Iofina Share Discussion Threads

[che7win] 19/6/2015 22:59

Naphar,
Thanks....im sure you and others are tired after a long day....much appreciated.

[naphar] 19/6/2015 22:48

Thanks rhw

[naphar] 19/6/2015 22:48

They have no plans or need for raising funds. On flip side they do need the Panacea loan, and they do need it for operational and growth reasons.

They do not anticipate extending the bonds to be an issue and bond holders are very supportive apparently. I agree, we want an improved share price prior to formal re-negotiation.

Yes, it would not be unreasonable to expect a lower cash position at end H1 due to building this strategic inventory. But that is my observation and not a comment from Lance or Tom. I may end up being pleasantly surprised.

[rhwillcoll] 19/6/2015 22:42

Naphar: many thanks for all your accurate posts from today's meeting.
I wish to confirm that what you have said below was exactly my understanding of what was said at the meeting:

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naphar
19 Jun'15 - 22:19 - 33912 of 33917 1 0

Huh? I am tired but I am sure it was 100 from optimisation (total not per plant) and not 200 or 50

[ansana] 19/6/2015 22:38

Naphar well this says it all. ", but Lance said at last years AGM, he had been worried about his investment. He is very relaxed about it this year, given where they are now and what has been achieved in past year."

[che7win] 19/6/2015 22:35

Naphar,
Thanks, now it clicks for me!

It's because we are moving into a new phase of selling raw iodine, that is what I was missing. Fair point, really appreciate you replying.

That is a new ball game in a way, so the cautiousness now makes sense.

Ansana posted earlier that funding wasn't a problem...I am not sure what way to interpret that.
We have two years to negotiate, but what we don't want is a lowering of the conversion price. To that end, we need a higher share price, or growth. That is where my thinking is..., appreciate if there is any further insight there.

I expect cash will decrease this H1 then as inventory builds, that should make sense after today's valuable comments.

[naphar] 19/6/2015 22:33

I cant remember if I posted this bit earlier. Dont have my notes to hand, but Lance said at last years AGM, he had been worried about his investment. He is very relaxed about it this year, given where they are now and what has been achieved in past year.

[naphar] 19/6/2015 22:30

Rob
I personally think thats a reasonable interpretation, but I am not sure Lance was ever the real driver of over optimistic expectations. I think we largely have ourselves to blame for that. Although I also believe Lance has learnt some lessons and is being more cautious than he previously was.

[naphar] 19/6/2015 22:25

Che
Because they are being cautious.
They need to build customers confidence.
With selling smaller batches of 4-5 ish mt a time.
Getting good sales prices for those batches, above market prices.
Build that way, then move IO1. That might then have bigger sales or offtake agreements, which would not get such a premium price.
They need to build consistency and confidence, and dont want to have inventory they cannot sell easily because that trust has not yet been built. They are trying to manage growth and cash flow to most efficiently grow the business with less risk.
Edit: they are also still collating lessons to build best plant possible so not quite ready.
I hope that helps.

That was my take. Happy as always to be corrected. (But I can be stubborn when I am sure I am right :-) ) i may have also forgotten some of the reasons, it has been a long day.

[roboben] 19/6/2015 22:24

Not having been at the meeting I appreciate the feedback and the analysis of it.

Thanks folks!

The impression that you've given me is that we now have a Tom company rather than a Lance company. Solid, secure and sound. Maybe not exciting in the way that it was when I first invested but given the past two years I'll settle for this. I doubt that we will now be attracting the hot money of speculators but it does look as though IOF is now a sound investment for the medium to long term.

I hope that I am interpreting the posts correctly.

[naphar] 19/6/2015 22:19

Huh? I am tired but I am sure it was 100 from optimisation (total not per plant) and not 200 or 50

[che7win] 19/6/2015 22:17

Naphar,
Thanks for those points.

A very good point you make on profits versus cash flow. In addition, we will have to look at the cash flow along with inventory as you state to get the overall strategy building inventory for orders.

This business is maturing, I think it will be a good cash generator and largely derisked, let's hope iodine does rise here and Finncaps comments come to fruition.

Naphar I get the optimisation on current plants, but I still don't understand the rational on IO1 not being resited ASAP.

[naphar] 19/6/2015 22:16

Mad, 4 more months of special tweaking, then just normal activities to constantly strive for better results.

Re the accounts, I am happy that the answer to my question, on why the accounts did not seem correctly balanced from H1 to H2, made sense. I did not suggest the inventory write off topic, or the redundancy costs, Lance put those forward as the reasons. Without knowing the numbers, I am content I had an honest answer.

