Iofina Share Discussion Threads

[tackems] 21/6/2015 16:08

We have jus got home after spending a few more days in London after the AGM and having a quick read through some of the reports I may be duplicating things so please excuse me but here are my notes on the day. Lance seemed happy with tings and therefor so do I!

• Chilean desert ore mined 1m down gathered into size of a football pitch and 80 feet high and sprinkle water on it to leach out the iodine.
• IOF have Good geological information for the next generation of iosorb plants which we can bring on line in the future
• USA 6% producer of Iodine western Europe and North America consume over 60% of the iodine used. Iofina has a nice niche in USA to provide 20-25% of USA iodine supply very rapidly.
• Iodine price has been an issue in the marketplace. In 2011 a perfect storm of events. Japanese Tsunami and Chilean supply illegally using water also other production issues prices spiked some spot prices over $100 per kilo. Currently supply and demand in line with each other at $30 per kilo some high cost Chilean production not sustainable.
• Iofina plant has had a change in technology to handle dirtier water as the Oklahoma water is not as clean as in the original blueprint in the State of Montana.
• 2014 was a nice rapid expansion period for the company but was not focused on the operations properly to reduce the cost per kilo.
• Going to exceed 280 metric tons for the first half year not including a small amount of recycled Iodine
• Crystallised form of iodine that IOF produces is 85% iodine and 15% water with no other significant impurities. IOF also has the technology to remove the water to produce 99.5%+ prilled iodine and also sell that into the market. The usually don't do this though as IOF Chemical can use 85% iodine in the production of the derivatives. Prilling is a small cost step to basically remove water.
• IOF has a worldwide reputation in the Iodine world as a quality producer.
• Iodine is used in making of Simvastatin but not Torvastatin and Tom himself takes Tovastatin for his cholesterol Chemical CEO gives him a hard time for this!
• IOF feels the water ruling was incorrect. HE says the statutes have been interpreted the same way for 30 years and he overturned this. Two channels of attack firstly back to the Commission to understand the change in interpretation (others in jeopardy?) and also within the next 2 weeks to the Judicial review to challenge this particular ruling. IOF will 'fight' for this water permit however no major resources to this until they know if it will be granted. IOF feels the Commissions review will occur but probably more likely than not that will need to go to a JR. Commission will not overturn events if there is a JR in progress so IOF maybe delaying things to see what DNRC say. The courts may invalidate all other water permits in the State! IOF feels confident in getting 100% (not the 50%) amount of 'firm purchase letters' even though this is highly unusual but O&G companies may be prepared to do this because of the uncertainty of the situation. My question answered - yes same procedure if it was IOF's own water used.
• 12 to 18 month build out when water awarded dependent on weather. Right of ways already taken care of. JV partners notified and they (note plural) are disappointed. No preferred partner chosen yet.
• IOF have 'models' in place to protect themselves should iodine prices fall slightly from here and also to take advantage of price recover.
• Selling prilled and crystallised iodine but some big buyers will not procure unless they see IOF have a 'strategic' inventory in place so they will be building that over the course of the year
• Mobile units are designed and ready to go but part of strategic review was lets do what we know best and have operational control, startup procedures in place. Relocation of IO1 is a much lower risk (3 to 6 got cost per kilo up not down) so targeting higher ppm sites. IOF now at the 'inflection point' as a net producer of Iodine and not using it all internally. They have sold small quantities of Iodine above market prices only 4 to 6 metric ton lots. IO1 (or IO7) could be a 200 ton+ model. Needs to go at a location where there is excess brine which is consistent in ppm. Mobile units are 'more than drawingboard' because they have taken existing technologies and adapted them. They are ready to give the green light but don't think it is the best use of capital at the moment. Lance suggested not 12 months for mobiles but maybe before the end of the year.
• Costs got out of hand for plants 4 though 6 about $4m per plant whereas earlier ones were $2m if a new plant $2.5m then they reckon moving IO1 would cost $1.5 to $2m (largely dependent on electrical upgrade requirements) in total. Reuse of towers but other infrastructure needed new eg steel and concrete would take 4 to 6 months. IO1/IO7 would build up inventory really quickly also there is more up-side out of existing plants which would improve this.
• Not all the sites are doing the maximum volume they are designed for (eg earlier designs, elevated locations)they need to improve efficiencies eg downtime - maintenance every 9 months to re-pack the towers for over 3 weeks most recent time the tower was up and running in 4 days. Also chemical efficiencies needed to do eg are the nightshift getting the chemistry right. Tried 3-6 on 100% automated but this did not work and less yield using auto. Retention of people important and helped by reduced oil prices - more strong applicants. IO6 has the most optimisation but still working on this. IOF expects good growth this year and expect this to increase YOY. IO1/7 should play for additional plants. Dependent on the price of iodine the payback of plants is 12 to 36 months if built in the right areas. T&M did not help, Contract Bidding would have been better.
• IOF really excited about the response from debt holders about pushing things back and they want shareholders to understand that they are working with IOF as 'partners'

