Iofina Share Discussion Threads

[superg1] 17/4/2015 14:33

Meb

On the Chile producers.

SQM produced more than my forecast as they turned the Iris plant back on in Q3 2014.

Then comes a bit of a red herring production number for Maria Elena the closed mine. It produced about 380 mt, but it's not what it's seems as if you read the small print the mine is closed they just leached out reaming Caliche heaps after closing it. Overall they look to be producing about 1500 mt or more less than 2013. The Iris plant could be turned off once more at any time.

RB energy is full of surprises recently and I need to read more but the recent report mentioned zero positive revenue from the mine which tends to suggest their $22 per kg claim costs was just some number games pre a hoped bid, it went to $24 and $26 forecast before the meltdown. So it seems that mine has been operating at a loss at these prices.

SQM hinted others were on a loss too which must be Algorta and Bullmine as they pump seawater.

Cosayach now have a seawater pipeline, which is a lot more costly than nicking it from local wells. They need to find $370 mill plus to cover court orders and fines on their way, bosses will probably be jailed too.

I suspect they will avoid paying anything as long as they can, but it's hard to see long term how they are going to survive. The $82 mill tax fraud case has only just begun.

Cos had an inventory due to water theft, Sirocco/RB had 800mt. SQM took the price down knowing both would need to be aggressive selling their inventory to get cash, and the less cash they got the better it was for SQM.

SQM of course didn't see the chaos coming that they have had and now find themselves under investigation.

So imo I can't see with the big investors livid, how SQM can continue the price game, which has been damaging profits and dividends.

It will all have an impact at some point and should start to show as we move through the year.

The first interest to me now is the RB mine, the business is screwed and a few surprises have appeared to the negative side for investors in RB.

It seems highly likely that production has stopped at RB, with their false supply rate (production plus inventory) about to disappear from the market.

So now over the next few weeks we should learn about exactly what is going on there and elsewhere.

India import prices are many weeks behind the market due to the supply times etc.

[superg1] 17/4/2015 14:16

Od

All we have is the India import rate, which isn't much of a guide as most of that iodine is from Cosayach and Sirocco/RB. A drop in imports in India in H2 2013 is why Sirocco stopped supplying iodine, not because they needed to build up an inventory.

Meb 123

For the last 5 months the Chile Peso US dollar exchange rate has been about a 620 peso average which is the weakest it's been for about 5 years and the longest sustained weak period for over 10 years. So while it may show $30 per kg, practically all Chile production costs are in Pesos. If the exchange rate had stayed equal from the lows it would be roughly $40 per kg in this 'price war'.

The main driver for the Peso seems to be copper. The copper miners are hitting problems of water, power, rising costs and lower yield resources. It's the same picture in Zambia.

Logically to me, regardless of demand, some copper mines won't be able to afford to produce copper and may close. That then reduces the supply market, prices rise, the currency strengthens and their fixed costs therefore rise too. For Chile Zambia and others heavily supported by copper the two are linked, currency and copper.

In Chile I just can't see how there is much more room for Peso weakness, and with copper prices lower, the Peso had strengthened recently from the 640's area to 615 to 620.

So it's case of keeping an eye on what is going on re copper and the Peso strength.

[odvod] 17/4/2015 11:12

Is there any Iodine hedging/financial derivatives or is it just a spot market? I can find spot only which means several months before iod production volatility meets the market price.

[meb123] 17/4/2015 11:07

Morning SG1

when do you think iodine will start to rise if it hasnt already . From your analysis there are two dynamics in play - the artificially low prices staged by SQM and the shortfall in meeting world demand due to mine closures etc in Chile. will there be a day of reckoning ?

[owenga] 17/4/2015 08:25

Whoops, I meant 10.03!

[owenga] 17/4/2015 08:25

Superg1Thanks for coming back to me with your post at 9.43 yesterday. Very much appreciated, and keep up the good work. IOF should employ you as a consultant!Owenga

[superg1] 17/4/2015 07:39

It seems RB is definitely dead and buried. I'm now trying to work it if RB screwed over the interim lender while they were under court protection.

The interim lender had first bite of the leftovers to cover their loan if it all went wrong. The iodine inventory covered that.

BUT RB had taken payments from a customer up front for lithium, and now we learn they covered that by offering the value they had in the iodine mine. So now it seems potentially the interim lender, is number 2 in the pecking order. The amount is $11m to cover which is roughly the RB inventory which I have as about 400mt.

It may be lower as I imagine when the rains hit their mine, and with their inside knowledge, they may have left it rot from then on.

It's also said (rumour control) that the RB CEO was saying that IOF technology didn't work some time back and they couldn't produce iodine. That's the way the RB team works, lies, lies and more lies.

