Iofina Share Discussion Threads

[rugrat2] 03/11/2013 20:08

Eleven new drilling permits for MidStates in October, shown in dull green on the map with the following link:



Of these there are 4 on the Baker lease two miles off the bottom of the map area, indicated by the arrow. With two wells already producing there, this becomes their first six well pad. Probably three of the eleven will be linked in to IO#2, with the others closer to the Dacoma swd.

[judgemeister] 03/11/2013 17:33

Ok thanks SG, I somehow thought they were planning one already.
If no immediate need & mud works for consumers at lower costs then everyones happy & we can concentrate on plant roll outs on cape ex.

[superg1] 03/11/2013 17:17

Judge

In past presentations they mentioned a market for the mud/crystal of around 1200 to 1600mt.

Prill is easier to handle and essential for some intended uses.

In the last presentation the question was asked re the prilling v mud.

Some end users are buying prilled iodine as that is what the supplier has, when in fact for certain products/processes all they need is mud.

The key point being prilled iodine is 10 to 15% more expensive. Much of the Chile iodine goes to the US who import near 6000mt. So clearly there are US end users paying 10%-15% more for a refined product they don't need, simply because there is a lack of the mud/crystal.

So for now there is a market for mud that isn't being filled. So IOF will no doubt plan to have a prilling tower, for a point where they believe they need it.

I think we are talking H2 next year for any prilling tower

[judgemeister] 03/11/2013 15:34

Can anyone please advise on the prilling tower build as I seem to have lost the plot on its tomeline with everything else moving on nicely.

[the librarian] 03/11/2013 12:27

Simon Cawkwell was actually ramping NBU a few weeks back John, I can see why but he did identify the risks.

[dorset64] 03/11/2013 11:09

Hi Che7win, Tethys are my biggest holding with IOF second. Is anyone else holding TPL as, with that RNS I can honestly imo see them hitting year highs by the roy, and within 2 years being a 10 bagger plus, assuming everything goes to plan.

A little co like TPL having super majors farming in to their assets does not happen everyday plus, with lots of news/drills/deals due to be released in the next couple of weeks should help the share price massively imo.

[superg1] 03/11/2013 10:18

I just stumbled an old article that covers Algorta norte in Chile. It make an interesting read to understand the difference and 'complications' of producing iodine in Chile. Alogorta are one of the companies SQM mentioned as increasing production, but you will also note Algorta due to various issues only achieved half of their intended production compared to what they hoped to achieve.

340 employees and they got to 2000mt but will be increasing now.

$150m of initial capex, they quote a ppm average of 350 with a cut off point of 235ppm.

It's far more complicated picture than an iof plant at an SWD.




Recently the company Algorta Norte SA has put into operation a plant whose first phase iodine has a production capacity of 2,000 tonnes per annum (tpa) of iodine 99.5% purity and in 2012 reach a capacity of 4,000 tpa.

New this nonmetallic mining project, located 100 km northeast of Antofagasta, II Region, is that it uses sea water at all stages of chemical processing and mining. Ownership of Algorta corresponds mostly to family and Urruticoechea Japanese company Toyota Tsusho Corporation which owns 25.5% stake in the initiative. The project is based on the exploitation of caliche in an area of ​​140 km2 located in the Pampa Calichera in the area of ​​the former saltpeter Ercilla, in the municipality of Sierra Gorda.

In summary, the North Algorta project consists of the following parts:

- A water conveyance system, which includes the sea water intake in the industrial area of ​​Mejillones and pumping and piping system would push the water from the mining sector to the area of ​​the plant, in the vicinity of the former office Ercilla.
- Mining area, consisting of the activities associated with drilling, drilling, blasting, loading, transportation and caliche material crushing.
- Area leaching system comprised of a stack of material removed in stacks, leaching with seawater, pools of accumulation and transport solutions iodate solution to the chemical plant.
- Chemical plant in which to perform the extraction and concentration of iodine solutions, refining and packaging the final product.
- Additional work, which includes the construction of roads, salvage yard, power plant, boiler room and other minor facilities (wastewater treatment plant, fuel tanks, bunkers, evaporation ponds, chemical laboratory, camping, casino, maintenance shops, administrative and engineering offices, etc..)

