Iofina Share Discussion Threads

[sandbag] 23/8/2013 10:08

Lance may suggest £6 per share as being his target (or an earlier target) but if an offer came in now for say £3 or £4 it may be accepted by a majority of shareholders. That's my concern and why I would like the share price higher at this time.

[diggulden] 23/8/2013 10:06

There could be loads Bogg1e, chemical, oil, resource companies, plenty with deep pockets, remember who is behind Sirocco. I'm not concerned by any takeover talk at the moment. This will be worth more to shareholders if allowed to become a major Iodine producer rather than being bought out. I'm just purely focusing on the plant rollout for the next 4 months.

[bogg1e] 23/8/2013 09:52

Looking at SQM on wiki; 2012 revenue $2.4 billion, net income $650 mil. If Lance suggested £6 per share, then sqm would have to pay about a billion. On these revenues could SQM afford IOF? I dont think the question is immaterial, if the only people interested in buying IOF are relatively small businesses themselves, I just dont see where they will get the mney without taking on huge debts or share dilution, either of which is highly unattractive. So I shall reframe the question; which company or companies has IOF on their radar who can actually afford them?

[the fat controller] 23/8/2013 09:09

bogg1e,

If the business case is compelling, these international conglomerates can raise the cash.

But I wasn't being overly serious, it was meant to illustrate that potential suitors have a LOT of cash when necessary.

As I said in an earlier post, lets concentrate on making lots of Iodine in the short term. If we do that, then potential purchasers are going to have pay more and more with the installation of each new plant. That's when we should worry about how much cash they have.

TFC

[bogg1e] 23/8/2013 09:00

TFC the question is though; how deep are the pockets of likely suitors? We have heard a few names but how much cash does eg SQM have in the bank or how much credit can they leverage?

[the fat controller] 23/8/2013 08:45

Just to chuck another potential purchaser into the mix......

BHP Billiton have just agreed to buy a Canadian potash mine for $2.6 billion.

"The decision, unveiled by new chief executive Andrew Mackenzie, should pour cold water on speculation the Jansen project in Canada would be shelved, after the break-up of a major potash cartel threatened to drive down already low prices for the commodity.

"This is by our standards a modest sum of money ... that gives us the optionality in the future to maybe invest a more significant amount," said Mr Mackenzie. "This is something that has the potential to add very active and growing levels of return in the decades to come, if we get it right."

In case you missed it, i'll repeat

THIS IS BY OUR STANDARDS A MODEST SUM OF MONEY!

I don't know how Iodine would fit in with BHP's products, but there is a synergy there for SQM, so its not a great leap to see that it could work for BHP.

Just a thought...

TFC

[rogerbridge] 23/8/2013 07:59

Nice to have you back Scrutable. Still fully loaded and waiting for updates. Nothing has changed, not much to say.

[captain_kurt] 23/8/2013 07:58

It's an extremely exciting 4 month period.
Anything close to execution makes the current share price look silly

[skylite] 23/8/2013 07:52

Good to see you still in there Scrut.

I'd sincerely hope that 1700mt by 2014 end would in fact be a distant milestone by then though. I would think by year end 2014 Iof should have 9 sites up and running, minimum plus mini units on the prowl for hyper ppms. If we're still not producing more than 1700 by YE then something has messed up.

In fact we'll know in the next 4 months, this is when we'll find out how scalable the roll out is and has been going, if 6 go in this year then it's dead set certain 6, at least, can go in next. We'll also find out more about ppms in the coming months.

Anything near what has been rumoured means the 1700mt will be met and surpassed by the first 6 sites, waste and the first mini or 2.

[che7win] 23/8/2013 07:44

Ps, Scrutable, if it helps...

Over the summer, I added here by selling PMHL, BRT and SGP.
Within a couple of weeks, PMHL was taken over at a large premium (I never expected to have to sell it), BRT also went into a takeover approach and SGP up over 80%.

The other stock I sold down to buy in here last autumn has doubled.....