I wish Simon Jackson would respond to my email, I'm 10-0 up on my claims v what he replied to me when he was VP at Sirocco.

[superg1] 16/4/2015 22:15

For the record the RB boss had been dropping hints pre bid end date that they would get a firm bid which was in play.

The share price just before the bid end date said otherwise.

[superg1] 16/4/2015 21:55

Now going back to the software alert system.

It won't know about RB, or Cosayach facing fines and orders to pay of $270 mill plus. SQM bosses going to jail, or the fact they may lose their lease for 39% of their business.

It won't tell them other mines are loss making or it's the weak Chile Peso and SQM price fixing, tax evasion and fraud that keeps the iodine price low.

It won;t ell them the court monitor has just filed a report on RB that should have been released in news.

It doesn't tell them Carlisle is a lying old rat hell bent on saying anything to protect his business. In fact the software won't even know about iodine or water, just figures. Then one day as all those factors start to kick in and grow, the Software months behind at some point says 'eh fells, look at this'.

So the shrewd then pile in and the price soars proving how good the software is.

[superg1] 16/4/2015 21:47

RB Energy update

It's not out in new yet, but the monitor while they have been under court protection submits files that can be viewed online.

Details below but in short.

They received no qualified bids as we know, but then there was a quick sales process to see if any of the potential bidders would show interest with a deadline of 14th April.

Here is the result.

18. Pursuant to the SISP, the deadline for submitting final Binding Offers was March 27,2015. The SISP specifies a number of criteria for determining which Binding Offers are determined to be Qualified Offers and therefore eligible to be selected as a Successful Bid.

As reported in the Monitor’s Fourth Report, as at the Offer Deadline no Qualified Offers were received.

The SISP Team reviewed and discussed the received offers and consulted with the Interim Lender and the Agent. As a result of those discussions and in
order to maximize recovery for all of the Petitioners’ stakeholders, the Petitioners requested that the Sales Advisor re-engage with potentially interested parties identified during the SISP in the expedited Amended Sales Process to attempt to solicit one or more Binding Offers by April 14, 2015 that were capable of constituting a Qualified Offer.

419. No Binding Offers were received by April 14, 2015 and the Monitor is informed that there are no indications that any Binding Offers will be submitted in the near term.

As no Qualified Offers have been received as a result of the SISP and the Amended Sales Process and there is no reason to believe that any Binding Offers are forthcoming, the Petitioners are seeking approval from this Honourable Court to terminate the SISP.

[superg1] 16/4/2015 21:31

Someone in the markets explained this to me, and I think it's useful for PIs to pay attention to what the professionals look for. To be more precise the professionals don't look at all they rely on software to alert them to investments within their parameters.

Some examples were given which I have deleted in case some are in them.



FYI, XXX runs a bunch of automated screens . ??? currently qualifies for the James Montier ‘cooking the books’ short screen. “It measures six inputs including the divergence between net income and cash-flow, increasing days sales outstanding, increasing days sales of inventory, increasing current assets to revenues, declining depreciation relative to PPE and high total asset growth.”

It has the same StockRank as YYY (18 – which is not good for those who invest on published fundamentals) and ??? qualifies for the Altman Z-score short selling screen. “The Altman Z-score combines five weighted business ratios to estimate the likelihood of financial distress. The idea is that, if the Altman Z-Score is close to or below 3, it is wise to do some serious due diligence.”

It’s just a different perspective. The reality is that virtually all pre-profit/early stage growth companies have a low StockRank and qualify for a short-selling screen but there are a large number of private/professional investors using these types of screen to support their investment decision making. What this tells me though is that IF you can pick an early stage company that goes on to succeed, there are a large number of investors in the wings that will buy at much higher prices once profitability/dividends etc. start to come through. A lot of instis won’t/can̵7;t invest until the market cap goes above £100m .

So I hope that helps some that get frustrated about what goes on in the market.

[nixonpaul] 16/4/2015 21:16

Fesrario

That really made me chuckle.

Same boat

[superg1] 16/4/2015 21:11

An interesting comment re water on the copper side. It's becoming pretty common now and we have been talking about it for a long time forecasting such problems for them, because it's copper the investment world pays attention.

So going forward when IOF tell funds the problems Chile are having, they will be well versed in it. I suspect it's going to be a while for the market to fully appreciate the scale of problems to come for Chile.

I suspect 99% of them don't realise it's not just about water for mines but that much of Chile's power is Hydro-power from the south. Hydro-power covers about 40% of their power needs and the south is suffering a severe drought.

On the flip side less water in the north means they have to use and pump seawater. That adds to the power consumption from a supply market that is suffering due to the drought.

