Iofina Share Discussion Threads

[rhwillcoll] 20/6/2015 11:33

Re SQM and latest re CORFO, this is my understanding of that area re iodine, from the AGM: the proposed Gov't revocation will not affect iodine mines directly, but will affect potash and lithium. But it is the potash that keeps their iodine prices low.

[naphar] 20/6/2015 11:26

IIRC, they wouldn't give an annual production target for iodine mt. But suggested an announcement may be made in next month or so.

For those wondering about recycling, they still do it bit its not much output, its part of IC as we knew, so excluded from output figures as it always has been (to my knowledge).

And their tonnage figures are based on crystaline weight. Some producers quote output in prilled form, others crystal and some flake form (a new concept to me. Iof will not produce flake)

sales price is quoted based on iodine content not weight of what is sold.

Sales price is quoted per uodine

[superg1] 20/6/2015 11:22

Spike

I should be doing something else but spotted the same point.

If it helps I just listened to Tom saying it was unsustainable in the presentation video.

No need for that though as we know some Chile producers have opex higher than the current price.

The regain market share bit by SQM is a bit farcical as what they mean is we want Cosayach out of business.

SQM want 30% of the market v 26% now. 31,600 mt in 2014 means 1264 mt extra.

Current claimed opex $22 per kg v current price of $30.

Gain at the same price on 1264 mt = $10 mill dollars.

Sold last year 8,800mt. Loss for the change from 38$ average in 2014 to $30 now = $70 million.

So the plan is to lose $70 million in profit to gain $10 million.

It's all about putting Cosayach out of business, it's an unsustainable price for SQM as well.

Considering the pain going on at SQM they surely have a limited time frame where they can keep the pressure on.

It will feel like the sky is falling in for them if those water rights get suspended.

[spideyyy] 20/6/2015 11:21

Hi rogerbridge
I looked out to see if Mr Big was there but couldn't see him
On the water permit I got the distinct impression we need to forget that for some time
Lance and Tom are not so sure what the JV partners think of all the trouble trying to obtain it(have their partners enthusiasm waned?)...regards spideyyy

[spike_1] 20/6/2015 10:41

Hi monts: Tom actually said 'the current price (iodine sales)is un-sustainable' (I have 5 pages of notes).
Best wishes - Mike

[naphar] 20/6/2015 09:20

Rob

On the Atlantis water discharge permit opportunity, Lance said they cannot just extract those barrels further downstream, they also need a permit to extract even though it is their own water. That was news to me!

[roboben] 20/6/2015 09:15

Many thanks yet again for all the feedback from the AGM.

I do find it reassuring that someone who was actually at the meeting (Monts) seems to have come to the same conclusions that I have reached just from reading the write-ups and knowing the company for a few years.

Disappointing conclusions in some ways, but at least there appears to be a sound investment here and there remains the possibility of upside from a variety of directions (albeit none of them certain).

When RB folds the iodine price looks likely to rise. That in itself could be transformational.
Early JVs on the iodine side could follow. Who knows what kind of impact that could have?
There could be further disruption to iodine supplies from other Chilean suppliers.

The water permit could be granted! Long term, I know, in terms of actual revenue but it all helps.

There's the Atlantis Water resource which the company is sitting on and which is so far unexploited.
They may have oil.
They may have Helium.

(I was tempted to add that they may have the elixir of eternal youth, but I restrained myself!)

I also suspect the the drop in price when the water permit was refused was actually overdone and there is scope for a gradual rise after that. Not an exciting surge, perhaps, but a rise nonetheless.

All in all, I don't think I'll be selling just yet!

NAI DYOR etc.

[rogerbridge] 20/6/2015 08:54

Months 12, exactly my take, we need II's on board if the share price is going to lift. A lot of dissapoined PI's around who probably won't be investing until profit growth is established.
Water or iodine price increases could change the game.
Mind you, boring and predicatable companies are what II's go for.

Did anyone see Mr Big at the meeting?

[superg1] 20/6/2015 08:13

Naph

100mt also gives some interesting figures as does existing production rates.

So on all the comments we have 10% (60mt ish) to 100mt of optimisation left and 200mt extra for an io1 move.

They will have taken the cautious approach re the 200mt figure for the io1 move.

Before I sign off and I must. Very interesting permit comments which fit with things I have heard. I'll have to check all the posts to see If bits I'm aware of are listed.

And before I forget, July 17th is a key date re SQM and CORFO something to do with the judicial process.

[naphar] 20/6/2015 08:08

I would assume the redundancies were also a driver of turnover. Why stay somewhere where people are losing their jobs, when there are better opportunities available.

