Iofina Share Discussion Threads

[testuser123] 14/5/2014 14:43

SG - OK yeah agreed we aren't going to see rain in the Atacama desert (it would be the first time in several thousand years). However rain anywhere in Chile will be a boost to the hydroelectric power producers and may mean that power costs don't go up by the usual 10% YoY next year (but they would still rise). Like I say though it would be a pretty minor effect in the greater scheme of things.

[superg1] 14/5/2014 14:30

Mr Big (and others)

Here are some basics re the Chile players.

Just 2 years ago no one other than Algorta was talking seawater, now they all are, but Sirocco (RB) may never go that route.

Algorta

They are the ones SQM mentioned as increasing production affecting prices. They are however limited to their current pipeline supply which isn't sufficient to expand production much further.

Sirocco had costs of $35, $38 and finally $41 per kg using there ALP which they have now dumped (as predicted). The plan was to go over 2000mt, now reduced to 1000mt.

Algorta put this out in news when iodine was over $50 per kg. The period they talk of is H1 2013

In this period the company had revenues of U.S. $ 56.2 million and an operating cost of $ 38.8 million. The result contrasts with the losses experienced $ 2.3 million in the same period last year due to commissioning of the plant was given to the second half of 2012.

The production of iodine, controlled by the De Urruticoechea family have achieved design capacity operation at the end of the first semester and is expected to close 2013 with a production of around 3,000 tonnes of iodine turnover rate near the U.S. $ 150 million.


Ioditech reported early 2103 prices similar to 2012 which means they would have been in the 50 to 60 range or more.

SQM reported 52/53 average. So looking at Algorta they did about 1000mt in H1 2013.


Algorta costs around 69%. meaning $55 per kg would equate to costs of $38 per kg. So they must have had costs of somewhere between $35 to $38 per kg.

Fast forward to H1 this year, and they won't be on much more than break even, AND have gone quiet.

In that time costs will have gone up, but on a cost basis the weak Chile peso has probably kept most going on the lower prices.

Algorta use seawater so their costs represent what it is likely to cost others, although by virtue of quantity those that produce more may have slightly lower costs (SQM)

Algorta will peak they can't keep increasing without another pipeline and they are expensive.

The 2 I know of are Sirocco $50 mill to SQM $250 mill.

So the water issue is a big factor and so is the pending 150 litres per second rule on fresh water.

From litre per second comments it seems to me around 2,500 mt is the limit for that.

Cosayach I hear are around the 3,700 mt mark and have cash problems.

So if the rule kicks in, it forces SQM to get the pipelines in ($250 mill) and will force their opex up. Cosayach will have the choice of big spending, opex up, or go for reduced production to stay within the 150 limit. It's a rock and hard place situation for them if it happens.

For SQM it may well turn the nitrate side of their business loss making. As mentioned recently the cut-off rates at some mines for nitrates is below the cut-off grade. Those that are under are only so by 1%. 7% resource 6% cut-off grade. Seawater will probably wipe out the 1% and more.

The iodine cut-off grade will also go up from the current 300ppm.

SQM have dumped around 2000-3000mt (estimate) at the end of 2013 and their figures support that.

Sirocco have dumped 600mt and shelved plans which would have seen 2000mt plus by them (now 1000mt).

3% demand rise each year means another 1000mt needed. So once inventories are done and the dust settles at the end of this year, the over-supply situation has gone. Dumped production and growth seems to more than wipe out what others have added.

Hence 2015 should see good prices, and if the water rule is in by then it kicks in for 2016.

Cos increased as did Algorta and Bullmine but they have limits.

While the price looks low and could squeeze down further, the various actions taken at the end of 2013, situations and rules in play going forward, along with tax and cost rises, should mean the price of iodine will have to rise.

No way will big money be thrown in by Chile producers to expand, when they can barely survive at current prices. Big money for some (pipelines) will be needed just to stand still and watch costs rise.

Short term the peso v dollar situation is key, if the peso weakens then they are ok, if the peso strengthens prices will have to go up.

On that point copper seems to be the key so what that does directly affects the peso. Higher copper prices = stronger peso, and the closing of margins for iodine miners.

All we need now is the el Nino to send loads of rain Atacama way, but I doubt that will happen.

[superg1] 14/5/2014 13:47

Test

That's the beauty of the Atacama. Any rain is unlikely, El Nino or not.

BUT if the Atacama were to get an unusual amount of rain then it actually makes the situation worse. It's a moon dust situation turning the place into a mud slurry with landslides and complete chaos with flash floods.

Thus look what happens with 40mm of rain in just a few days. In other circs mudslides dumped land mines in other areas.



Rain for any length of time would be great especially in the caliche areas as it would carry off much of the iodine as leaching is the way they recover it..

So no rain is bad, but a decent amount of rain is worse.

Large lakes can disappear over night due to the nature of the region.



There is no answer other than seawater, and that is the way it will go without a doubt. Most large mines in other sectors have gone that way, or are going that way.

[wizard2020] 14/5/2014 13:29

Thanks psycho you are right.

[mister big] 14/5/2014 13:01

Just dozing on Eurostar reading papers and catching up !

[napoleon 14th] 14/5/2014 12:54

Oh, so Mr big is back!

Good; I was starting to Wonder how much substance there was to you...

