Iofina Share Discussion Threads

[piripiri2] 26/6/2015 20:00

must be running short of money now

[severnof9] 26/6/2015 18:27

SG1

I agree they previously intended a move to Pampa Blanca but that has been shut down for 5 years now

From the 2014 Annual report

In October 2013, the Environmental Evaluation Service approved the Pampa Blanca Environmental Impact Study, to increase our caliche ore extraction in the Antofagasta Region in order to increase production capacity of iodine by 10,000 tons and nitrates by 1.3 million tons. The project also requested permission to build a pipeline from the Pacific Ocean to the mining site. Operations at Pampa Blanca were temporarily suspended in March 2010.

From the latest Annual report they have clearly highlighted NV as their preferred investment area. Unless this is an elaborate smokescreen they have clearly refocused their investments at this site. However, that is subject to securing sufficient water resources either seawater or freshwater


From the annual report:

In 2013, we completed expansions in the production capacity of our iodine plants in Nueva Victoria. Our capital expenditure program also includes exploration for metallic minerals…..

In 2014, we invested in the development of new extraction sectors and production increases in both nitrates and iodine at Nueva Victoria, reaching an approximate production capacity of 6,500 metric tons per year of iodine at the facility. We also issued a bond in the international capital markets for US$250 million, primarily to refinance existing indebtedness

In September 2010, CONAMA, currently known as the Environmental Evaluation Service, approved the environmental study of our Pampa Hermosa project in the Tarapacá Region of Chile. This approval allows us to increase the production capacity of our Nueva Victoria operations to 11,000 metric tons of iodine per year and to produce up to 1.2 million metric tons of nitrates, mine up to 33 million metric tons of caliche per year and use new water rights of up to 570.8 liters per second. In recent years, we have made investments in order to increase the water capacity in the Nueva Victoria operations from two water sources approved by the environmental study of Pampa Hermosa, expand the capacity of solar evaporation ponds, and implement new areas of mining and collection of solutions. Our current production capacity at Nueva Victoria is approximately 8,500 metric tons per year of iodine (including the Iris operations) and 700,000 metric tons per year of nitrates. Additional expansions may be done from time to time in the future, depending on market conditions.

I also suspect that you are right that SQM sought to reduce costs while driving down the unit price of Iodine to hurt Cossayach. However, it is also a smart move to extract the iodine from mined caliche just in case water restrictions are applied at NV. Meanwhile if Cossayach collapses under its debts its a win win situation if they secure that seawater pipeline for peanuts. Nueva Victoria provides a substantial slice of revenue and profit to SQM

It will be interesting to see which comes first COSSAYACH'S DEMISE OR RESTRICTIONS ON WATER AT THE NV SITE.

Whichever happens either SQM or Cossayach will be seriously damaged. It is still a game of Russian roulette in my mind unless neither event happens.

[superg1] 26/6/2015 17:25

Severn

I personally think it was just a short term cost cutting idea as a bit of a bluff re opex.

EG if the NV shut down all caliche ore mining operations tomorrow they could still carry on producing iodine from the already established heaps for 3 to 6 months.

Using petrol from your reserve tank, you get more miles for the last tenner you spent, but that reserve tank will need refilling at some point, if you want to get the mileage in the future.

The NV water issue has always been there.

Facts

Complaints about environmental damage to the reserve were in play back in 2007.
Back then less water was being used and less production.

Last year Cosayach were prosecuted for such damage to the reserve, damage caused by extracting water belonging to SQM which are as yet unused rights.

So SQM know if they try to expand they can't as they know it will cause damage.


Now Cosayach have been dealt with that news report suggests the damage continues so now they are looking at SQM as responsible for the damage.

Late last year Chile were bringing in reforms to restrict water rights to protect national reserves.

Those SQM unused rights were awarded in 2010 pre the drought setting in.

SQM never intended to be at NV now, In 2014 they were supposed to have moved it all to Pampa Blanca. They have a seawater pipeline application in for that area, they don't have one for NV.

Cosayach did have plans in place, and now have a pipeline which covers part of their production next door to SQM.

[arlington chetwynd talbot] 26/6/2015 15:32

To say you don't care what anyone thinks is surely stretching the limits of even your credibility Graham? No golf today mate?
Then to have us believe that you believe all that matters is cost is obviously a result of an afternoon sherry?
This is not one for the people you preach to, you require followers who are made of sterner stuff.
Have a good evening.