[monts12] 20/6/2015 08:07

Spike I think the perfect storm comment was in reference to the last spike in iodine (chile drought, Japan tsunami, etc). With respect to current prices, the general impression given was that they may be nearing the bottom, not that they were unsustainable.
If I get time, I will post my notes at some point but I think Naphar has covered it pretty well.
Overall I think the audience was too kind to Tom and Lance, they probably expected more of a grilling but to be fair they did answer all questions I put to them. My opinion is that IOF will not be the super growth stock that I bought in for. Lance seems to be positioning himself for an exit from the board in the short to medium term together with reassurance that Tom knows what he's doing and that there will be more board appointments.
Sorry to say IOF are not going to set the iodine world on fire any time soon imo, increasing production will be a long arduous affair and any significant upside in share price will be as a result of increasing iodine spot price ($35/kg by end of the year was mentioned iirc) and insti investors being persuaded to return in a meaningful way.

[superg1] 20/6/2015 08:04

I need to focus on doing an SQM report (request from someone). So will pop back later on, perhaps this evening.

One more point though as it was one unanswered but covered a bit now and just mentioned.

Employee's high turn-over etc.

As in prior comments, oil boom and high wages etc, it will be far better now.

Sorry if it's already been mentioned but this will trigger a light bulb for most of you.

NW Oklahoma University (Alva) has a number of Chemistry students going through it each year. As a project pre io2 they worked with Arysta to do an iodine survey in the locality. There is a report in the university archives available to view.

Thus the university has been a source of employees making their first step into the chemistry employment world, and acts as a convenient starting point for some.

Naturally such a route will involve a high turn-over.

[naphar] 20/6/2015 07:51

Spike, 1MM
Nice summaries

[naphar] 20/6/2015 07:50

Sg
Probably no need to check the calculator.
Yes, an additional 100mt would fall almost straight to the bottom line as most costs are fixed, they even stated most people have to check that in discussions but it makes sense.

I dont think 200mt more from optimisation is at all likely. They refocussed us to expect more like 100.

Interestingly I suspect much of that will come from IO2 as it is nowhere near its peak output due to operator changes to pipeline brine feeds to the sight (an extra loop if that makes sense?), so IO2 is the next focus area. Explains why output growth seemed so low, given we always assumed IO2 was doing well.

[che7win] 20/6/2015 07:35

Spike,
Appreciate your feedback today also, it reads well.
Overall, I like to hear warts and all, it's only when one knows the negatives that one can be confident in the overall picture.

I think from here they are largely on the correct path in letting the iodine market recover and working on supply agreements. Io1 costs to move - they will want to ensure iodine has bottomed.

The inflection points make sense to me, also they are at an inflection point on increasing profits...our 5 plants are now covering admin more or less, so profits should arise from here on.
One more plant or iodine rise will help.

Up until now, the plants we have built have not demonstrated the asset they are because iodine fell amongst other things. We only see the real benefit of running them when iodine rises.

Last point Naphar made:
" 19 Jun'15 - 17:41 - 33891 of 33931 2 0

I feel the need to correct MadMarky's staff turnover post. It was bad, because oilies were paying $90k plus vehicle for staff. No longer are and people valuing solid stable jobs, so retention better."

That is insane money - I think that illustrates how much fracking companies can cut costs and live with cheaper oil as $90k salaries will fall sharply as employment falls..

[superg1] 20/6/2015 07:28

Coldelco

There are dozens of reports if anyone wants to look them up.

This one gives the flavour.

The Chile gov wanted to attract new blood to the lithium sector and they out it out for tender.

SQM won the tender, which turned out to be a sour event, dept mining minister resigned. all sorts of allegations re SQM and the tender was withdrawn from SQM and has been pout on hold.

Then up pops CORFO the gov dept trying through the courts to rescind SQM leases,

One analysts says 'Nah can't see then ever doing that they need SQM to continue'

I must dig out the name of that analyst and send some 'interesting' info :-)

[superg1] 20/6/2015 07:19

SQM

Having read some 'bits'.

Analysts have the impact of the CORFO case as covering 50% of SQM revenue not 39%.

The 50% is a good call as it covers the 'like' production arenas that SQM mention from time to time.

In that case it's all about the lithium leases. There is no mention as far as I can see about the main iodine production areas. The location in question is not the main iodine areas.

As mentioned in posts way back.

Ponce Lerou was the head of CORFO at one point and more or less gifted himself the leases.

That was back in 1993 where lithium wasn't such a big thing, SQM were after the nitrates. Since that time Lithium has become hot sector with Chile having some of the best commercial resources. The Chile government considers such resources a national asset and with SQM in control of it (plus SQM antics)they are not getting the returns they should from such an asset.

Hence CORFO have come up with the potential grave breach of the lease and are determined to end the contract through the courts.

With so many articles about it, it seems very clear that SQM's changed the way they were doing things in 2009.

It must be back then that that started selling lithium at discount rates to companies they own, and then those companies would sell on the lithium at the market price. That way SQM reduced the amount in royalties they needed to pay.

SQM have offered something like $17 mill in compensation having avoided $9 mill in payments. CORFO have told them to stuff it.

CORFO demands through the courts are, the lease to be ended, payment of the $9 mill, payment up to 2030 (lease end date) as if the leases were in play, and fines etc.

