Iofina Share Discussion Threads

[monty panesar] 04/12/2013 20:07

A question for those with the "knowledge":

Iodine in Chile is extracted from the Caliche Ore and nitrates are produced as well. The combined sales of nitrates and iodine make up the overall returns for the likes of SQM.

Any idea how this is broken down into the overall revenues? Is it predominantly from iodine and nitrates a nice extra. Also not sure what the what nitrate price has done recently and how that affects the overall profitability.

TIA

[rock star] 04/12/2013 19:03

Congratulations to Superg. Spot on with Sirocco. I had thought it wouldn't be until next year that they would close. The Lundin Family are smart investors and have decided to cut their move into the Iodine market before they lost too much money.

The fact that all the producers have stopped production so quickly should mean that most the destocking will occur this quarter and in the first part of Q1. Perfect timing for IOF to enter with higher volumes in Q2. It is very unlikely that any of the mines that have been closed will return.

The shift of power in the Iodine market is changing month by month.

It just need a few more strikes in Chile now.

[naphar] 04/12/2013 18:10

Well if that's how it happens Bag,that's how it happens. Many here are worried about a cheap early takeover so might be happy with the future you predict.

On the other hand, a potential suitor can make a friendly agreed bid based on belief of figures and costs, do due diligence and pull out if not happy. You seem to ignore valuing in the future potential. Many companies may think that too risky, but some may see it as too risky not to make a move.

Both seem equally possible to me.

[baguette] 04/12/2013 17:59

Much talk about being bought out but that is not quite so straightforward. IOF only has io1,2 & 3 with no solid production figures yet available and no history of sustainability of production output levels, whatever they may be - any potential purchaser would be taking an awful lot on trust at this early stage, not only in terms of output but real cost levels for the business as translated into profit.

Even if an offer came in at say £2 a share (low enough to make us cry) that would still mean an investment of say £250m which is a mighty sum to invest in an as yet untested prospect. Hard to see a company getting shareholder approval for that. Give us say 6 more months and lets say io4,5 & 6 are in and lets say producing at very satisfactory levels, so lets say in excess or maybe well in excess of 1000mt and lets say water is granted - surely the share price will have risen to say £2.50 - £3 at the very least.

Then an offer would need to have a bigger premium so maybe £4. Now the investment would be £500m (£1/2 billion - sounds a lot in billions does'nt it). What sort of return would be needed to justify such an investment, well lets say a 15% return minimum so they would be looking at profit (before or after tax, not sure, of £75m)

This would be a very steep profit ramp up from where we are today in a very short period of time and seems quite unlikely.

So I think a buy-out is unlikely until we have a much more solid profit history and I cannot see that being in 2014. It seems to me that management surely will need to hunker down and just keep building plants, maximising output, selling iodine and building a profit portfolio.

Its only my view but I cannot see a buy-out in the near future, so hope that Management have a longish term perspective for their shareholdings.

[superg1] 04/12/2013 16:16

Scrut

I'm tracking a potential near term news release which in theory should help the cause you talk of.

Sirocco.

The big plan with them was the all new Agitating leach plant. Basically that looks dead, as predicted, they seem to have given up on it, and have heap leach left.

Mill plan shelved and cash now going towards lithium expansion in the merger.

One down, and how many more will follow?

[sandbag] 04/12/2013 15:40

At the London presentation Lance said words to the effect that IOF's plans were totally fluid and they would do whatever was necessary to make money.We know that the original plan was to extract iodine from Atlantis until they were producing around 1000 tonnes a year by which time a bidding war was expected between Chile & Japan. Since that time both those countries have hit production problems and IOF has found copious quantities of cheaply produced iodine.I wouldn't cry too much into my champagne if the BOD said they intended to carry on as producers and pay, for example, a pound a year dividend, plus the water, oil, helium and gas.

[scrutable] 04/12/2013 15:40

The share price has bounced off the rising Support line of a rising wedge around six times since June 14, and banged up against horizontal Resistance three or four times at 188p.

The share price is certainly preparing PIs for a breakout but not necessarily tomorrow. The angle of climb for the share price is slow. It would ordinarily take until the New Year.

However sentiment almost always exaggerates such tendencies at this time of Year. Christmas euphoria is likely to give the share price a heave through the Resistance line a bit earlier - ie just before, or just after Christmas.

Of course if IOF's NOMADS tell them they can't hide out-performance and oblige the board to come out from under the radar and tell us that IO#3 is producing from multiple brine streams at 500mT/pa, we will get breakout the same day.

Simple tram lines are more often effective as an indicator than anything else.
Two years ago at 20p the share price began to lift off and rose to 240p in May/June 2013.
It turned unexpectedly and sharply down on sight of the the Black Swan - the sad news concerning LB - but the next half wave to the bottom ended Sept 1 at 135p. We are clearly well on the way with the next up swing.

After the breakout occurs at 187p the share price will I believe return to the original
long term channel and make up for the lost time. That should take us to 350p by the Summer. If the roll out keeps to the current, but delayed schedule, and IO#4/5/6 are bedded down and producing I don't think that forecast would be unrealistic.

Could they stumble again and not have IO#7 and 8 commissioned by the end of May?

jcs - I will be interested to see your take this evening. Do we agree?

[angel of the north] 04/12/2013 15:35

Thanks all for taking time to answer a simple Mackem! Off to SOL now for tonights' annihilation of Chelsea! Keep the elastic tight at close for me.

[superg1] 04/12/2013 15:33

The lithium link up, it looks like the Sir cash will pay for lithium expansion.

Silly sods still on about nitrates. They have been banging on about that for 12 years, and haven't produced any yet.

