Iofina Share Discussion Threads

[gadolinium] 27/4/2014 23:35

Boggle re post 20225,
Some numbers for a selection of Iofina iodine derivatives.

Iodine derivative name (% iodine) as follows:
IPBC (45.15%), methyl iodide (89.4%), methylene iodide (94.8%), hydriodic acid (99%), potassium iodide (76.5%, cuprous iodide (66.6%), calcium iodate (60.15%), 1-chloro-3-iodopropane (62%), 2-iodobiphenyl (45.3%), ammonium iodide (87.5%), bromoiodomethane (57.5%), ethyl iodide (81.35%), iodine monochloride (93.15%), iodobutane (69%), iodopropane (74.65%), lithium iodide (94.8), iodosuccinimide (56.4%), perfluoropropyliodide (42.9%), periodic acid (66.1%), potassium iodate (55%) etc. So not many with less than 50% iodine content. I imagine methyl iodide, IPBC and potassium iodide will be among the most important products.

They also make a small number of non-iodine containing products, principally chloramine-T, trichloromelamine, methyl fluoride, HF-pyridine, hexafluoro butadiene and DDCP

[crosseyed] 27/4/2014 23:02

I have been looking more closely at Note 12 Property, plant and equipment (Group) in which the headings have been revised. IOsorb capital costs are now shown under the headings Equipment and Machinery and Construction in Progress. When an IOsorb plant is completed, it is re-classified from "Construction in Progress" to "Equipment and Machinery". However, the latter category would presumably also include capital expenditures for the IO Chemicals factory.

At 31/12/2012, the Construction in Progress amounted to $2,415,453 which the footnote says included costs incurred in the construction of IO#2 (not then yet completed).

Additions during 2013 for Equipment and Machinery shows $4,661,176. Since just two plants were completed during 2013 (IO#2 and IO#3), we can add the IO#2 costs from 2012, giving $7,076,629 as their combined construction costs, or $3,538,314.5 each. Note that this estimate is probably too high since other capital spending at the derivatives plant may have inflated those figures. However, let's assume $3.5 million per plant.

At 31/12/2013, the Construction in Progress shows $6,976,977 with the footnote indicating that figure included costs in the construction of IO#4, IO#5 and IO#6. At $3.5 million each, giving a total of $10.5 million, that would indicate a further $3.5 million in capital spending to complete all three.

At 31/3/2014, it was indicated that $1 million of capital spending would be required to complete IO#6. Hence, capital spending of about $2.5 million occurred during Q1 2014.

It would certainly be useful to know whether all of the investments have been cashed, despite the statement that they were converted to cash in Note 13 (Interest Rate Risk), I queried in an earlier post whether the investments were to be cashed on their maturity dates, which happen to be monthly from January to August.

Like some here, I remain uneasy about the cash position, though not about IOF's ability to raise capital as required. It would seem that the cost of plant construction is somewhat greater than the $2-2.5 million previously thought.

c

[cyberbub] 27/4/2014 22:41

PS people still need to remember that small AIM companies are risky! IOF isn't Shell or Aviva or whatever. You have to decide whether you believe the market and the directors can deliver the bacon medium/long term.NAI

[spike_1] 27/4/2014 22:39

And of course Mr Big would most likely be near the top of the queue to offer help if needed. His sudden disappearance strongly suggests he has already done so, however the accounts make it clear no offers were necessary or accepted.

[hurricane.] 27/4/2014 22:38

From April 28, the Alternative Investment Market will become exempt from stamp duty and investors will no longer have to pay the 0.5 per cent fee when they buy AIM stocks.

[cyberbub] 27/4/2014 22:31

Well we all know that cashflow is king in all businesses.I have no doubt that it will be tight here for the rest of 2014. But remember we have an operational company profitably producing an in-demand product whose price is likely to rise soon, with a new (returned!) chairman coming in who seems determined to see the company turn over a new leaf.If they are really 2-3 mill short on cashflow I would have no problem with them doing a small placing. I think it more likely that a loan or overdraft would be made available. Crikey I would think Lance could lend them a couple of mill until 2015 at zero interest? Director loans are common enough.The point is Iofina is not some potless tiny AIM mining explorer with no income and no prospect of any. THEY are the ones that get shafted by heavily discounted placings or SEDA fundings etc.I am not worried.All just IMO of course, no advice intended.

[spike_1] 27/4/2014 22:28

Boog1e - you are over reacting. The published results are un-qualified, i.e. the auditors have not required the Directors to add in a rider as to the state of health of the company.

Obviously things can change, but we know that Lance is in the process of overcoming the brine shortfall for the new plants. IOF believe that a run rate of 400 mt is enough to make them profitable, and is achievable.

IOF have also stated they will be announcing their production numbers, and will do so very regularly.

From now on - what you see will be what you get.

[naphar] 27/4/2014 22:13

Can't say it would not be an issue Bogg1e as you just never know. But the company say they have sufficient funds and the auditors have not disagreed. My money is on them being fine. They can factor receivables until brine start flowing well enough to generate more cash. Then there is the option of bank loans or overdrafts.

