Iofina Share Discussion Threads

[dot com] 29/5/2015 10:00

Thanks Bobsworth for taking the trouble to email Lance. Much appreciated.

[hew] 29/5/2015 09:58

Thank you to odvod, bobsworth, crosseyed and others pursuing and illuminating the numbers. They seem to be becoming a little clearer. Whatever the detailed picture I am seeing a most regrettable and, to me inexcusable, lack of the clarity we should expect from those using investors money. This digging for explanations should not be necessary. It leaves me wondering what else might have been inadequately explained.

[odvod] 29/5/2015 09:21

As I said before - accounting policy - they probably used to capitalized costs regarding all intellectual.So results were much higher. New management wrote them off.
Am I correct?

PS
here it is:


Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred. Costs that are directly attributable to the development phase of a new customised chemical manufacturing process or development of a natural gas/iodine field are recognised as intangible assets provided they meet the following recognition requirements:

-- completion of the intangible asset is technically feasible so it will be available for use or sale;

-- the Group intends to complete the intangible asset and use or sell it;

-- the Group has the ability to use or sell the intangible asset;

-- the intangible asset will generate probable future economic benefits;

-- there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

-- the expenditure attributable to the intangible asset during its development can be measured reliably.

Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits.

Development costs not meeting these criteria for capitalisation are expensed as incurred. In 2014, all research and development expenditures were expensed as incurred.

And under:

10. Intangible assets (Group)

Impairment 950,785 - - - - 950,785
Charge for
the year 180,000 65,000 23,375 - 268,375
At 31 December
2014 950,785 977,404 363,625 126,928 271,000 2,689,742


2,689,742 is written off + add what Lance talked about insurance etc 1.3 mil and you get 4 mil

[bobsworth] 29/5/2015 09:15

Dear Lance

Unfortunately, I'm finding it hard to understand your reply.

My understanding now is that the labour costs were fully incorporated into COS in 2014 but they were not (fully) included in the 2013 accounts which would explain that the labour costs noted as being assigned to COS exceeded the Labour + Manufacture O/H + Royalties amount in the breakdown of COS!.

Is my understanding Correct?

As you say "the bottom line" was not affected”, presumably the difference was to be found under Administration Costs and thus neatly reducing that category.

Is this presumption correct?

If this is the case I now wonder why the 2013 figures were not re-stated in the comparative notes of the 2014 accounts, with an appropriate explanation note.
If so please can you explain why an appropriate explanation note was not provided.

Sorry to raise these thoughts with you but shareholders like me are still no closer to understanding the overall explosion in costs in 2014 leading to roughly $4 million of the $6 million loss.

As a result can you please clarify further this explosion in costs in 2014 that accounts for roughly £4million to Iofina’s 2014 $6m losses.

I look forward to hearing from you,
Regards
Shareholder
………;……̷0;……R30;……230;……………………………;……̷0;……R30;……230;……….
REPLY

Lance J Baller - 6:58 AM (1 hour ago)
to me,Tom

No not correct, direct labor has always been included in COGS but not other direct intangibles such as manufacturing insurance, office personnel whose such percentage of time is based on production etc. These were included in the large SG&A number. The SG&A now only includes none manufacturing expenses. Again it does not effect the bottom line as the number was included in sg&a which would show higher Gross Margins but the bottom line the same.
Best Regards

............................................

My thoughts which Iam happy to be corrected on:

From Lance’s reply these additional $4m losses looks to be caused by an increase in their direct intangibles such as manufacturing insurance, office personnel associated with production. Other intangibles that could have added to the extra $4m losses include: intellectual property (patents, trademarks, copyrights, business methodologies), research, goodwill, franchises and brand recognition.

The question that now springs to mind now is - are these a intangible costs a one off cost or recurring.

[superg1] 29/5/2015 08:31

The water disposal SWD side isn't new it was mentioned long back re a JV.

Now they mention it again, and bring up the dormant water discharge topic.

Those comments have followed a period of actively pursuing the water side. If there was nothing in it, they wouldn't have mentioned it in such detail.

[bocker01] 29/5/2015 07:59

With everything else that's been going on its easy to forget that a heavy hitting water specialist with a pretty senior exec background was given a directorship at IOF this time last year so one would assume that quite s lot's cooking.