[huttgl] 04/12/2013 15:24

How does the iodine supply market work ? Are producers tied in to deliver certain quantities, over a certain period, at a certain cost. Can the customer chop and change supplier.
Wondering how quickly price changes might pass to consumers. How easy they can change supplier and so, how Iofina is placed to sign up supply agreements.

[superg1] 04/12/2013 15:21

I can't keep up today

Now Sirocco is on a friendly offer/merger, with Canada Lithium (small company).

Sirocco have the cash and CL the lithium market, it looks like a switch to lithium. Iodine won't work, Sirocco have bundles of cash but Chile is just too cost intensive for iodine

12 plus years of trying to make a go of iodine hasn't worked.

It's just a case of where will the iodine price go short term, a bit lower would cripple other mines. Interesting times ahead.

My fave google search words for the next few weeks will be SCM Bullmine.

[superg1] 04/12/2013 15:12

AOTN

There are some big guys out there, some that cover not just iodine, but chemicals, oil, gas and water. Not just one either.

The Japanese used to dominate the market, there is now an opportunity for them to do that once more.

[superg1] 04/12/2013 15:07

Well that roskill report included a list of names, some of which I'd never heard of.

However having researched one or two, they are much bigger than Toyota or SQM, and into all sorts, including the US and Chile in various businesses.

We talked Chile could not cope with low prices, but now the actions speak much louder than the words.

Compared to what they were claiming, even just few weeks back, it just shows how they have shot themselves in the foot.

It will take a few months to balance out as inventories deplete, but thinks look like they will get very tight on supply next year.

Any demand growth looks set to be picked up by anyone that can produce iodine cheaply, Chile producers with high opex won't chase growth again, they need the higher prices.

A bit daft really considering they cover 60% of world demand. However they now are taking drastic measures to protect the price.

Any bets on SCM Bullmine collapsing shortly?

[johncsimpson] 04/12/2013 15:04

That's not stupid at all, that's a very pertinent question Angel.

Any answer though would be guesswork, even from within the current iodine industry, but who's to say others may not see an opportunity?

[captain_kurt] 04/12/2013 14:51

Good question Angel. The Japanese once where leaders in Iodine production.
With the Chileans Iodine business roadmap crumbing, a number of multi-billion dollar Japanese companies can pull off the deal of the century by acquiring Iofina imo

[timbo237] 04/12/2013 14:45

AotN - The Japanese or a major conglomerate like Dow Chemical perhaps? Somebody who is already producing iodine or a big user of it.

[angel of the north] 04/12/2013 14:42

A stupid question? - With all these Chileans in deep trouble and expected closure, just who would be expected to launch T/O of Iofina?

[superg1] 04/12/2013 14:38

Investec

If you are reading, the rumbling in Chile suggests SQM have just closed another mine.

last I heard was 2 and 400 laid off (media comments on that).

Rumblings of a 3rd mine gone and more jobs :-)

Inventories will keep things ticking along for a month or two but they won't last long.

As posted the other day, the main earthquakes in Chile at the moment are around greedy iodine mines, big cracks in their plans appearing each week now.

Barrick found to their cost just how dramatic the rising capex and opex has been in recent years, in Chile

I see one copper mine now has strikes, workers demanding more money again.

[supreme mo] 04/12/2013 14:33

Great posts SG1 and CK.Another good article - Sirocco laying off 150 workers...http://www.brandonsun.com/business/breaking-news/sirocco-mining-temporary-reduces-production-at-chile-facility-234344531.html?thx=y

[captain_kurt] 04/12/2013 13:45

Analysts at Investec said news that competitors of iodine specialist Iofina have delayed production was good news and the business climbed 0.5p to 162.4p.

[captain_kurt] 04/12/2013 13:40

Investec Reiterates "Buy" Rating for Iofina plc (IOF)
Posted by Bonnie Powley on Dec 4th, 2013

[superg1] 04/12/2013 13:02

Recent weakness in the iodine price should highlight Iofina's (LON:IOF) significant cost advantage over its rivals in Chile, says Investec.

The broker noted recent comments from two of Iofina's Chilean competitors that mentioned on recent softness in iodine prices and that have already started to take capacity off line in one case (IMO that should read two as SQM closed mines)

"Given Iofina's cash costs of $10-20/kg, we would not expect these market developments to affect its expansion plans."

"We make no change to our forecasts and retain our NAV-derived target price of 230p," said Investec, which has a 'buy' recommendation.

Iofina has so far commissioned three of its patent-protected plants that extract iodine from the brine produced from oil and gas wells and is continuing work on the roll-out of the next three plants, IO#4, IO#5, and IO#6.

Investec says Iofina's cash costs are around half of those in Chile, which accounts for just under 60% of global iodine supply (32,000 tonnes in 2012).

[phoenixs] 04/12/2013 13:00

I don't think there is any worry about being taken out before the BOD agree.

[noli] 04/12/2013 12:47

Che, we know they have been snooping around the plants, these guys are worried and SG has pointed out just why.

[superg1] 04/12/2013 12:35

A reminder re Cosayach

The project "Enhancing Production Iodine Negreiros SCM Cosayach "considers the expansion and / or modification of the facilities to ensure increased production Chemical Plant Negreiros, increasing the rate of production of metallic iodine from 770 2,500 t / year. Currently, under the protection of Resolution No. 0848/96 SERNAGEOMIN approving the project construction and operation Plant Iodine Negreiros, is operated at a rate of 770 t / year, equivalent to the final product.


The above was recently binned, they have shelved their plans.


SQM closed mines and are laying off 400 workers.