Exploitation

The mineral content in this mining property (conventional nitrate deposition) corresponds to a caliche virgin mantle with little overhead (Pachuca), which on average contains 5.0% sodium nitrate and 350 ppm of iodine.

As mentioned above the proposed North Algorta base is the production of 4,000 tons / year of iodine (99.5% purity) which requires the annual operating 15,500,000 tons / year caliche iodine with an average grade of 350 ppm (0.035% w / w) and cut-off grade of 235 ppm of iodine. The daily operation of caliche-thundered and loading trucks-will of 42,000 tons per day (2,000 ton / hour). Drilling and blasting will take place at stations 25x25 meters with an average of 100 wells per season.

The project involves hiring an outside firm to the loading of explosives and blasting wells same. The haulage trucks of 60 tons of caliche thundered be made through three hydraulic excavators and then transport up to two mobile crushers. Crushed caliche material is subsequently sent to the area of ​​the leach pads by using automatic conveyors and stackers batteries which will form between 8 m and 10 m high and 400 m wide by 125 m wide.

The belts and stackers system is portable and will continually moving from place. The batteries will be formed on a previously prepared and compacted soil on which are mounted a PVC sheet 0.5 mm thick.

Batteries are irrigated through the use of thick film sprinklers installed on top thereof.

Irrigation is carried out at a rate of 2,150 m3/hr approx. a mixture of sea water and recycle solutions of iodine chemical plant. About 22 batteries will be watered by year at an average rate of 2.5 to 3.5 irrigated litros/m2/hr. Emerging solutions impregnated iodine batteries (iodate), nitrates and other salts will be pumped to storage pools 100,000 m3 capacity and then sent to the chemical plant iodine.

Process

In the chemical plant about five sixths of dilute solutions of iodine, previously acidified with sulfuric acid, will be treated initially in an absorption tower with sulfur dioxide (SO2) in order to transform (reduce) the iodate to iodide solution. At this stage the remaining gases dilute sulfur dioxide will be captured in a tower scrubber with caustic sodium hydroxide.

SO2 is producing a sulfur combustion furnace air. Subsequently, a solution mixture of iodide and iodate Original feed blow-out towers where iodine formed is removed by an air stream and carried to an absorption tower where the gases are absorbed iodine into dilute hydroxide sodium.

The iodine solution produced from the blow-out towers, with a concentration between 100gr/ly 120 gr / l iodide finally passed the precipitation step and refining. Iodine mud, produced by adding sulfuric acid to the concentrated iodide solution is cast in special reactors at a temperature of 114 ° C and this, once separated by difference in density of the aqueous phase system becomes granulation and drying under vacuum.

Finally, the product of iodine (99.5% minimum purity) is bagging fibrocartón drums and then taken hold of iodine.

Discard solutions (solution feeble) derived from blow-out system are recirculated to the leach pads.

At this stage, part of the solution feble, with high concentrations of sodium nitrate will be purged to a solar evaporation pond.

Drying the salts obtained in this puddle will enable future obtaining fertilizer grade sodium nitrate and / or industrial.

Besides the Chemical Plant and Water Supply System of the Sea, the project considers various infrastructure facilities and utilities, installation comprised a camp for 160 people, casino, general offices, change house, power house , chemical laboratory, muestrera, electrical and mechanical workshops, parts warehouse and diesel fueling stations, etc..

The drinking water supply in the project for use in camping, casino, processes, etc.. will be through a reverse osmosis plant with a production capacity of 200 m3/day of potable water.

Power supply sea water to the plant is 500 m3/day approx.

Finally, after bagging the product of iodine in 50 kg drums or big bags of 500 kg and after certification of its quality, will be transferred to the port of Antofagasta and / or mussels which will be shipped to various destinations, mainly, USA , Holland, England, France, Germany, China, India, Brazil and Colombia, among other countries.