[spike_1] 26/6/2015 15:17

Continued thanks from me also SG. Quality research and quality answers.
Best wishes - Mike

[severnof9] 26/6/2015 15:08

Water is in shortage in Northern Chile

hxxp://www.cr2.cl/approach/about/geopolitical-regions/water-scarcity-in-northern-and-central-chile/?lang=en


Among the several issues that can limit the Chile’s development, scarcity of fresh water is identified as an outstanding problem. In a country that still bases its economic growth in the exploitation of natural resources, water is much required in agriculture, mining and hydro-power, as well as for human consumption. The increasing demand of water resources is in collision course with the scarcity of this element in north-central Chile. The northern part of the country (18-30S) holds most of the mining activity along the Atacama desert, arguably the driest place on earth with less than 10-20 mm/year. The only input of water there is the convective rainstorms that occur over the high Andes during summertime (the so-called Bolivian winter) feeding small creeks and recharging the aquifer system of Pampa del Tamarugal. Winter storms become more frequent as one moves southward, but annual rainfall in central Chile does not exceed 500 mm for the most part. Fortunately, much of the winter precipitation contributes to the seasonal snow cap of the subtropical Andes, which melting during spring-summer support the river flow that is used in agriculture.

If the balance between water supply and water demand is nearly tie in present day, the future looks worrying. On the one hand, economic growth implies increasing demand even though usage efficiency is enhanced. On the other hand, climate models consistently project a substantial decrease of the precipitation over central Chile (33-40S), extending southward the water-stressed region. The reduction, relative to present conditions, can be as large as 30-40% under a high GHGs emission scenario (A2) for the end of the century (Fuenzalida et al, 2007). We need to sharp our projections of the hydrological cycle during the 21st century.

[severnof9] 26/6/2015 15:02

SG1

Your comment

they may not up the mining rate and will hit lower levels of production once the spare heaps expire.

If they are experiencing issues with respect to water at the Tamarugal Aquifer which feeds the Nuevo Victoria mine it would make sense to extract the Iodine from the heaps already mined as the extraction costs have already been incurred. If water use is restricted or suspended at NV they will have wasted expense on creating heaps from which the only way to extract the iodine is to use water they no longer have access to.

Perhaps SQM are playing a game of Russian roulette in which their only hope of continued iodine production in the NV area is that Cossayach shoot themselves first and SQM pick up the seawater pipeline and other Cossayach assets on the cheap. SQM have loaded Cossayach's gun with more bullets by dropping the iodine price while hopefully Cossayach have too many problems to resolve in the time still available. The way they seem to have shifted funding between linked companies as identified by you suggest this is a real possibility.

This scenario really hinges on water being an issue at The Nuevo Victoria site.

[rhwillcoll] 26/6/2015 13:53

SG1: I totally agree with all that you are saying. Now that IOF have good and consistent production, it really is looking good for IOF investors moving forward from here.
PS Thanks re 34214: no probs :-)

[superg1] 26/6/2015 13:43

Thanks rh I'll amend it.

I've changed the percentages and other bits too.

[superg1] 26/6/2015 13:39

Rh

No problem.

As you can see I don't care what anyone else thinks, what the share price is, whether Mr Big is still around, Jeff giving some to the grandchildren or which month they plan to add another plant.

The fact is this sector which see's growth year on year, tech uses growing day by day and is high on the limited commercial resources scale.

All that matters in any competitive industry is cost.

It's only a matter of time before IOF iodine costs half or one third of what it costs the best out there to produce.

In any other commodity terms the variance on cost is incredible.

Oh yes it would be lovely to bang in plants all over the place and while that seems like a distant dream, one trip in the market and you will have end users fighting to get supplies.

$2 mill to secure a 100mt or 200mt supply by paying for a plant is pocket money.

Take Toyota.as it stands they have paid out over $100 mill for a cut amounting to 600mt of iodine per year, and it costs them more to produce than the market price.

[rhwillcoll] 26/6/2015 13:14

SG1: it's even worse than what you showed, as your figures totted up below come to only 18,100, not 19,100:

Cos 4000mt
SQM 9200
ACF 2000
Bull under 500
Algorta 2400

Total

19,100.

[rhwillcoll] 26/6/2015 12:57

Hi SG1: superb answer 34207 to my earlier questions. Thank you, greatly appreciated.

[superg1] 26/6/2015 12:52

CORFO comment

'the organization has plenty of evidence to support its arguments that SQM systematically sold potassium and lithium carbonate production at below-market prices, and argued that SQM had seriously breached its contracts.'

Corfo also stressed the importance of contracts being fulfilled in good faith.

SQM news late yesterday

'SQM reiterates that it has always acted in good faith in the operation of the Lease Agreement and has always acted in accordance with such Lease Agreement. The Company has cooperated and will continue to cooperate with CORFO in relation to the Lease Agreement in force.'

From the recent info it sounds like CORFO have gone one step further and presented the evidence to the US regulators.

I know who I believe.

[superg1] 26/6/2015 12:46

Whoops

Just heard hot off the press. (I'll hunt for the details)

Apparently it's suggested CORFO have sent details to the US regulators showing evidence that SQM sold lithium and potash below market prices.

They state that just doesn't affect revenue for CORFO but affected SQM investors too.

To me it also sounds like a tax dodge.

I bet SQM hopes someone doesn't spot the iodine game as their antics their have affected income and investors.

[superg1] 26/6/2015 12:35

Severn

On the graph page they show 400mt leached at ME. In the notes it's 373 mt.