[napoleon 14th] 14/5/2014 12:49

test - I hope they get lots of rain too; not for the iodine producers,
but for the humans and their agriculture!

[testuser123] 14/5/2014 12:48

Hi Che7win,

Aye that's the one I use for daily spot prices. You can get Shanghai prices and commentary here.

hxxp://www.metal.com/metals/copper

The recent spike pushed spot prices back over the important psychological level of 50kRMB/mt. Will be interesting to see if it holds. At the end of the day though anything over $3/lb is good enough for the Chileans.

[che7win] 14/5/2014 12:29

Test,
A big bounce on copper since early March:

[testuser123] 14/5/2014 12:26

Just to provide a bit of balance on the Chile side of things it is worth noting that this year is expected to be an El Niño year, the net effect of which will be more rain in Chile (although hopefully also a warmer winter in the states). Should be confirmed one way or the other around September.

It's not a massive effect compared to things like Chinese copper demand/tax/legal issues etc but may provide some temporary relief to SQM et al. I should emphasise the temporary part however, they'd need something like 8 of them in a row to get ground water levels back to anything approaching sensible. Either way I'm playing it safe and expecting a mere 5% cost bump next year rather than the usual 15%.

While I'm posting it should also be noted that Chinese copper demand seems to be recovering after the new year slump, with prices now up in both dollar and renminbi terms for spot and futures.

[phsycho] 14/5/2014 11:55

Hi Wizard.. i think you are confusing TW with T Bulford, but TW was a AVN bull if i recall correctly.

[superg1] 14/5/2014 11:50

Not rising to the bait Wizard just pointing out the errors when he picks on shares I've done a bit of work on.

The point being, when they attack Blinx, Globo, QPP and others it seems plausible from the research.

Then you see research on shares I have had a good look at then the glaring errors are apparent.

Thus it seems anything he spouts off about is with little research and often full of at best, 'incorrect information' obviously a good smattering of 'errors' helps his cause, as those errors are always unfounded negatives.

Has he researched GDL he could have come up with some details far worse than he refers too.

I never was an Avanti bull and unwittingly supported that 'lot' while posting on AVN some time back.

[wizard2020] 14/5/2014 11:30

Not posted for a while as this seems to me to be a sit tight and let things evolve sort of time. SG don't take TW so seriously or rise to his bait - in the end facts will destroy his uninformed ramblings. I remember he was a super bull on avanti but eventually posted a sell note at around 150 after which the share price recovered somewhat. Thats when I stopped paying for RHPS - from memory again he then left RHPS to start the biotech sheet which was poor from day 1 so I didn't use that either. This is from memory so e and oe.

[superg1] 14/5/2014 11:19

Business as usual for Chile this week

'A Chilean city famous for mining in the Atacama Desert is running out of water. Fast.'

'Chile mining royalties down 33% in 2013 - BNamericas'

'Lawmakers call for Chile deputy mining minister's resignation'

'Mining operations in northern Chile threaten to drain the region's scarce water sources'

[mister big] 14/5/2014 11:16

Not really - interested to read info people drag up !

[freshvoicem] 14/5/2014 11:13

Subtle hints from MB trying to get price up?

Let's wait for positive news on production levels before we get excited.

We don't have any spare iodine to sell yet, still trying to produce enough to meet IChemical's need this year.

[mister big] 14/5/2014 11:02

That's an interesting article - all my calculations were done at a sales price of around 40, I suspect this will trend slightly higher with Chilean issues .
Iofina at these levels should be cash generative if they resolve plant issues and moving forward .

[woodpeckers] 14/5/2014 10:48

Yes the RB Energy report out yesterday makes interesting reading.



"Sales and shipments of iodine in the quarter were negatively impacted by both a port strike and an earthquake in Chile. Over the last 12 months the iodine price has softened due to an imbalance of supply over demand. Most recently however, prices have shown signs of firming up and demand is improving."

It looks like they sold 130tonnes in January at an average price of 36USD/kg and only sold a total of 126tonnes in Feb and March combined but at an average price of 40USD.

[ansana] 14/5/2014 10:15

There is no hopefully about it Mr Big you know as we do we it's all hands to the pump and noses to the grindstone. We ARE on our way again. The direction is upwards.

[superg1] 14/5/2014 10:02

I think things going a lot better is a given now 'changes' have been made.

LB has a completely different mind-set, it won't be about max production it will be about max production within the confines of cost efficiency.

We said it long ago, it's not about plant numbers but ppm x bpd.

As SQM have proven they closed mines as the ppm x caliche meant costs were too high, so they are clearly going on an efficiency drive themselves.

The other smaller mines will be slower to react. Sirocco (now RB energy) knew that so switched to heap leach and they still forecast $29 per kg on heap leach.

SQM said 'no worries' post the earthquake. Our findings in media reports re local news routes showed the employees are sick of the way they are treated, compounded by the recent earthquake.

RB energy report that the earthquake did disrupt the port and iodine overall. ??

All the various Chile issues building will hit as we go forward, as will the SQM reduced production. While some smaller mines went flat out to chase the price, they have limits.

[1madmarky] 14/5/2014 09:57

Ooh yeah can still taste the sulphur! Lovely views though

[neddo] 14/5/2014 09:54

go up mount teidi, nice day out.