Seawater

The seawater supply for North Algorta Project will be through a pipe 16 "nominal diameter of a length of 75 km from the Bay of Mejillones to the chemical plant located in the interior of the pampas.
The seawater flow is estimated at 170 l / s (612 m3/hr) on average which is transported from the ground level to a height of 1,380 meters

Water uptake in mussels will take place through a centina installed at a depth of 14 m using a pipeline of 500 m in length and 710 mm in diameter, which will connect to the uptake system and filter pump located on the beach . The pumping of water to the chemical plant is made through high pressure 2 stations whose maximum pressure is around 90 bar.

Timeline

The physical development of the project to a capacity of 4,000 ton / year of iodine, is planned according to the following schedule.

Construction of water supply system of the sea, the general infrastructure, camp, heap leach and chemical plant with a capacity of 2,000 ton / year of iodine is running between 2010 and 2011.

While the company is planning for 2012 to double the plant's capacity to 4,000 t / yr iodine. The total estimated investment in the project is U.S. $ 150 million and includes the water supply system of sea mining equipment, chemical plant, infrastructure, utilities, commissioning and working capital.

The direct labor total project is estimated at 340 people once it has been completed production capacity of 4,000 ton / year of iodine, including senior management.

[superg1] 03/11/2013 09:13

On the tax front it looks like a year or two of losses to offset, by that time I don't expect IOF to around, but in the hands of someone else.

The iodine business model of iodine production is far too much of a threat to others(the iodine resources, capex, opex and patent), the vertical integration into the chemical business affects a wider audience of end users.

They have potentially identified, in iodine terms, a massive reserve on a scale second only to Chile. The only other major brine field exploited on a large scale is in Japan. Japan covers about 20% (6000mt)of the worlds supply.
The Japanese used to be the world number 1 producer. We know Japanese iodine is far cheaper to produce than Chile Iodine, but Japan is not a threat to Chile as the resource is in decline. However the Japanese tech uses harsh chemicals, with nasty emissions.

It's looking like The US has larger iodine resources than Japan, and IOF have patented clean tech with even lower costs.

Iodine is used in a vast array of products, from rocket fuel to baby milk, disinfection to mobile phones, and so on. It's already looking like the current lithium batteries will change to lithium iodide (double the charge and far safer) with many other technology uses turning up all the time. It's a solid base for continued growth and demand for iodine.

Those in the business know that, and won't ignore it, imo.

[crosseyed] 03/11/2013 08:42

che7win,

Accelerated depreciation is not a reduction in tax. It simply allows more of the carrying cost of capital assets to be deducted in the earlier years (sometimes up to 100% in the first year on intangible assets). The net taxable income after this deduction is then taxed at whatever the net tax rate is, normally 35%. The total deduction for the asset cannot exceed 100% with any disposal value adding to taxable income.

Given that the US has one of the highest nominal tax rates of any country, there might indeed be pressure for reduction, as indicated by the White House Framework. I would also expect the complex special reductions to be simplified or eliminated. Even at 25%, it would be higher than in the UK.

I would also point out that asset depreciation as stated in the accounts is in accordance with accounting standards. Tax depreciation can be different, eg accelerated, as long as tax depreciation is managed separately and there is a provision in the accounts to identify the differences. The accounts are designed to reflect profit/loss on the basis of the fair usage of capital assets during the accounting period. Tax paid (or deferred through accelerated deductions against capital assets) is a cash flow. Accelerated tax deductions are partly a charge against future earnings in the accounts.

c

[che7win] 02/11/2013 23:19

Crosseyed,
Yes, it's 9% of the 35% tax rate which is 3.15% making a maximum tax rate of 31.85%. No company producing in the US should be paying any more than 31.85% - that includes IOF.
This tax break is used for all sorts of companies from simple gift wrapping to hamburgers!

Another US tax break IOF should be using (although I'm not convinced they are or will be) is the accelerated depreciation tax break explained here:





This is a brilliant tax break, ideal for a growing company that needs to build out infrastructure as IOF is doing. The tax is loaded to the later years, giving more cash flow in the early years to aid accelerated growth - exactly what we need.

