Iofina Share Discussion Threads

[odvod] 28/5/2015 13:02

prices still decreasing but the India import quantities are increasing strongly. Smart people restock at a sale. Which also means that it will take some time before present stock bought at low prices will be used and there will be a need to buy new iodine at higher prices.

When Companies go down the tube it is all about squeezing the last cash out of the Co regardless of the profit and loss and the future.

[bogg1e] 28/5/2015 12:57

Next month when lance is over I would expect to see more enthusiasm. We are told that the market is forward looking, which looks good, as they are now finally making a profit. This is brilliant news isn't it? We've been waiting two years to hear this. We all knew 2014 results would be at best mediocre, so once the market is over the shock of seeing a $6 mil loss, it will reevaluate and realise that the company is now doing well and progressing onto better things. As for the iodine price, what could possibly keep it this low for long? We know its an engineered situation, not one of organic supply and demand and so will come to an end. Cosayach will be gone this year and the water ruling is fairly imminent. I see every reason to expect to see the iodine price rise and hopefully considerably this year.

[che7win] 28/5/2015 12:55

MM, It doesn't for me, apart from a possible opportunity that may present itself.The iodine price rising is the key.

[monkeymagic3] 28/5/2015 12:44

If we get a negative water decision next week, the picture changes significantly...

[che7win] 28/5/2015 12:43

I'm not contemplating selling any for the simple reason that when iodine rises, the plants will at that stage prove their worth as profits rise exponentially.

If our costs are say $27 per kg produced, we are maybe making 10% gross profit. If/when iodine recovers to $36kg, our gross profit goes up 300%.

I reckon next year iodine will be recovering, meanwhile we can grow strategically - grow IC as well as IR.

If we get a positive water decision next week, the picture changes significantly...

[woodpeckers] 28/5/2015 12:38

On the subject of costs, presumably there have been quite substantial costs associated with the water application.

[bogg1e] 28/5/2015 12:33

SG, cheers. Btw when is the Chilean parliament to vote on the water reduction law (650 liters per second to 150 lps)? I thought it was in june? Also when are the pending cases for cosayach? Arent they in june also? Thanks.

[bogg1e] 28/5/2015 12:31

serratia, the royalties are quoted in the figures somewhere, sorry but rushing around so no time to find them atm, but im sure I saw them. Something like $650,000 or $65,000 something like that.

[serratia] 28/5/2015 12:28

hew,

From memory iodine royalties are 3% so they would increase with production but not enough to account for the COS increase.

[bogg1e] 28/5/2015 12:01

serratia, you mention the risk of the atlantis asset, that it may not be commercially viable or whatever. The atlantis asset was pretty cheap, about $1000 per acre? I think sg knows more on this, but the numbers are far from concerning.

[bogg1e] 28/5/2015 11:48

Serratia, good points. Im not worried about the brine disruption because if they have got costs at IR down to $20 per kilo and have consistently hit 40 tonnes or more for about 7 months in a row, it suggests that there is generally consistency and stability. We know that the fracking disruption was meant to last until spring 2015 (ie now), but given lances estimate for half year at 220-260 tonnes (which would be about 40 tonnes per month) it suggests the brine disruption will continue til mid year, so hopefully in a month or so, we will get the half yearly production update and if the forward statement includes an increase in excpected numbers then we can assume that the fracking disruption is essentially over. IO2-6 between them could only produce about 70-80 tonnes max between them so we are consistently running at about 50-60% capacity atm. But lets not get too disheartened, the annual report is for last year and we have been making a profit since probably October 2014 (as we had $7 mil or so sept 2014 why was there only $6.8 mil at year end? Did they lose money or is it simply an adjustment in the accounts) to jan 2015. At least 5 months in profit, so costs are obviously now under control and operations are consistent.

[hew] 28/5/2015 11:38

Serratia, not managed detailed read yet, but re your list on Brine source issues and COS, are royalties mentioned? Might the Oil Cos have insisted on increasing them? (Increased potential concern now of course.)

[serratia] 28/5/2015 11:21

WRITZ,

I haven't looked at the manufacturing process in detail so these are just thoughts - If the ppm is low say for example half what would be expected they'd have to run twice the volume to get the same output. Labour is fixed, chemical prices constant (?) but twice the other variable running costs. I don't know how that falls out but the big jump in costs shouldn't be labour/ chemicals (?). Total volume of brine must have increased as output went up so the jump must be either running costs due to brine quality (?) or manufacturing overheads. Not sure what goes into the latter but they would have risen as more plants came on line.
I focused on the brine issue as the comments I picked up led me in that direction. I can't eliminate overheads as they don't say what they are. It's one or the other though or both.

EDIT- Maybe plant overheads have jumped as they say the performance of the new plants is below what they expected.

[freshvoicem] 28/5/2015 11:15

Serratia

A good summary and reading between the lines shows where the problems that don't get mentioned really are.
As we depend on brine these really must be sorted soon.
Still can't understand the increased cost of sales though. Directors started to take salary again but that is small compared to increase. The key question for the AGM is 'In the increase in cost of sales a one off expenditure, or is the the ongoing cost for the future?'

