Iofina Share Discussion Threads

[arlington chetwynd talbot] 27/11/2014 19:58

Why are you dancing with me?

You want me to tell you what I know?

I am a top boy and a drunk, you will look in my eye...

[superg1] 27/11/2014 19:49

And a major point you miss.

The chem div suppliers include those that are not iodine producers so they have to buy their raw product at a higher cost than IOF do.

The market includes niche sectors. Sectors that are not within the scope of large chemical divisions, it's not commercially viable for them to have production lines that are mostly redundant.

In time though IOF will be able to capture a share of others in the market as their costs will be lower. Ask the Troy corporation, they dread IOF expanding.

I note they announced price hikes for their products when iodine prices went up. IOF didn't they honoured contracts.

I haven't seen Troy announce price cuts since the iodine price dropped.

Some look after their customers and know the value of that, some don't.

[superg1] 27/11/2014 19:35

Don't confuse supplying information with being nice, I'm simply putting out information.

As they have over 100 sites to target and just 6 in place, fraccing stopping only reduces the list to existing brine, many sites which will be far better than their worst site now.

'The Group now has a large pipeline of sites and brine streams' Did you spot the 82000 acres of lease recently? (in OK alone)

IOC is probably contracted prices. It's in news. When the iodine price hit highs and IOF were buying the product at that price they honoured contract prices.

'Iofina made a strategic decision to honour our quoted prices to these new markets while iodine prices were changing rapidly. This practice hurt our profitability in the second half of 2011 but has been important in 2012 with repeat orders, customer loyalty and our reputation with our clients as we rollout new products in 2012. Iofina has targeted a rollout of several new products in 2012 for the iodine industry.'

To add further re prices, IOF chem div works in some niche sectors in some cases they are unique. They have invented new products to meet specific customer needs.

Many products that IOF offer are not available from SQM derivatives businesses.

I suspect the strategic decision back then is paying off now.

The main contest in the iodine sector is the sale of raw iodine, which is game IOF are not currently in. They produce iodine at a lower cost than the going rate then enhance the margin through the chem div.

'but if a distributor spots a cheaper source then they'll get you down.'

Yeah you would think so but as pointed out they cover sectors which are unique, they said they were doing new products and sales are up. The reverse has been the case they are coming to IOF not leaving.

Did you notice price hit hard, apparent over-supply, but IOF have hit record revenues.

They are going to them as Cosayach and RB are unreliable, and you forget import taxes. The US imports 80% of it's iodine. The US loves home grown.

IOF have supply contracts sitting on desks, they just don't have the product to to commit to them.

All you are doing is showing your weak understanding of the industry, and IOF. I'm happy to exploit that in a friendly manner all year long.

[che7win] 27/11/2014 19:35

There are some end derivatives that are sensitive to the iodine price and some that are inelastic, it isn't a simple matter of distributor but very much depends on the end use.

If we supply E.g. A semi-conductor manufacturer, our supply will not change no matter what the price, too risky for them and margins will be high.

They also won't be sensitive to the end price, but other customers are.

BTW, I think the derivatives business can expand upstream, do we do any LCD business's, I don't think we do.

[arlington chetwynd talbot] 27/11/2014 19:16

How dare you Banksy! Suggesting I'm drinking ;)

tbh I'm no great fan of UKIP, but I hate the main parties even more ;))

There's never a poor short or long until you close.

This one looks as if it might not need more funds from you at finals.

Answer this, if this was 20 would you neg with bod te get yer 40 down te 20?

Do you want to be on the BOD?

Do you want to drill for erm... oil?

[arlington chetwynd talbot] 27/11/2014 19:11

Okay you can say that IOC might be the cheapest anyways... but if a distributor spots a cheaper source then they'll get you down.

[mister big] 27/11/2014 19:11

aaah ACT you seem in a better mood today - I expect at least three MP to defect before Christmas ( turkeys reflect on christmas at this time of year).
strangely I agreed with your shorting comments, perfectly healthy business particularly if it produces more cheap shares for me.
however, IOF is a poor short now and not one that gives enough upside to compensate for the risk of a bid or industry player buying the company or a stake!

Vote UKIP and higher iodine prices thats my platform!

[arlington chetwynd talbot] 27/11/2014 19:09

The market is designed to be efficient... IOC cannot hide from distributors who know the price-war.

[woolybanana] 27/11/2014 19:08

What might these derivatives be and what is the added value on the price of, say, a ton of raw iodine?

[arlington chetwynd talbot] 27/11/2014 19:07

"the point does not seem to have registered, IO Chem's profits are essentially insensitive to the market price of idoine."

That's not true, you sell to the distributor, who knows.

[rogerbridge] 27/11/2014 19:06

Here here,

[crosseyed] 27/11/2014 19:04

As has been indicated before, though the point does not seem to have registered, IO Chem's profits are essentially insensitive to the market price of idoine. Derivatives contain quite a small percentage, both in quantity and cost, of raw iodine. Very little raw idoine is sold directly into the market, perhaps 10 mT during 2014. IOF now produces all of its required iodine for IO Chem manufacturing of derivatives at increasingly lower unit cost, as IOSorb production grows. IOF has the option to increase derivative production at almost no incremental unit cost, since extra shift working is an economic option with little or no additional capital expenditure. On the other hand, should the market price of iodine rise, there is the option to sell raw iodine directly.

