it's a business without a competitive moat, competition will increase, although the geographical distances for water stations will be similar to the aggregates business.
If you're buying a load of stones, the costs is significantly dictated by the distance the quarry is from you.

3: we can get immediate money ($10's of millions) to deploy straight into building out iodine plants. Anyone fancy 20-30 mobile plants next year? What would that do for our iodine output?

4: with a JV, we can sell 50% and still have a free carry on the water plant whilst getting 50% of the profits. That is a good deal.
We will get enough money from 50% to be able to build out plants as fast as we can, probably too much in the short term.

4:Why do you think they reiterated their intention to be one of the largest iodine producers in the world? Because unlike the water business, Iofina has a unique competitive moat in iodine, we are the lowest producer, that is were out long term value creation is in my opinion.

I wouldn't like any more than 50% of the water venture sold off, we wouldn't be able to deploy all that money in plant build out fast enough, we can sell the other half later on.

What is SQM going to do now, that is what I want to know :-)

[bogg1e] 04/10/2014 15:25

Good news but lets not get too excited too quickly. We have the public notice phase, which should be about 30 days or so, which brings us to november. The law in montana states that construction cannot take place unless the ground is dry. Well we are coming into winter, so assuming that we do get the licence after the public notice, i would expect Iofina over the coming months to be formulating agreements and contracts with JVs, with the intent of commencing construction early spring, in readiness for commercial operations to begin early summer 2015, ie about 9 months still to go. Im not expecting a massive reaction to the sp, it dropped 35p when the application was first denied, but that doesn't mean the share price is going back up 35p tomorrow. Excellent news though. Iofina and us PIs deserve this break.

[hurricane.] 04/10/2014 15:23

ACT is that the best you can do? Lol

[1madmarky] 04/10/2014 15:13

Absolutely excellent news!
BUT we do not actually have the permit yet
We do not actually have a depot yet
And we don't actually have revenue coming in through the door... Yet

However all the above are looking far more likely now. But I don't see revenue until the middle of next year. Just my view. Trying to keep feet on the ground. GLA

[woolybanana] 04/10/2014 15:03

Teething problems

[spike_1] 04/10/2014 15:00

jj: absolutely agree. IF we want II interest then the last thing we need to do is state our intention to begin another business from scratch given our very poor record (against expectations), so far in producing raw iodine.

[woolybanana] 04/10/2014 14:58

ACT, head in bowl, pull flush, there's a good little chap!

[jjoshaw] 04/10/2014 14:54

From memory I think they have a year from full approval to get a water business going on a use or lose it basis regarding the license.Given that they're only just coming to terms with the core business and are carrying$20m of debt,going it alone would increase the overall risk to the co.,imo.A JV with cash upfront would underpin the balance sheet and derisk expansion of the core business,imho.My vote goes for a JV.

[arlington chetwynd talbot] 04/10/2014 14:38

So we'll now have monthly water disappointments as well as iodine?

And this comes just at the time when you appear to be turning the corner?

It seems this lot are addicted to not making money.

Ironically amusing ;)

[naphar] 04/10/2014 14:34

Well we do the all have to see it the same way.
Not having the staff to go it alone is no reason not to do it, employ some more, the payback is there.
The competition are not so great an issue to me, we have the potential to be a big supplier.
The company may have messed up iodine, but water is far simpler, especially starting off just with cold. And we have a water expert on board to oversee things. Much different to expand in iodine.
and I don't think it's just one of three permits we would be JV ing on Spike. In my mind they would be buying 50% of the water business, which would include all future permits, but I guess if it's done like a farm out, you might be right.

My view is its time to be bold and take the advantage.

[superg1] 04/10/2014 14:33

The reason I want a JV is the potential cash up front. We are not throwing out wild preferences there as we know such circs have been on the table before.

The core business is iodine, and the next 12 months is the time to strike and go aggressive IF IOF had the funds to do so. They can cope with lower iodine prices, others can't.