One analyst is very blase about it (others are not), quite frightening really as the one clearly don't understand the history and current circs about it.

I have it in the back of my mind that the Chile gov want Coldelco in charge of the lithium, I'll do some work on that.

As for why they are taking this route. Quite simply they want the full value of the national asset to help fill the government coffers for spending plans. With SQM holding the leases they are not getting that.

[spike_1] 20/6/2015 07:13

I have little to add to the previous posts, all of which are an accurate reflection on the day, but here goes in random order:

They actually said there was scope for further optimization that could add another 10% to output – and separately they said optimization would be equivalent to half a plant, which with five plants is the same thing.

Other stuff: published iodine price as supplied to India was not totally reflective of the market as a whole and they were selling their raw/prilled iodine above that price.

Che7win: I told them I was very disappointed they had not already started moving IO1, as – worst case scenario – they could mothball another plant and use it instead at a better site. They said it had been one of the scenarios that they had considered, but didn’t specifically explain why they hadn’t opted for it.

Several times they used the term ‘reaching / having just reached’ the ‘inflection point’ or as we might say: ‘tipping point’. Whilst they never actually explained what that alluded to, my guess is two things:
1) Iodine market price bottomed and
2) only now have just enough reserve of inventory to enable an off-take agreement
and the off-take agreement will - IMO - initiate (and quite possibly pay for) the move of IO1, which they were estimating at 1.5 – 2 $m (but they mused that it might even be less).

Cost of new plants should be around 2.5m. Some of their newer plants had cost 4m each because previous management had gone for ‘time and materials’ instead of a fixed price contract!

Speaking of the past, they said they had ‘been to hell and back’.

Re last year’s costs: we asked Tom if he had thrown in the kitchen sink, he appeared to agree and specifically said ‘there are no other big hits to come’.

Earthquakes: no conclusive evidence in any direction, and they tended to be where the really big SWD’s are – much bigger than the ones we utilize, but equally there are other large SWD’s where there have been no earthquakes. Doesn’t consider it an issue of concern for IOF any time soon.

Tom took personal responsibility for the change in results date resulting from delay in financial info’ – partly due to changing their accounting package to the same as IOC had been using – much better than previous.

They answered q for just under 2 hours, and from memory only two or maybe three times did they not provide an answer as it ‘would require updating the market’.

Lance looked to be in good condition, and when asked about his commitment long term (beyond the next 12 months) simply said that the company was now structured so that the loss of any one individual should not adversely affect the co. It was also clear that Tom was now totally hands-on and had a clear idea of where IOF were going.

Separately Lance said that they were looking to strengthen the Board to ‘add value’.


As for the future and for overall iodine supply – they used the term ‘perfect storm’ and said the current price was ‘un-sustainable’.

They talked briefly about all their competitors, and in particular RB who they expect to exit completely any day now and surmised they had / have about 300mt to shift. They don’t anticipate SQM going under, but acknowledged their current and potential difficulties ahead.

Overall they appeared confident and relaxed, and I, and I believe most others, came away equally so, albeit expansion at current iodine prices will be a slow process.

Best wishes - Mike

[superg1] 20/6/2015 06:59

Naphar

I said last night a few things caught my attention. Prior to reading the current posts I had fired off an email hoping to get a response re the 200mt comment.

That was more about the impact on opex rather than the extra production, I have a scalar in mind due to things that have been said before the AGM about opex ranges based on tonnage per month.

At the current production rate they are very favourable, but at 200mt extra potential then I had to check the calculator was working properly.

The indication seems to be that extra tonnage goes straight to the bottom line as most of the costs are fixed.

There are a number of other points too but I have to check the 150 posts or so.

[captain_kurt] 20/6/2015 06:47

RB energy folding will be the trigger for iodine prices to rise.
They know employees in the company that are expecting that to occur any day

[ansana] 20/6/2015 06:44

For those of us who didn't go ......

hxxp://www.stocktube.com/video/iofina-ceo-presents-final-results-on-agm-day

[arlington chetwynd talbot] 20/6/2015 01:11

Have to agree, a decent read for once. Maybe you should play more golf Graham?
As I said earlier, expanding rapidly in a low-price climate is suicidal, so the brakes make perfect sense. I also pointed out that debt-term might be extended which appears to be on the cards. Although I'm not expecting much in the way of profit this year, a moderate amount of earnings for '16 should be achievable once prices edge up and a proper strategy with good management is in place.
Still plenty to do do but the crisis appears to be lessening somewhat.

I see finnCap target 45p? If that's still on 3p for '16 then they're going for around a p/e of 15 which to me is a bit rich given events and existing issues but not surprising as it is NOMAD and J/B.

The stock is about right for now.

[monkeymagic3] 20/6/2015 00:10

Thanks for all comments Naph. An honest report without "polish", exactly what was needed.

[senden11] 19/6/2015 23:10

Many thanks to one and all for the generous meeting feedback which is much appreciated - I would have gone but, as of this week, have had an enforced return into full-time employment!