I am also reasonably content that they were one offs unlikely to result again this year. But that assumes we do not have further falls in iodine price.

And as posted some posts ago, the opening inventory was valued at lower of net realisable value and production cost. NRV would have been circa $30/kg. So some high production cost inventory from 2014 will be valued at $30/kg, later output may have been produced at less than that. So i would guess the mixed inventory value per kg in opening inventory is between $20-30/kg. That means gross profits in H1 may not be as high as we may have expected. But they will bring in cash.

[madchick] 19/6/2015 22:15

Lance was voted in again - was it for a year again? I searched last night for the resolutions to be voted on and I couldn't find them, so not sure if it was stated in there.

[1madmarky] 19/6/2015 22:11

Yep naphar, I can't walk, count and post at the same time. So we are actually talking about getting another 50mt pa from optimisation. Not to be sniffed at but again steady as she goes.

[naphar] 19/6/2015 22:06

Ansana - snap

[madchick] 19/6/2015 22:06

naphar - you got there more quickly and more concisely than me!

Thanks to ansana, MM1, naphar and those who texted to ansana, for reporting back so far. Any other impressions gratefully received!

I'm a bit disappointing that it seems to be more fiddling about for the rest of the year (that'll be around 18 months in total), but at least they're getting there.

naphar - you're satisfied that most of the loss was due to one-off costs, then?

[naphar] 19/6/2015 22:06

Mad
I believe the 100 and 200 are being taken out of context.
A new plant (IO7 onwards excl mobiles) could reasonably be expected to do 200mt.

Optimisation could increase annualised output by 100mt from current levels.

At no point did IOF state current plants could be optimised to produce 200mt average.

[ansana] 19/6/2015 22:02

Yes beefy corrected 100mt optimisation not 200. Fat fingers. I am content with my investment. Fullness of time and all that. As I said in a previous post I would rather they acted cautiously and prudently with so much uncertainty with oil and iodine prices and the Chile factor than they splashed my cash and over extended. I can wait.

[madchick] 19/6/2015 21:58

But if we are currently averaging around 10 MT per plant per month (assuming 5 plants are doing around 50 MT per month) that makes around 120 MT per year per plant, so, as 1MM implies, 200 MT a plant would be a significant increase.

If they optimise by 100 MT per annum, that's about 11.5 MT per month per plant, or 690 MT (700) per annum total across all plants or 140 MT per annum per plant.

So, the statement of 100 MT being half a current plant doesn't really add up or is it me?

If we expected 100 MT to be half a plant (I assume annual production), we would be expecting at some stage to attain 18 MT per month total per plant. This would mean a run rate of just over 1000 MT without any additional plants. I can't really believe that.

Something's not quite right?? I have just been at the margaritas...

[At best, they meant 100 MT would be half an optimal plant, I guess.]

[naphar] 19/6/2015 21:42

1MM
Whereas, my interpretation is half a new plant would be 100mt.

If half a current plant were 100, I would be happier as that would put our current 5 plants on annualised output of 1,000mt, and I just do not believe we are anywhere near, with it more likely being 600-675mt based on Q2 output.

Again, just my opinion.

[naphar] 19/6/2015 21:37

My take home is, steady as she goes. Hopefully worst behind us.
Managing what we can control. Mitigating risks where we can and incentivising brine suppliers with variable instead of fixed royalties, which is, perhaps surprisingly, proving to have financial benefits to IOF.

Good growth in front of us, but not at any cost, and not the phenomenal growth we were (most of us) anticipating a couple of years ago.

They are looking to get instis back on board and believe they will in time, as they have delivered a lot past 12 months, things are turning round, and instis will become interested again over time.

I am not for one minute trying to be negative here, just realistic.
If I had more funds, I would be looking to invest some more here for the medium to longer term, after today. I would not have said that yesterday. But the whole approach today, pleased me in many ways, and I got satisfactory answers to questions I'd had regarding results, that had been on my mind (mainly confirmation of inventory write down impacting H2 results) as well as reasons for delay in accounts (where I am not happy with reality, but appreciated responsibility taken by Tom, with comment on lessons learnt, and commitment to improved timelines on future results).

Please do not take this as investment advice. Its just my thoughts/feelings from the meeting.

[1madmarky] 19/6/2015 21:28

Half a current plant would be around 100mt. I'm happy with that interpretation

[awolagain] 19/6/2015 21:26

Look forward to it....so the golf went well lol!