I hope this adds to all the previous report-back an nice to see peope from last years outing!
I wonder what it will be like next time? I hope it is in the same place which we felt was excellent

Cheers
tackems

[crosseyed] 21/6/2015 15:56

rogerbridge,
What proportion of SQM's revenues are derived from iodine production? Is it that important to them? Will they really be hurting (apart of course from their other problems that aren't iodine related)?
c

[rogerbridge] 21/6/2015 14:43

With probable fines and even suspension of mining, how long will SQM want to keep prices low. The damage has been done to the competition, but SQM will also be hurting. I wonder how many contracts are out there on a low fixed price and how long before those contracts expire.

[superg1] 21/6/2015 12:29

Hurricane

I don't know if it's covered since the AGM but I heard the Commissioners don't want a judicial review. Such a case could bring the Montana oil industry to it's knees re suspended water depots and rights should a decision support that.

Go for it I say as IOF do have at least one contract. If you look at Ames, at his hearing it looks like he sold practically nowt to his LOI lot who he is supposed to be contracted with, but sold most of his water to 55 customers none of which he has a contract with, which is against the rules of his permit.

So any judicial review in water depot/ frac water permit terms, could cause a complete meltdown in Montana, costing 100's of millions in lost revenue, lost taxes and significant job losses.

Quite clearly the bureau needs a shake up and clarification as to why they awarded so may illegal permits.

My guess is internal guidance led the way. That 50% rule which contravenes rules was introduced by them. There is no way they that rule is anything other than speculation as there are no contracts or LOIs needed.

I also understand it won't be long before IOF know more on the topic.

[superg1] 21/6/2015 12:15

I've still to had time to read the posts since the AGM, but have managed to complete a bit of a report on SQM for someone else.

Still busy but while doing that report I spotted something which may be relevant.

In the last week or so there are some reports breaking about SQM causing environmental damage through water extraction at their main iodine mine.

SQM have yet to comment about it.

Since about 2007 into 2014 Cosayach have been blamed and prosecuted with wells closed in 2011 and 2014. The 2014 case is about SQM claiming theft of water that they have rights to.

It's all the same aquifer and that aquifer feeds an important national reserve in the vicinity.

The recent reports said that in April the relevant folks met up and are looking to deal with SQM.

The relevant bit.

'Through a motion of agreement that included most members of the Regional Council of Tarapaca, in mid-April it was decided to refer to the mining environmental authority. According to the Minister Richard Godoy, Pampa Hermosa "has caused tremendous environmental damage."


Pampa Hermosa is the SQM NV mine (6000mt of iodine).

The extra bit I've spotted is on SQM's website which is about that mine.

'Thus we have developed a plan of hydrogeological monitoring is done permanently and biotic monitoring plan is made annually in April, during which the maximum expression of the product vegetation of summer rains in the area occurs.'

So In mid April the Tarapaca head guys met and have reported SQM to the EIA re environmental damage.

The SQM website tells us the annual check/review of the reserve is done each April.

My guess is that with Cosayach wells closed in May 2014, when the annual review has come around the problem is no better or getting worse. Therefore it seems SQM current operations are causing environmental damage.

Figures re production by Cosayach and SQM back in 2007 when the same problem existed are lower than they are now. Logic suggests SQM production will have been causing damage. Since 2007 a severe drought has set in no doubt causing more stress on the aquifer.

It seems likely to me that SQM could get those rights suspended (laws for that introduced re that late last year).