[superg1] 29/5/2015 07:54

Bocker

Just as a reminder the Hal original deal was ready to be signed well before a permit was achieved, so I'm judging it on those points and recent comments. EG there are actively moving on re the water depot and any negotiations etc.

Under the circs of a hearing and decision pending, it seems to make sense to leave that dog sleeping until a decision has been made by the HE. There is no point throwing more spanners into the works during the objection and hearing decision period.

There are some interesting water comments not covered before in that news, so something is definitely in play with others imo.

There are some obvious companies to mention as they declare there water services division interest in their own news.

3 I would def put in frame are Hal, Oasis and Select energy. On a broader scale water division (including other states) I'd put Hal at the top.

While the odd line may not mean much to some, it stirs up old comments and research for me. EG Hal wanted a link up to piggy back in with IOF for disposal and supply contracts where IOF already have good relationships with operators etc etc.

Note the brine comment in news (better control) and Midstates thinking of selling their SWDs. The Pennsylvania and other states circs too re the need to remove iodides.

The water side is more than about a depot or two imo.

[bocker01] 29/5/2015 07:39

You may know more than I do SG but my view is that a conditional deal is simply an agreement to have an agreement if a future condition is met in this case the water permit. Then it becomes meaningful, has value, and of course is binding. it is possible that such a deal would be announced alongside the water deal. Of course the best deals are negotiated when you actually have something to offer not when you say that you might have something to offer. Thus I would prefer to see the permit arrive over the next few working days then a deal but they could be simultaneous.

[superg1] 29/5/2015 07:34

Now and future

Group was EBITDA positive in Q1 2015.

On target to meet a production target of 220-260 MT of crystalline iodine in H1 2015

Iofina Chemical continues to expand and is recognised as a leading global iodine derivative producer of quality products. With the increased production from Iofina Resources, and an ever-increasing global presence, we anticipate record iodine consumption at Iofina Chemical in 2015.

"With the efficiency improvements implemented following our operational review we have been able to refocus our efforts in exploring new areas for potential iodine deposits. We have identified a number of sites for expansion and these areas show great potential even at today's iodine prices. I look forward to updating the market accordingly once plans are finalised."

Additionally, improved cooperation with our partner oil/gas/brine operators has resulted in increased brine water flow to our plants in late 2014 and into 2015, which also reduces iodine production costs.

With these improvements implemented we have been able to refocus our efforts in exploring new areas for potential iodine deposits. Currently, we are actively acquiring mineral rights in three new areas. These areas show great potential even at today's current iodine prices.

IC is committed to investing in R&D, and is currently developing new processes for the company in order to offer new products in a safe, efficient and economical manner.

IC continues to invest in its facilities to improve infrastructure, produce new iodine derivatives and improve our current process efficiencies and safeguards.

We anticipate record iodine consumption in 2015 at IC.

The Group has identified numerous expansion sites

We continue to review our operations on an ongoing basis and are keenly protecting our current resources and vigorously determining the best sites and approach for growth. Additionally, we are actively investigating alternative scenarios where Iofina would be more in control of the iodine-rich brine raw material, and not as dependent on others for delivery of this resource.

(This bit caught my attention, as above)

'Additionally, we are actively investigating alternative scenarios where Iofina would be more in control of the iodine-rich brine'

Having just spotted that my concentration has gone, as it's wandered off to the water permit side of things combined with operating SWD's, so I'll stop there.
There is a lot of water comment not mentioned in recent times, and as the permit decision is so close best wait for that then discuss what they have said.

My thoughts based on original IOF comments some time back, have turned to a water JV more complex than just a Bakken water depot.

[superg1] 29/5/2015 07:20

Someone asked re io1 'will they move it'?

Comments in the news



'Many of the salvaged assets will be reused at a future site'.

'relocation of underperforming plants'

So yes I take it many parts of io1 will be reused at a new site.

[superg1] 29/5/2015 07:19

Just had a quick read of it all. I can see the costs are dominating the thread so some lines first picked out of the news. My comments in brackets.

With the efficiency improvements implemented following our operational review we have been able to refocus our efforts in exploring new areas for potential iodine deposits. (Costs there associated with land men and lawyers to secure leases)

substantially reducing administrative costs that had surged since H2 of 2013 and early 2014.