"Because of the time-value of money, there is a significant tax benefit to the company for using accelerated depreciation methods. By freeing up cash flow and reducing the effective cost of the asset, it encourages companies to buy more equipment, all else being equal. Further, accelerated depreciation acts as a form of debt-free leverage, by essentially borrowing money, tax-free and risk-free, from the government (in terms of up-front tax deductions). There is no evidence, however, that accelerated depreciation leads to higher overall tax revenue for the government.
Governments generally provide opportunities to defer taxes where there are specific policy reasons to encourage an industry. For example, accelerated depreciation is used in some countries to encourage investment in renewable energy. Further, governments have increased accelerated depreciation methods in time of economic stress (in particular, the US government passed laws after 9-11 to further accelerate depreciation on capital assets)."

The reason I'm not sure:

The depreciation IOF state in the annual accounts is on a straight line basis and for IOSorb plants is 10-20% a year. However, I'm sure our plants should last more than 5-10 years so are they accelerating the depreciation? I hope it is five years.

As an aside, the Obama administration has been looking at reform ( no one pays the 35%), more details here:



"A second major component of the White House Framework is the reduction of the tax rate on certain qualified manufacturing activity from the current effective rate of 31.85% to 25%."

Enough from me on this subject.

[naphar] 02/11/2013 18:32

On the tax front, I am with Cross, I think its safer to assume the 35% and less is an upside. I am sure there will be ways to reduce but we won't get to UK rates. If we were selling produce to USA we would be making a portion of our profits here, sheltering them from the higher US tax rates. But we don't, its all produced in USA and sold from USA to end customers.

If we has a prilling plant and Chen plant in UK, we could make more of our profits non UK and hence have a lower overall tax rate.

Of course the first year or 2 will be unprotected a bit because of those losses, and we might have allowances that bring it down a bit. I don't expect their initial 22% rate to last long once those losses are used, but I am not a tax accountant either and do not understand the US system, but my small amount of research months ago told me we will probably get near 35% quickly.

[crosseyed] 02/11/2013 18:26

che7win,
Interesting. And that 3% increases to [edit]9% in 2010. Indeed useful if it is still in force.

c

PS You can get round ADVFN's absurb restriction on links for non-blues by simply starting it with hTTp (instead of http) and it then shows as an actual link.

[che7win] 02/11/2013 17:50

I'm not an accountant either but there are ways to reduce the 35% rate as I remember looking at this before.

For instance, there is a production activity deduction which lowers tax for manufactures/miners and I assume Iofina by 3.15%

[crosseyed] 02/11/2013 17:27

pcjoe,

As I said, I am not an accountant. Whilst most states impose taxes, it would seem that they are eligible as a deduction against US Federal Tax. It is therefore a close approximation to just assume the US Federal Tax rate for estimation purposes. Though che7win suggests that there might be other ways to reduce that rate.

c

[pcjoe] 02/11/2013 16:41

Cross - Nighthawk O&G comes to mind re this as well as listed in the UK - A few of us in that now - How do the State taxes add to/affect this? - I presume these vary from State to State?

[crosseyed] 02/11/2013 16:35

che7win,

The way US companies reduce their tax is by having overseas subsidiaries against which they can offset costs against tax at home. Revenues from those subsidiaries are not taxed until re-patriated which can be deferred indefinitely for a multi-national - maybe shifted around outside the US. Note that theoretically the US taxation is only deferred.

Can you explain how Iofina, based in the UK, could avoid US taxation at the full rate?
What are these tax credits, other than accelerated charging of capital expenditures against tax (an area in which tax deductibility is generous but still limitied to the total capital expenditure on an asset) ?

I have looked into this with regard to an O&G company based in the UK but whose assets are in the US. I would be very pleased to hear how their tax liability could be reduced.

c

PS The article you cite mentions only multi-nationals as having the ability to avoid taxes by using overseas subsidiaries.