Such a move would be apparent to Chilean producers and it would further knock any ambitions they would have for expansion.

It would be a great time to get the engine turning, to start that intended path to be a world leader, in iodine and derivatives. The line 'the world leader' sounds a bit strong., but it seems the iodine is there in Oklahoma to do just that.

[tim3416] 04/10/2014 14:11

It's nice to have the choice though isn't it? :-)

[captain_kurt] 04/10/2014 14:04

We haven't got the staff after Lance's cut to also take on the water business.

JV is the way to go IMO

[spike_1] 04/10/2014 13:49

naphar: I wouldn't want us to go it alone on the water. We couldn't even produce iodine properly until this month (hopefully), due in part to inexpert execution.

Why do we need to start a whole new learning curve when we can partner with an expert, who by the way will not therefore be competition.

What we desperately need right now is loads a' money, to expand rapidly in Iodine. If it can come from a partner rather than through more diluting deals so much the better.

AND let's not forget, it's NOT 50% (say) of the water business, it's 50% of this ONE licence. We still have just under 2/3 of our acre/feet still available for future licensing, not to mention our other water rights in reserve.

Best wishes - Mike

[woolybanana] 04/10/2014 13:22

Perhaps Mr Big could lend us the money rather than using it for political causes

[naphar] 04/10/2014 13:04

I am still hoping we may go it alone on the water.
No reason not to get a bank loan imo with the payback.
Keep 100%. Make free cash flow of maybe $2m a month to fund rollout of mobiles at a steady rate. We have a water expert on the board now, we nearly have the permit, we have the customers, we have $7.5m in the bank currently. Can't see the logic in going JV route, unless the up front payment is really good and we give away much less than 50%. NPV of going it alone should be much higher than JV route, especially considering value of potential additional permits.

[superg1] 04/10/2014 13:04

A US oil barrel is 42 US gallons.

An acre foot is 325851 gallons

325851 x 3622 acre feet = 1180232322 gallons / 42 = 28100769 barrels /365
= 76,988 barells per day.

[cyberbub] 04/10/2014 12:55

Che, you suggest that a JV for water would be good. But if there are firm LOIs from customers which can be converted to formal contracts, could we not seek to raise a bank loan instead, on the back of those contracts? I know we already have 2 convertible loans, but seems to me that a standard bank loan could avoid giving away the 50% to a JV partner......though I can see the attraction of a JV lump sum also, to accelerate IO plants... just depends on what the best long-term NPV is... is it water at 'x' profit margin probably reasonably certainly, or iodine at 'y' profit margin but dependent on the world sale price going up...A nice choice for our management to have, in a way!!

[superg1] 04/10/2014 12:53

An acre foot is in the region offer 325,000 gallons if that helps.

However a gallon isn't a gallon as we know it's 4.54 v 3.78 litres for the US.

A barrel is also different when using different liquids, 32 gallons v 42 for oil, but they seem to use 42 for frac water for the reason you state.

I wish they'd stop using those damn dollar things too, as the price keeps moving on the exchange rate.

However a shed-load of potential revenue is the same in any language. :-)

Interesting on the 50% capability intent on hot water. 20% of that at $5 pb is $27 mill worth in revenue.

Going on opex from some fact sheets hot water opex should be in the area of $2.50 ish pb.

You can see from the figures it makes perfect sense for someone like Hal to link up, pay a lump sum, pay for the depot, and knock down their water costs, the pay back to do that would be swift.

[bocker01] 04/10/2014 12:49

Yes I am a bit confused with Leggits 37,468,000 barrels pa amounting to 77,000 a day. Not that I'm really bothered. The news is just so staggeringly good either way. The fact that half of it might be hot water sales at 4 or 5 times the margin of cold water takes my breath away!

[cyberbub] 04/10/2014 12:43

What on earth is a 'barrel' for that matter? An oil barrel is 50 gallons is that right? Is a water barrel a different volume, and if so why does it have the same name?A litre of water and a litre of oil (or a litre of helium for that matter) are exactly the same volume!