While the Group was aggressive on the cuts it made, the full realised effect was only in the last few months of 2014

While the Group had achieved many positive effects of the corporate restructuring and cost reductions in 2014, the lower than expected iodine production, poor production efficiencies especially during new IOsorb(R) plant start-ups, anticipated lower H2 margins at Iofina Chemical.

IR has improved efficiencies at all the plants by first improving the efficiencies at one location, then implementing the process at all the plants. This included certain mechanical modifications, such as improved pumping capacity and design,

Major capital projects, IOsorb(R) plants #4, #5, and #6, were completed in 2014, but did not generate the expected cash flows due to the drop in iodine pricing.

(As we know io4 was on a high spot, fixed with a booster pump, io5 and 6 had 'modifications which affected yields at higher bpd, that has now been fixed. Plants lay idle, as did employees waiting for 'certificates'. No power at io5 so a generator was in place at $150k per month).

I'll pick put some now, and future comments.

[superg1] 29/5/2015 06:47

Bocker just working on reporting rules as imo in would be material.

Now (at last) I have time to go through the news.

[bocker01] 29/5/2015 01:44

SG deal in place does not mean an RNS because it would be conditional on actually getting the permit. The two would happen simultaneously

[arlington chetwynd talbot] 29/5/2015 00:17

You all seemed to be expecting a small profit, breakeven or a small loss. This is because the company failed to warn the market of the likely range of loss in the updates since year end. I believe that once again the company has broken stock exchange rules. If anyone can post the last broker estimates for FY 2014 I think you'll see what I mean. The key being 'material change'. What I'm saying is if the company hasn't warned the market that consensus will be missed materially it has broken the rules. Treat this one with the utmost caution.

[superg1] 28/5/2015 21:51

Jb

Deal in place would mean, an rns, IE contracts. Do I consider they have serious interest ready to go if they get the permit, absolutely. I've always said that.

The rns tended to confirm that re the comments about the discharge permit capability and virtually unique advantage. I've said it all along and IOF opened up for the first time in a long time. Why mention it unless there is interest.

There are a lot of oil companies and oil service companies looking to cash in on water divisions.

The Bakken is here for decades, water supply issues may come and go. The key is, if you discharge into a water system you own that water. It's known as storage rights, and IOF or a partner/customer can extract that amount in Montana or ND.

The amount on the discharge permit can be increased, currently 30k bpd.

[65jack] 28/5/2015 21:35

o/t transformational news out at NSCI a this afternoon . can see this going pretty crazy tomm as news is digested.

Woodword trust also a major holder there and 91% of shares held by II's

NetScientific PLC PDS Biotechnology reports positive Phase I results

[bobsworth] 28/5/2015 21:25

crosseyed agree. I will email Lance back

[bogg1e] 28/5/2015 21:22

Highly likely, they were approached by 5 companies straight after receiving the preliminary licence approval. Im sure it was mentioned that contracts are on the desk ready to be signed. Given Iofinas history with Haliburton it is likely to be with them. Also we are now coming into the warmer par of the year, which is perfect for building so I imagine that plant construction would begin fairly soon after the licence is confirmed.

[jbe81] 28/5/2015 21:16

Superg do you think Iof already have a JV deal in place subject to getting the water permit?

[che7win] 28/5/2015 20:09

I have to say I'm no further on with Lances reply.
This is not an adequate explanation as far as I'm concerned, it doesn't explain the costs outside of labour.

Further more, I am now finding it impossible to compare the results H2 with H1 as we seem to be comparing apples with oranges.

H2 was meant to be a much improved half on costs, it's a pity iodine price hadn't been more stable (just to compound things).

[bogg1e] 28/5/2015 20:06

Thanks to Naphar for this. Ive been wondering whether we were profit making from Toms update in September; $7.5 mil and adding to it monthly, we thought at the time approx. $375k per month, meaning at year end they should be at about $7.5 mil + 4 months at $375, or $9 mil. Actual enmd of year cash was $6.8 mil but crucially with $3.5 mil in receivables, which would come to $10.3 mil cash and equivalents. This suggests that iofina have been earnings positive/in profit from September last year, which would be 9 months now. Sweet if true.