Less fresh water = less power generation, but less water means more power needed to pump seawater.

[superg1] 16/4/2015 18:04

There is no point looking at any small cap with a private investor research methodology and expecting the 'market' to be close behind you.

There are investor sites and systems that through number crunching, trends, revenue moves and a host of other factors that drop the vast majority of such shares in the 'don't touch' bin.

When the numbers stack up on many fronts via the digital systems, investors at the top end that rely solely on such factors arrive in numbers.

Currently IOF is in the 'bin' just like just about all shares I see tipped here.

That's fine by me as that gives plenty of time to sift through the 100's of shares that may be of interest.

Some will break out and stay out. For many reasons stated I think IOF will be one of them. One of the very few that do succeed on the AIM.

[festario] 16/4/2015 17:23

I have cash.
But I used to have a lot more cash.

[jbe81] 16/4/2015 16:56

Will bounce quickly once seller clears, will also rise with anticipation of water news, makes this an attractive level to buy at even if it does fall a tiny bit more. Seems to have plenty of support in low 30s. Great opportunity for anyone with cash.

[superg1] 16/4/2015 16:15

Ranger Thanks.

It's a common theme on many BBs, when folks say "who would be selling now".

There are dozens of reasons some sell including funds, and little is often to do with company circs.

EG I know for sure that one BR fund portfolio some time back saw the aggressive sale of many shares.

The reason.......... the fund manager changed so he sold all the shares in sectors he didn't like, regardless of prospect or their position at the time and he wanted his own preferences in the portfolio.

Stena on IOF, they had money troubles and needed to trim a load of investments, regardless of the share price or the position of the share.

Forced sells, margin calls, bills, tax liabilities, T trades, the list goes on and on.

Hence I look for timing. No need to rush with a seller about, and I think there is a fair chance we can spot the permit result before it's news.

Once we know who it it then we may have an idea when it ends.

Some could have said poor production news was coming on the back of the seller, but now you can see it would have been wrong.

[chumbo] 16/4/2015 16:07

Famous last words Crosseyed given our propensity for Heinz 57 mishaps. But hopefully you're right!

[crosseyed] 16/4/2015 15:26

sg1,

I have just quickly run the per unit IOsorb production costs per kilo through my financial model. IOsorb costs are predominantly relatively fixed costs of labour and plant overheads, plus the relatively small overheads related to chemicals to process the variable brine quantities processed and directly variable costs of royalties and shipping (very minor). As you have often posted, the unit production cost decreases very rapidly with quantity produced.

I estimate #IO1 costs to be about $50/kg at 2.7 mT/mth, wherease #IO2 was around $10/kg at 17.9 mT/mth. Those are my rough estimates for March. With iodine at $30-$40/kg, that firmly underwrites the decision to close down #IO1 (it's cheaper to buy the stuff in the open market). We might well see overall opex from the remaining units at sub-$20/kg very soon.

I also note from the RNS that March was the highest producing month to date. The previous highest was probably 40.5 mT (as RNS'ed) in May 2014. March production might have been as high as 48.9 mT though some of that might be attributed to Jan/Feb in Q1 2015.

I don't think achieving 260 mT in H1 2015 will be all that challenging!

c

[meb123] 16/4/2015 15:02

Exactly my point. Don't get me wrong, I have a big holding ( at a loss needless to say ) and in it for the long-term. But if they are profitable and cash-generative from recent trading , they need to say so asap in my opinion. Great when they get the water , but I hear figures banded around like 10 or 20 mill cash injection. Just wondering if it turns out well below that , what the market reaction will be .

[briggs1209] 16/4/2015 14:47

I can't see the price notably changing without a set of results that reveal the actual accounts. I have a tiny nagging doubt about how production translates into cold hard profits. That aside this is still a very large holding for me but one that only needs to disappoint one more time for me to sell out.

Good news on the water front would go a long way to making me feel a lot happier.

[odvod] 16/4/2015 14:28

less free trade, customs, quotas, currencies

[meb123] 16/4/2015 14:27

Without knowing who the seller is and his/her motives, its impossible tosay. All sorts of reasons- deposit for a house , divorce settlement , retiring going off to Spain , donation to UKIP even .

[ranger1955] 16/4/2015 14:19

Super G

I would just like to thank you for the unimaginable ammount of research you must be doing on our behalf. I was very pleased with yesterdays RNS and looking forward, we have a lot to gain in the coming months. I would hope! Which begs this question...... we seemingly have a seller, why would anyone be selling now, when just around this corner, hopefully, we will have an share price considerably higher than it is now?? Could there be anything out there which jeapardises a rising share price which we aren't aware of?. I am a holder, (52000), which, for me is a considerable ammount and is also considerably underwater.