Their claims about having the ability to expand there, with the extra 570 litres per second rights they have, just seems to be a blatant lie and they know it.


Cosayach were taking 400 litres per second of unused rights and caused damage, so how can SQM use it, they were supporting the case re the damage by Cosayach.

Now it seems current production is causing damage too, or as in the report...

"has caused tremendous environmental damage."

[hurricane.] 21/6/2015 07:20

Water as I understand it, iofina have threatened to challenge every existing water permit if they don't get their one. I bet that sharpened the water commissioners mind

[woodpeckers] 20/6/2015 22:38

Many thanks to all for AGM comments. I am particularly pleased to hear that Tom really does appear to be taking the driving seat. One of my main concerns was Lance's health.

roundup, you may have missed it but naphar explained earlier their reasoning for not moving IO1 yet.

"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."

[roundup] 20/6/2015 21:03

My sincere thanks to all who attended the AGM and shared with us the information.I'm glad to see that we are more stable with steady progress toward profitability.It is a fact that we have had some setbacks in the last year through no fault of our management, and it is to their credit that they have managed to steer us through a very difficult year conserving expenditure.I, like others, still find it hard to understand why they don't immediately proceed, with dismantling 101 and re-erecting it in a suitable position. We have no control over the price of iodine, so our only option is to increase productivity. For a relatively modest expenditure we could produce another 200mt. That with optimising the other plants by another 100mt could make a substantial contribution to the bottom line.

[monty panesar] 20/6/2015 17:20

It's more important to me as a shareholder that they are running the company responsibly for shareholders. The comments from Lance about the state of the company compared with a year ago are very reassuring.The underlying quarter on quarter volume improvements in both divisions is showing very good compound growth which will show through when the iodine price turns.
From the posts it seems as if an average of 60t per month from 5 plants is a possibilty. It seems just a matter of time before the iodine price turns and the share price will re rate sharply.

[roboben] 20/6/2015 14:42

Sorry I haven't responded sooner. Life gets in the way sometimes!

Naphar et al. Thanks for all of your work on this. You really have clarified the current situation.

Setting aside extraneous issues like water, oil and helium for now does seem to be the most sensible option, as you say. I will view this as an iodine company, which is what they've always said about themselves!

There is still enough scope for upside to entice me to maintain my interest here. I no longer think that we're likely to be rich next year, or indeed any time soon, but I don't feel as though what remains of my wealth is going to disappear without trace.

I cling to the hope and expectation of a rise in the price of iodine in the not too distant future. After all we don't need anything dramatic. It doesn't have to double. A $5 rise would be very significant and a $10 rise would be wonderful.

[naphar] 20/6/2015 14:12

Spike, wasn't it more, on topic of mobiles, that it was:-
1) more cost effective to optimise current plants, first, because that extra output falls straight to bottom line with minimal cost, when sold
2) probably betted to move IO1 first, as it is more of a known quantity, so inherently less risky
3) the mobiles, while same tech, are an unknown quantity, so stick to what you know and building on lessons learnt whilst stabilising business with a hopefully rising iodine price, then take a small risk by introducing a mobile from a stronger position
4) the hyper brine sites vary by 10-30% in terms of brine quality (and quantity). Mobiles dont need hyper ppm though. I suspect, if we saw a normal site with much too much brine, we could see one there some time next year as a test base, but thats my wishful thinking.

I don't think it was said specifically that mobiles are not sufficiently cost effective, more that there are more cost effective short term opportunities. But I could be wrong as working from memory, its a subtle but important difference.

[spike_1] 20/6/2015 13:44

Tom said that at current iodine prices mobiles were not sufficiently cost effective. Was questioned on their viability given that they haven't even built a prototype. It was made very clear that this was current technology - just (potentially) being used in a different setting - they know it works - (allegedly). There was minimal talk about mobiles.

Best wishes - Mike

[madchick] 20/6/2015 13:06

I think this is the link (ansana posted it or a similar one earlier)


Hope that works, tried two other links and both got deleted!

[naphar] 20/6/2015 12:32

Your take may well be right monts, time will tell.
As long as they get the structures in place to ensure no future issues if it happens, I don't have a problem with that.
Whilst I was glad to see Lance looking and sounding better than at last AGM, I assume he is still impacted by health issues.