[uppompeii] 28/5/2015 11:03

I'd do it if I were you cyber...

[cyberbub] 28/5/2015 10:59

I can sell 100k shares at full bid price at the moment.

[writz] 28/5/2015 10:56

serratia, surely lower ppm or interrupted supply would have a direct impact on output and therefore revenue, but only a marginal impact on costs (ie you're still paying for power, labour and maintenance even when you're 50% below capacity). Unless they're trucking in brine from other locations. That might explain costs - but not the impact of low iodine prices.

[serratia] 28/5/2015 10:29

I've read and re read the report to try to discover why the cash flow was below my expectations. This may sound negative but I haven't sold any shares as I still believe in the future prospects.
Comments I picked up from the report -

IR - Procedures, responsibilities, design were all improved. Some of these points are basic issues that I would have expected to have been sorted by now eg responsibilities. This implies that the whole production process is/was not under control.

Goal - To be a lower quartile cost producer. This implies they're not yet there.

Brine - They're looking for more control of the brine source. This implies problems with brine quality/availability. They say that practical production quantities are below theoretical capacity. Again indicating lower than hoped for brine volume or quality.

Plants - They're looking at relocating underperforming plants. Note the plural so maybe it's not just IO 1.

Risks - They say there's no assurance of commercial recovery from current acreage.

Output - They're not getting the expected returns on IO 4/5/6. Probably due to the iodine price but how well are they performing ?

COS - This is the big issue for me. Labour, manufacturing overheads, raw materials up from $2.3m to 10.9m. Staff costs have only risen from $5.2m to $5.7m so where has the cost increase come from ?

Patents - They comment on the importance of the IPBC patent so that must be an important part of IC. Iodopropyl butylcarbamate.

Upside - Cost reductions only materialised in the last few months of the year.

Conclusions - It looks to me that my assumptions on brine quality/availability were out of step with the actuals. I thought they had numerous options on high quality streams. The above comments imply that they have a source problem combined with hopefully past poor production procedures/controls.
The big jump in the cost of sales seems to confirm this view. Raw materials (non brine) shouldn't have changed much in costs, labour only slightly up. It looks like a low quality brine supply driving up the COS. At present they only had a 10% GP which is wafer thin.
I had thought they'd do better than the actual figures by reducing the overheads but I think it's a brine supply issue.

[kattatogaru] 28/5/2015 10:27

To me the whole tone of the RNS was very downbeat, I think they are managing expectations downwards having previously inflated them unjustifiably, which is understandable. As some commentators have said there are some rather odd statements in the accts and we need some clarity on those. One thing that worries me is the continuing, very modest salaries for the management team. It was a necessary step for mgt to take a haircut last year due to the dreadful performance but how long can IOF retain good managers on modest salaries if more lucrative offers beckon, especially if the horizon for profitability is receding?

AGM should be an interesting show. Who will be there?

[superg1] 28/5/2015 10:20

Cross

One snippet that may help you, it doesn't help me.

IOF adopted a new real time accounting system last summer.

[superg1] 28/5/2015 10:17

On the basic point.

I still don't know of a sector which has such limited producers, and limited resources, that has the major suppliers (Chile) in such difficult and potentially company ending circumstances.

In fact I don't know any sector regardless of it's resources under such a threat.

All the facts and events in play now and the near future must have an impact on the price in a significant way.

The low price is simply unsustainable for nearly all producers.

SQM have the added threat over their lithium leases, which could severely dent revenues or they could lose them altogether.

Algorta pipeline supreme court case pending, that could end them.

RB just died.

Cosayach (the top crooks) are odds on to die.

All other than SQM are probably losing cash. Cosayach has kept going by water theft, and massive tax fraud, with more potential connected fraud raised this week.

The recipe for low prices is heavily influenced by the weak peso, but has been executed by SQM. Talking of those, their accounts are being scrutinised too and there may be some more fraud revelations to come for them (likely).

The price battle reasons are all very obvious, is openly admitted, and is unsustainable.

[superg1] 28/5/2015 10:03

Roundup

There are other snippets like that and I intend to have a good look at them.

They have already said they have numerous sites, but it seems the drilling over the last year or so has turned up some big ppm areas.

What I would like to know is how many viable sites there are in relation to that comment, bpd and ppm.

I don't want numerous sites info any more, how many, what bpd and what ppm.

I understand they need to protect some info pre securing of the leases, but where it is all secured then let us know what it is.

In short it's said there are a few io2 sites ready to go, but that bit seems to be new info.

I also have questions re the water, rights of way, leasing etc. Is that a new site as all the rights of way and leasing for the current one is done it seems.

[superg1] 28/5/2015 09:58

hxxp://www.seair.co.in/crude-iodine-import-data.aspx

Note the price fits what has been said so it's a good guide but will be 3 to 4 weeks at least behind due to export/import time frames as it's India.

You can use the code 28012000 in the search box.

Any amount of 21,600 or broken up figures amounting to that is Cosayach.

On occasions those are below the going rate, but that is what SQM have done to them in the price war.

Turkmenistan stopped supplying late last year. Anything below $35 per kg must be below their opex. They do about 500 mt per year