Thus, the argument of the likes of TW that the market price of iodine is in decline remains largely irrelevant to IOF's profitability.

c

[superg1] 27/11/2014 18:41

ACT

I agree but as they have over 100 commercial sites available pre boom. It's going to take a hell of a long time before that becomes an issue.

That's the one silver lining of the last bunch, they targeted some lower ppm sites just because they were on the list, instead of the best sites.

On that basis for every site they target which is better than their worst site, then the overall opex comes down.

Opex at io2 is very much lower than the lowest ppm site, there are plenty more io2 types sites out there and better. That's what will be targeted. For every one they add opex will drop, that will be their goal and strategy.

[superg1] 27/11/2014 18:36

ACT

You need to pay attention.

re

'Yes but producing wells are the real key here, so any reduction in overall production is not good in the longer-term, despite what I've read on here to the contrary.'

Absolutely. Iofina were targeting Oklahoma long before the industry realised it could target the Mississippi play.

What you have read to the contrary comes from the Oklahoma government. In 2007 2.2 billion barrels of brine were going down disposal wells in Oklahoma. Since this boom the number will have risen.

Pre this boom IOF said they have identified over 100 sites in the core area.

The io2 site was on 18.7k bpd, it went frac mad in the area and some time back it went to 51k bpd. Fraccing has been the disruption.

From the brine just in Oklahoma pre boom they identified 19000 mt per year going down wells in Oklahoma (not the US).

The main reason continued fraccing helps for the future, is that logically the new sites will be identified with higher ppm and bpd. Increasing the economics of expansion.

If you have a 5 fish limit you keep binning the smallest fish of the 5 if you keep catch more than 5 and bigger fish..

Its simple but some like to make it look very complicated. In the case of the last lot, for some weird reason they reeled in some small fish and kept them, when there were big fish sitting there happy, to throw themselves on the hook.

The new guys will work with it, tweak it, then scoop up the bigger fish when they see fit.

There simply isn't the room in the market for a material downside. The Yen and Chile peso which has assisted their costs are either on record weakness or close to it.

In Chile a loadf of cost increases are lining up, along with a production figures that seem to fall far short of past and present demand.

I did note this disclaimer in SQM news yesterday

'Readers are referred to the documents filed by SQM with the United States Securities and Exchange Commission, specifically the most recent annual report on Form 20-F, which identifies important risk factors'

I think I'm one of a handful that actually reads those. One of the biggest risks in their business is water at the is main Iodine mine. They quote changes in water laws as a big risk to their business.

By my reckoning they have 2 months worth of inventory cover. Historically earthquakes and strikes in Chile have caused iodine price spikes. Now we can add drought and water laws and 3 companies looking like they may struggle to survive.
RB look like they are dead, Cosayach from recent news must be in huge trouble, Bullmine must be losing cash daily, they truck in seawater.

SQM dropping the price doesn't get them 30% of the market, the market demand increases when prices drop. Companies dropping out and SQM filling the gap gets them back over 30%. They currently have 27/28% of the market. But they are not currently producing 27/28% of world demand.

It's an inventory game, others had excess to sell and SQM have forced them to sell it cheaply stifling their cash flow.

It seems like a very smart move too me. Short term pain for long term gain.

[arlington chetwynd talbot] 27/11/2014 18:13

Basically what I'm saying is it's better to have outages and a better choice of brines than to rely on a reduced oil-well producing environment that reduces your scope.

You could say it's swings and roundabouts but you'd be wrong.

[woodpeckers] 27/11/2014 17:50

ACT, afraid I have you on filter so I'm not sure if your last post was a response to mine. I wouldn't want you to think I was being impolite not responding if it was.

[arlington chetwynd talbot] 27/11/2014 17:46

Yes but producing wells are the real key here, so any reduction in overall production is not good in the longer-term, despite what I've read on here to the contrary.

[woodpeckers] 27/11/2014 17:28

Am I not right in thinking that if they did take the price of oil down below the $60 pb that seems to be being suggested as the price at which fracking becomes viable, some of the fracking may be suspended giving Iofina a 'holiday' from interruptions to flow. The price of oil would undoubtedly then go back up and fracking would resume.

Seems to me Iofina can't lose.

[arlington chetwynd talbot] 27/11/2014 17:24

Well, yes, I have £2.5m ptp for '16, and I'm not valuing water too highly given the issues, £10m - £1M ptp '16.

Not a high value, but there's upside as well as downside.

[che7win] 27/11/2014 16:13

OPEC no change as I expected, oil price falling heavily.

[che7win] 27/11/2014 14:21

ACT, You basically think IOF iodine will make £2.5m in two years time to justify your £25m valuation now with no growth and no iodine increase.Using your two year rule which isnt a bad rule.I think you will be proven wrong, you neglect the gearing effect in the business to iodine price rises, costs are fixed. You set a very achievable target.