[superg1] 02/11/2013 16:34

I seem to remember hearing something about technology credits too, but I think the basic message is, not a lot of tax for the first year or two.

[che7win] 02/11/2013 16:08

Crosseyed,
I'm still not so sure. I don't think many US corporations are paying 35% effective tax rate, it has steadily fallen over the years as the chart below shows.



There is a big difference between the US Corporate tax rate of 35% and the Effective Corporate Tax rate. I know there has been mention of tax credits available to IOF on these boards so that is probably one avenue they can take.

I would hope that IOF have done their homework on tax planning as the average effective tax rate is 12.6%:



Something to clarify in the future but hopefully our rate will be lower than 35%...

[crosseyed] 02/11/2013 12:49

che7win,

Being a business located in the US, Iofina are subject to US Federal and State taxes, though the latter is a tax-deductible item in most states, making the US Federal rate the one to apply. Fed tax rates increase with taxable income but rise quite quickly to 35%, so superg1 is right in using that rate. The UK tax rate, being at a lower rate, is really irrelevant, except for income that is exclusively derived in the UK, ie almost none - there might be some deposit interest. As a UK-based holding company, the UK taxation is shown in the accounts but a charge will also be included in the P&L statement for foreign taxation. Because of double taxation agreements, (almost) all tax will be paid in the US, (almost) none in the UK.

Those Group tax losses, plus further depreciation of capital expenditures, will be available to offset against taxable income when it arises, which may well be quite soon. From superg1's reckonings, and I have little else to go on though no reason to dispute them either, I would think that it might be at least a year or two before any actual tax becomes payable. The accountants will know how best to eke that out.

[PS AIMO, I am not an accountant]

c

[superg1] 02/11/2013 12:22

Che

Thanks, more good news then.

Interestingly just looking at the first water depot and comparing it to the 200k original Hal JV deal.

200k bpd at 50% of the revenue on a JV, 30 to 50 cents pb suggested for IOF.

$60k to $100k revenue for iof per day

IOF suggested $1 pb recently for cold, so in theory $80k. The mid range revenue for 40% of the original supply.

We know IOF have the 200k bpd deal with Hal (100k Montana, 100k ND) but the 10k acre feet original application covers Montana.

The rules say that the applicant must cover at least 50% of the demand in the application, with actual intent to purchase customers. So they clearly have 100k plus bpd covered with intent to purchase letters.

It's not the core business, and I'd be surprised of someone doesn't come after the water side of things. We'll just have to wait and see.

[che7win] 02/11/2013 11:29

Superg1,
Good post.

On the 35% tax rate, I'm not so sure.
Looking at the annual accounts, I would assume a rate less than 35%.



Page 42, uk income tax rate being used is 24.5%. That will fall in the coming years.

Also:

"The Group has accumulated tax losses of approximately $15,022,809 (2011: $13,891,622) carried forward which may be deductible from future taxable profits subject to agreement with the relevant tax authorities.

The Iofina Chemical operation, located in the U.S., will likely be the first location that will report Federal tax expense. This tax rate will be a consolidated rate for the Group, which will be based on an escalating tax scale. Initially we would anticipate this tax rate to be approximately 22%.

A deferred tax asset has not been recognised in respect of losses due to uncertainty over the timing of the recovery of these tax losses."

[superg1] 02/11/2013 10:54

Back on my old PE comments.

A 15 PE is around 12p per mill profit. 25 PE 19p.

The reason I like IOF is not just the potential, but a clear map to how revenues can be achieved, regardless of slips in timelines.

The execution of the business plan is in motion and successful delivery of it should see the share prices well above where it sits now.

If however IOF decided to only complete 6 plants, it seems to me that would put IOF in the 1500mt region.

$50 per kg seems to give a $35 per kg. The chem div portion of the business should in theory easily cover that sort of average for now.

At those prices, and 35% corporation tax it stills gives around £22m profit. I doubt the tax would kick in for a while as they have losses to offset from IOF and from the acquisition of the Chem div, so it would be more.