[bogg1e] 27/4/2014 22:05

Ok so there is still a risk that they will need to raise funds then? So that leaves them $7 mil in inventory and $2 mil-ish in cash. I hope Lance is being honest when he says that they have enough iodine to see them through or that they dont need to raise further funds, because their liabilities come to about $8 mil this year, provided there is no further capex beyond the completion of IO6. Therefore cash and equivalents vs yearly expenditures are broadly even. I only have one fear really and that is i recall a good company in the past, running into short term cash flow issues, which was then bankrupted by a major creditor and took an excellent company for free, leaving shareholders with nothing. now im pretty sure the boD can raise finances if they choose to, but is such a nightmare scenario possible in IOFs case? Many thanks.

[naphar] 27/4/2014 21:58

Bogg1e
yes they are. BUT the accounts also state they were cashed in since year end. It's the last ish sentance in the interest rate risk section, which is why I mossed it.

[bogg1e] 27/4/2014 21:53

cgray,

My area of concern still remains the plight of the $6m investments on the balance sheet at 31/12

Arent those the certificates of deposit that mature throughout 2014?

[freshvoicem] 27/4/2014 21:41

See bad weather, tornados etc forecast for states including OK.

[naphar] 27/4/2014 21:10

I don't think you would get much more from many companies!

[bazzerp] 27/4/2014 20:25

Why the hell can't this bluddy company report in sufficient detail & clarity ?
I have most of my life savings invested here at a much higher level. Their attention to detail & duty of care is deplorable verging on disgusting @!

[dcgray21] 27/4/2014 19:43

I would second Festario's thanks . My area of concern still remains the plight of the $6m investments on the balance sheet at 31/12 and cashed in we assume by 31/3 to give a 1Q closing cash of $2.3m . Looking at the accounts the gross cost of equipment and machinery + drilling equip and pipeline rose from $11,016k at the end of fY12 to $ 18,088k at the end of FY13 or an increase of $7,072k. Could that be deemed to be the majority of the IO3-5 build out costs ie could IOF have bought / paid for and capitalised these costs prior to year end . My concern is that if not , then has the $6m been spent in 1Q on the IO3-5 build. That would clearly make the cash position tighter but there must be a chunk of receivables on the balance sheet from 1Q sales that can be collected / factored to support the liquidity position .

[festario] 27/4/2014 18:41

Some excellent, detailed and meticulous analysis on here today. We are indeed lucky to have so many investors interested here who understand the intricacies of a balance sheet.

[naphar] 27/4/2014 17:38

Just checked my notes. They say a landowner 6% owner fee and a 10% fee for the operator, but that the operators were keen so cutting their rates. So 14% overall may not be unreasonable. Under 10% for IO1 as it's outside OK.

IO2 was said to be a $200k a year fixed fee.

[crosseyed] 27/4/2014 17:30

naphar/superg1,
Thanks. I'll modify my model accordingly.

c

[naphar] 27/4/2014 17:24

Super yes, it is the US export rate I was thinking of and memory says it was about $28/kg.

Cross, I was working on 10% royalty on the 171 mT at $28/kg . then deduct a bit for IO2 being a flat rate If I am right on that. I had forgotten about the mineral rights owner (that's only an issue in OK I believe, and one other state). Even if I am not right on the IO2 piece, 14% is only $670k.

[superg1] 27/4/2014 17:17

TW makes some daft comments re willingness to fund I of.

One small one I track picked up £6m the other day. They have nothing but an idea at the moment.

I also understand some were falling over themselves offering cash to iof in recent days.

I think TW is the reason the saying 'Why spoil a good rumour with the truth' came about.

[superg1] 27/4/2014 17:13

Royalties 10/11 percent operator 3 percent lease owner I believe.
However as someone spotted the figure to base it on looked like $28 per kg. I never found the data but I understand royalties are based on long standing US iodine export rates, not spot or contract prices.

In the early days I heard 26 per kg on that topic, so throw in a couple of years of just under 4 percent yoy rises and 28 seems to fit.

So on that basis (if anywhere near right) royalties are $4/5 per kg.

Just to note re commingled brine at SWDs.
I asked re that way back, once you get 55 percent of the leases there is a rule/law that then covers it all, so there is then not an issue with nimby's etc. I forget the term name and process.

[crosseyed] 27/4/2014 17:09

naphar,

Thanks for your thoughts.

The royalty figure of 16% that I use came from superg1 and was well-argued. It incorporates a percentage on revenues from the extracted brine to the operator (their payment for providing the brine) plus whatever is negotiated with the owner of the mineral rights. A report by First Columbus in May 2013 used 15% for IO#1 and 11% for IO#2, so 6% would seem to be far too low. I have assumed the current market price in the IOsorb production month to calculate the revenues.

I take your point that some of the staff costs may be absorded in inventory (which is over $6 million) before being transferred to P&L Cost of Sales when derivatives are sold from inventory. Not exactly transparent though.

c

[superg1] 27/4/2014 16:57

Cross

Note the staff comment. No doubts there as asked myself. A number of non-essential staff appeared and I believe they will disappear just as quickly so that cost will decrease in H2