[bogg1e] 20/6/2015 12:24

Naphar thanks.

Monts, I think it is too pessimistic to say that Iofina is not going to become a high growth company. I think it still may, but clearly Lance wants the rest of the year to fine tune the plants and get them up to their full production potential (Im disappointed they aren't already, I assumed lower production was due to brine disruption not the tech). However, its no coincidence that Lance mentions proceeding with mobiles by the end of the year earliest. Well of course he would, he wants the chemistry resolved before rolling out any mobiles or further plants. Decent growth is still possible, just not this year. Additionally, when lance has the contracts and leases in place for the first of the next three sites hes working on, which is stated as soon, we may yet see progress on developing this site(s) this year. If Lance, as you suggest, is being cautious, he may think it best give no growth plan, rather announce growth on a plant by plant basis. Any thoughts? I wasn't there and you were so if you strongly disagree please do so.

[monts12] 20/6/2015 12:20

That was me Naphar, as his answer was given in a way to reassure, that's what made me think that stepping down is definitely in his mind. Just my take on it.

[naphar] 20/6/2015 12:04

Mad
They would not give targets without rns ing them.

Where is the video? Seems I missed it.

On Lance stepping down at some stage, I am sure he will eventually, but got the distinct impression be has no such plans currently.

I dont know who the guy was to far left and rear of me, who asked Lance, given he had implied at last AGM he may not apply for re-election this year, what his plans now are. But Lance replied that he is not doing nearly as much as he was this time last year, Tom had taken control and was doing all the leg work,and Lance is currently ok with the role he now has.

Lance also mentioned strengthening the board, to ensure they are not reliant on any one person. That was the issue when Lance stepped down as CEO, so it seems they have learnt and are trying to take the right steps.

Lance also mentioned that he was much more vocal at this meeting than on the rest of the roadshow, where Tom did most of the talking. I wonder if we asked more awkward, prying, difficult to answer questions that needed Lances background of having met us before, to answer.

[madchick] 20/6/2015 11:51

Also just watched the video. Came across as balanced and cautious, which is probably what we want. They aim to be the second largest US producer by the end of this year - that was a new one for me. I guess they have to be careful legally about what they say about the water.

I just keep on thinking about what a good job Tom did with IOC and I do feel we are in good hands with him. If Lance is planning to step down at some stage (wouldn't blame him - this has all stuffed up his retirement plans too), I just hope he keeps his shares and that the market also has confidence in Tom by then.

I am also hoping that they are now in an underpromise and overdeliver approach, generally. Did anyone ask what their financial target was this year (they've alluded to it in the last RNS without stating what it was)?

[superg1] 20/6/2015 11:47

rh

Good point

That's the like costs situation where they apply costs. I must find the disclaimer mote on that which says it all.

They don't produce any iodine (as far as I'm aware) in relation to the CORFO case. That's not a caliche area they gain the lithium from underground brines.

[naphar] 20/6/2015 11:45

Sg
Yes Lance did mention final leaching

[superg1] 20/6/2015 11:43

Re the talk of putting Cosayach out of business. If you recall I mentioned only one of their 3 sites could legally produce iodine.

From 2012

Following the discovery of irregularities at its iodine and nitrates operations last year, Cosayach was asked to submit EIAs to legalize its Cala-Cala, Soledad and Negreiros-Chinquiquiray operations.

As I recall they did get approval on one, and cancelled applications on the other two. I'll have to check the Chile site to see of they are in the process of gaining EIA permits.

That's Cosayach for you, they hit 6000 mt pre 2011 with no EIA permits, while stealing water. Then sold that iodine at $26 per kg (on paper) to a false company to avoid US $82 mill in tax (on-going fraud case).

The talk is even with all their antics to reduce costs, that they are now on $30 to $33 opex.

RE the RB comments I note the 300mt. My guess was 400mt so not far off, The court had ordered the termination of employment for all employees.

My guess re comments is that final twitches include leaching any heap leach piles still on site post excavation close down. SQM did that at El Tcoc when they closed that, details in the 2014 report. That accounts for about 400mt which won't have been in play in H2 2014 on for SQM.

[jjoshaw] 20/6/2015 11:39

Many thanks for the feedback on the meeting.