Those PE's give a range of £2.60 to £4.18.

Up to io6 (double plants at io2 if decided) is underway.

The above is just for the 6 plants, but we know IOF seem to have potential sites for io7 and 8 sorted, with plans to build 12 plants by the end of next year, with some pods thrown in.

So in theory I can double the above, all things being equal.

Water

If IOF get one water depot running, and only sell half of the water for $1 pb I can add 56p to 90p using the 15/25 PE. (£5m profit 35% tax deducted).

I understand the 80k bpd isn't enough for current customer demand, so sales in full from the first depot are likely



IOF's full plan is to have 6 depots across Montana and ND.


So from just the 6 iodine plants producing and nothing else, it looks like this price is well covered and allows for drops in the iodine price. But such a drop can't be much as Chile supplies 60% of the worlds iodine and they are not going to take the price down to loss making levels. $40 TO $45 per kg looks company crushing for some, SQM have already put the brakes on above $50.


Plant number 6 fully running would seem to take us to those levels above and £22m profit.

The 6 scenario could be in 8 weeks, it could be 16 weeks or more.

1.80 represents £10m to £15m profit on the above PEs. Post io6 I'm thinking a £20m plus rate, that's with the 35% tax deducted and ignoring water completely.

The key point as pointed out to me recently in a PE ratio is the E.

Potential is great, Earnings are what matters.

Now if I look at the AIM, I can see some shares, where on the PE they represent £20m plus profit p.a. on a 15 PE.

BUT, for some the earnings are years away, and they may not ever get there, some are carrying big debts. Trying to work out revenues, and how they will achieve them is a lottery. Some are a one trick pony, one trip wire and they are in serious trouble.

IOF seems to cover what they could do, by achieving 25% or less of the business plan.

On that basis the current price v short, medium, and long term risk, looks very attractive.


Then I think of all that land, on the 3 forks and other shales, next to the US biggest oil boom in decades, then it's a free carry. Nothing at all is priced in re that asset.

Having mentioned the above, it seems to me that shares with potential future revenue, sometimes many years down the line, can race off to prices that make my eyes water. That is fine as in the minds of the investor there is no near term failure scenario, as execution of the business plan is so far off.

Those share tend to be at prices, punching above their weight, with no room for failure at all.

Look at shares actually performing, with great prospects well beyond what their actual share price is, and then investors become very wary, craving for actual performance spelt out, not the prospects.

A very strange and illogical set of circumstances, but that's just the way it seems to be.

Hence I don't chase the hype shares on high prices with prospects way down the road. Once they actually look set for near term achievement of their promise, some should in theory, be far cheaper than I can buy them for now.

No wonder insti's wait for actual delivery.

IOF is in delivery mode, it could be 170 next week it could be 180 or 190, I don't know, but none of those prices seem to reflect the completion of the plants going in now, and certainly don't cover anything to do with water.

Next week we move into the 6th week since the water permit was deemed correct, so we are starting to drop into he timeline when recent permits moved from application correct to 'determination to grant'.

I note the Ames permit has moved to deficiency response received on 28th Oct, so someone is working on them.

[nashwan123] 01/11/2013 23:59

It doesn't matter what anyone says just look at the chart. Slowly but surely-UP!

[freshvoice] 01/11/2013 23:45

Cool hand
I think the 100k sale reported late was the reason for drop.

[supreme mo] 01/11/2013 23:26

Great posts SG and well put scrut.Just going to throw something into the mix JP said at one of the q and a's during a recent presentation (jointer can hopefully back me up)...He said that the ppm is so random its unreal in a particular area. He gave the example of the building we were in at the time and the local train station 400m away. He said here (the building) could have 250ppm at one well whereas the train station could have 20ppm at another well - it can vary that much.He was very confident they got most of the sweet spots they need.He also expressed the importance of consistent brine in terms of bpd.As mentioned in the past iof have identified "hyper" sites with idiosyncratic levels of iodine in samples, but the bpd are low. These locations are where the mini iosorb units will be used.