As you say it's the left over heaps, and distorts SQM production by that much for 2014.

Hence the actual rate is about 9,200mt v 10,900mt in 2012 and 10,800mt in 2013.

But we now know that 17% of the iodine at NV (1000mt) was gained from heap stockpiles rather than mined caliche. So they saved 17% on mining the caliche at NV for the same production, but it can only be a temporary price cut solution as they need to mine the ore.

OR, we don't know yet, they may not up the mining rate and will hit lower levels of production once the spare heaps expire.

I doubt it. It just seems to be a smoke and mirrors game to represent low opex to frighten competitors.

[tackems] 26/6/2015 12:09

Thanks SG, if anyone would know I thought it might be you. Good research, thanks!

[monty panesar] 26/6/2015 12:00

Very interesting. It demonstrates the very long production cycle from producing iodine in Chile. They started cutting back 18 months ago and it is only now the inventory is coming to an end.
When the price goes up Iofina will be able to respond to demand much faster.

[severnof9] 26/6/2015 11:18

SG1

The footnote on page 51 of the SQM 2014 report confirms the leaching of previously produced heaps

(1) Operations at the El Toco and Pampa Blanca mines were temporarily suspended in November 2013 and March 2010, respectively. During 2014, María Elena obtained production from caliche ore exploited in prior years.

[rhwillcoll] 26/6/2015 10:42

SG1 - many thanks for your high quality research. Given all that you have uncovered re 2014 and 2015 Chile iodine production and inventory, and ignoring
(for now) all the disruptive buffers which are coming into play for several Chile producers, my question is:

Can you please say how much total iodine production and inventory there has been in Chile in 2014 and projected for 2015, relative to previous years, and what is the total shortfall relative to the norm? By all means break down into individual companies, but I am unclear as to what is the current total Chile iodine shortfall? It looks to be a fair amount, but please could you provide a clear picture?

Many thanks for your help: it is much appreciated.

[superg1] 26/6/2015 10:16

Takems

NV ppm is 460, cut off grade 300.

Their recovery methods give an average yield of 55-65% (their quote).

Caliche mined 2014 23.5 mill tonnes

Production 6,100 = 260 ppm recovered from a 460ppm source = 56.5% yield.

That's a nice figure. IOF methods can do 90% plus yields at a 40 C temp, although that drops when water is colder.

SQM effectively create the water solution to put through an extraction plant.

That's quite a big difference on yields. I believe IOF quote about 70% on cold water.

[superg1] 26/6/2015 09:49

SQM (again sorry)

2014 production v revenue comes out at $38.11 per kg. They say iodine and derivatives but the iodine average price they quoted for the year was $38 per kg.

So iodine plus derivatives revenue seem directly related to the amount of the raw product sold and the derivatives bit is just a bit of a red herring.

I mention that due to Q1 comments.

They quote a $30 per kg average in Q1 and quote $73.6 mill in sales.

That's 2450mt of iodine sold or a yearly rate of 9,800 mt.

In 2014 they sold 8,800mt and from my figures by that time they had 2,300 mt of iodine in the inventory.

The true continuing production rate is 9,200 per year excluding left over heaps at ME which are now finished (h2 2014).

So the Q1 supply rate suggests 9,800mt v production of 9,200 mt.

Note the beloww which states they expect the yearly sales to be up by 5% v 2014. That would be 9,240 mt which is about spot on with their apparent production rate

'We also believe that lower prices have helped to stimulate demand; we have also seen new uses related to the plastics industry in Asia. This demand growth has had a positive impact our sales volumes, and sales volumes during the three month period ended March 31, 2015 were over 14% higher than volumes seen during the same three month period in 2014. We expect sales volumes for 2015 to exceed sales volumes seen in 2014 by over 5%.'

So at some point they will have to stop the game and replace that heap inventory with actual mined caliche and that will put their costs per kg up.

Perhaps they have expanded at NV and that's what all the fuss is about re the demand to stop mining, although they claimed expansion in 2014 but the figures tell a different story.

[superg1] 26/6/2015 09:27

Tackems as I understand it once leached it's done, the heaps are massive. It wouldn't be viable to do it again as the ppms would be so low.

Cut off grades are about 300ppm and the caliche about 450ppm.

[superg1] 26/6/2015 09:19

So that means no costs for mining in 2014 re the 380mt from ME, and apparently no costs for mining covering 1000mt of iodine from NV.

9,600 production of which 15% carried no mining costs as it was heap leach only.

Mining the caliche is far more expensive than pouring water an an existing heap

Applying the full 15% costs it would mean $25.30 kg costs v the $22 claimed.

So the claimed opex is distorted by at least dollar or two due to the heap leaching that has been going on.

[tackems] 26/6/2015 09:13

SG, how many times do you think that they can pour water on the 'heaps' to leach out the iodine while maybe disturbing it with a digger etc? Could the same heap be 'leached' over many months even years?