This market is cruel, but I truly believe this stock will perform incredibly well over the next few years.

The lesson for me...I will not be selling any here as long as the conditions for shareholder growth remain in place.

This stock remains one of the best risk/rewards I have ever come across in my 15 years of investment.

[worsleybird] 23/8/2013 07:30

Shares Mag out yesterday

Weather-related production outages, June's resignation due to ill health of chief ex officer Lance Baller and margin calls for spread bet and cfd investors have all contributed to a 40%, three month decline in the share price of iodine producer Iofine (IO:AIM). This creates an interesting entry point at a company with a scalable and high margin business model. Broker First Colombus Investments forecasts a free cashflow (FCF) per share will burgeon to 3.9p in 2014 and 11.4p in 2015, implying a tempting FCF yield of 8.3% for the latter year.

Chemical Attraction
Iodine is a relatively rare element in a number of products and industries, including pharmaceuticals, animal feed and disinfectant. Although there is no spot market, the latest reports from key producers suggest average prices of around $50 per kg. Iofinas operating costs are in the $10 to $20 range.

The £189 million cap looks to build partnerships with large US oil and gas companies which see it extract iodine from the waste brine water produced at unconventional fields. The first two plants came onstream in the second half of 2012.

By the end of this year the £176 million cap hopes to have six sites in the operation with a further half dozen set to start work in 2014.

They will be part-funded by May's $15 million convertible bond issue. The group has secured patent protection for its IOsorb technology (2 Aug).

Iofina pays 100% of the installation costs, operates the kit and retains 100% of the iodine output. In exchange, the third party operator receives 10% to 20% of the sale price of the iodine. The company sells the iodine into its own speciality chemical iodine derivatives business in Kentucky.

Proven Concept
Second quarter output of 45 metric tonnes, reported earlier this month (1 Aug) was below expectations. Extreme weather limited the output of partne Midstates Petroleum but the US firm has started to put in place better infrastructure to avoid a repeat of the problems created by what it called "once in 50 year storms". Iofinas reliance on third parties for its production is a risk but this should reduce as further plants are brought onstream.

Baller's exit is a blow, given his role in helping transform Iofina from a good idea to a revenue generator, but with the concept now proven the impact of his departure is reduced.

Further upside could come from the Atlantis prospect in northern Montana. This is estimated to contain 35 billion barrels of water which could be sold to producers in the Bakken shale formation. Iofina is awaiting approval from the relevant authorities to extract 80,000 barrels of water a day and this is expected BEFORE THE END OF SEPTEMBER. First Columbus says the project could eventually provide $6 MILLION A MONTH IN REVENUES.

buy £1.37

[che7win] 23/8/2013 07:29

Scrutable,
Nice to see you back, I agree with your points. We should call you 2posts :-)

Superg,
The company is priced at a level where we need to see rapid expansion of iodine production, so I agree with Scrutable that the interim results will not reflect that.
I also agree that the next few months will finally show the potential here being realised, but will less well informed shareholders see past the interims?

The chemical divison is only one half of the business, that will be storming ahead of course.

To me, the prospects of four plants going into production in the next five months and one plant every two months thereafter makes the current price conservative but we need to set expectations for the next results.

[noli] 23/8/2013 07:22

When Lance was running the business i asked about excess iodine. He said anything we have customers want.

[superg1] 23/8/2013 07:01

Good to see you back Scrut.

Just one point as I have mentioned in recent posts.

Your comment

'H1 inevitably unimpressive numbers'.

Once more I ask the same question, what do you consider to unimpressive numbers?

H1 2012 was around $7.6m revenue. Considering delays, does that make $7.6m for H1 this year a failure.

Would double digit growth, yoy be poor or unimpressive.


You may have missed certain posts. IOF bought bulk iodine and late H1 in an interview Chris Fay stated they had surplus iodine.

While the extra production would have added, the chem div has not been short of the iodine it needs and they speak of growth.

So is 10%, 20%, 30%, 40% growth yoy disappointing ???

We wait to see what they are. All the indicators from presentations and comments suggest Chem div growth.

[festario] 23/8/2013 02:44

Scrutable, many wise words there Sir, none wiser than the phrase 'need to pacify the Spouse', I am four-square behind you there.
I am sorry for your setback too, I have also suffered badly in recent weeks.
However, I have been adding 'real' shares, in the hope that upcoming events will justify mine and my friends investment.
My average is still way too high for comfort though.

[dr andrewd] 23/8/2013 00:24

Thoughts on the CEO situation.

Bearing in mind that I am an engineer making similar projects to IOFs come to fruition, this is my view.

Firstly what is the role of the CEO?

Is he going to build the plants? No
Is he going to change where IO# 3-6 are to be located? Very unlikely the last pads are going down now
Is he going to change where IO# 7-9 will go? I doubt it.
Is he going to re design the plants? No
Is he going to design the mini-pods? No
...

For all of this I think IOF have a clear plan in place with quality people on the ground making it happen. They don't need senior management interfering, they are experienced enough to just get on with it.

We are hearing that the pad for IO#6 is underway. This shows their capabilities.

The CEOs job should focus on company strategy. That is:
- what should be the long term strategy for iodine production be to gain maximum value (mix of plant types, locations, deals with oil companies etc to minimise risk and maximise shareholder value, how to generate sales, how much to process through the chemical division)
- what direction should the water division take? JV or go it alone? Identifying the customers as the division expands and defining the strategy to maximise shareholder value
- what are the options for IOFs land, does it contain oil, helium etc. What is the best strategy to extract maximum value?
- what else can be done to add value to IOFs operations? Link ups / JVs with other companies etc to develop synergies which add value

For all of this we need a strong CEO to direct the company in the future, IMO this will not affect the short term rapid growth IMO.

Finally, for all we know the CEO has already been selected, but due to notice period, contract negotiations etc, we cannot be told yet. As is often quoted with investing, we need to be patient.

My thoughts

[scrutable] 23/8/2013 00:12

Festario 20 Aug'13 - 21:49 - 7296
...., has anyone seen that most confident of investors recently?

I am of course referring to Scrutable. He has spent much effort here comparing IOF to the stunning performance of ASOS.
I know that he was heavily leveraged, and lost a shedload a month or two ago,........ has he given up on IOF? I sincerely hope not.
............................................................................

certainly not - but for a while I was stunned, with nothing helpful to say.
Justly or unjustly furious with the company for deliberately withholding information crucial to the market value of the shares

I took a seismic setback, lost half my portfolio. That was 90% of my IOF holding, crumbling bit by bit through the three bear raids and ensuing down spikes, heart breaking margin calls, abetted by Dr CF's crass IR.

Luckily I took a quarter of my winnings out in late Spring - a six figure sum - paid off enough debt to breathe, bought a brilliantly engineered German car, licked my wounds, pacified my spouse,(always the greatest problem) - and put the remaining pittance to work again. The last week has seen the beginnings of the annual recovery from the holiday trough. The gearing responsible for my self inflicted crushing setback is again the leverage accelerating an abnormal recovery - 10% on average up each of the last three days. My friends call me the Mushroom Man - not just because my hobby is mycology, and thus the study of and collection of fungi - edible and poisonous - pace Lucrecia Borgia.

But what of my feelings re IOF?

Little has changed, whilst the company catches up in execution, the forecasts, justified but repeatedly delayed, not least by Lance's personal trauma. It is so good to know that he is still such a talented presence in the background.

IMO the fuss about the missing CEO appointment is vastly overplayed. Agreed that Lance created a company which would otherwise not be there. A singular entrepreneur of unfulfilled greatness. He set and proved the strategy, laid down the template. But the company as we can see it now, now needs rigorous execution, which many others can deliver. Lance's leadership and charisma is replaceable as he is modest enough to know. But he has left enough inducted talent for the momentum to carry on until a new CEO beds down.

Of course any creation of this kind contains bud points which could have broken out into new, unpredictable growth forms. Perhaps the new incumbent will have it in him via acquisitions, geographical expansion, international marketing, to take IOF into alliances and JVs, or exploit analagous molecules like bromine or lithium etc but these would be additional to what is there now, and what is there now can be sufficient for anyone's aspirations.

I have not posted for three months, because the momentum currently rules. In the meantime nothing has changed except the time scales. I still see 1700T/pa output for end 2014 and a giant step up in profitability to £40-£55m, and a share price of £5-+£6
( reflecting the delays )but we need the next RNS to confirm the max output to be reached by IO#2 and IO#3 as 300mT and 450mT respectively. Then and only then can the market price factor that in and overcome the next Bear attack following the H1 inevitably unimpressive numbers.

And hopes for the water remain the same. Not yet remotely in the SP, and not flowing until the next Winter frosts have melted. The same expectations for the revenue and profits comparable to those for iodine from mid 2014 onwards, doubling current estimates for next years SP, including mine.

[scrutable] 23/8/2013 00:12

apologies for inadvertently duplicating

[rhwillcol] 22/8/2013 23:33

I found this iodine synopsis to be very interesting (dated 14 June 2013). Iofina gets a mention:

[roundup] 22/8/2013 23:25

Baguette! Would you ever think of applying for the CEO post yourself. You sound like a pragmatic down to earth man who could handle the logistics of this enterprise.

[the fat controller] 22/8/2013 22:50

Very interesting discussion tonight.

My view aligns with hew's. And here's what lets me sleep soundly.

Does the technology work? Yes
Barriers to entry? Yes, patent granted (remember the quote that the market hasn't appreciated how important the patent is?)
Roll out of plants? Ongoing, slight slippage, but still saying 6 by end of year.
Interims? Not triple digit growth due to slippage, but any growth good, and roll out will provide in due course.

CEO is important, and I want a big fish making a big splash. Sod "under the radar"!

Water? Only improve the position. Substantially!

Macro economics of Iodine? Lets start making a shed load before we worry too much about SQM or Troy or Lundin or Dow. If we make it cheaper than everyone else, then it will sell. Customers may be tied into contracts with others, but they're not stupid, and will be aware that they can get it cheaper next time.

It's only a matter of time......

If a bigger company wants to take us out, then it gets interesting......

GLA TFC

[superg1] 22/8/2013 22:35

Bag

Yes spot on and a scenario that leaves us with the balls in the air, about what SQM would do about it.

SQM have their hands full with other Chile players, and really don't need another producer that adds materially to the overall production.

I have no idea how the carbon footprint factor could feature going forward either.

If you look at the SQM methods, there is nothing pretty about the production process.

[bobsworth] 22/8/2013 22:30

10 weeks without a permanent CEO!

With the right package that's plenty of time to source a replacement!

Surely it cannot be long now before we get news of our new CEO.

[bogg1e] 22/8/2013 22:23

If supply and demand are more or less equal, with little or no stockpiles, then surely this implies that none of the players have the room to try to manipulate the market. In fact the idea of competition in the market is slightly obscure because the market is large enough to absorb all production. Only when supply is greater than demand can one company use leverage such as lower opex costs, over another market player.

[baguette] 22/8/2013 22:00

SG Yes you have mentioned this before and I do take your points regarding Opex but in very simple terms there seems to be 3 choices.
1. Curl up and just let us take substantial market
2. Buy us but that surely would be a minimum £1/2 billion acquisition
3. Take a big hit and offer some juicy contracts on low price terms for a time

Dont know about 1. This would be unprecedented behaviour
Dont know about 2. Do they buy us then shut us down (incredibly expensive)or transfer production to U.S. (incredibly disruptive in Chile and expensive)
Dont know about 3. Danger of permanently undermining prices

Fascinating scenario I agree