Iofina Share Discussion Threads

[n3tleylucas] 16/5/2014 07:45

Bogg1e,

You state 'Cashflow is not an issue in short term, as their banking facilities allow for short term loans to the value of incoming receivables.'

I was not aware of any such banking facility. In fact I do not believe that such a banking facility exists for the group.

In fact the only interest rate risk I see in the accounts refers to the tiny sums generated from IOF's s/t cash deposits. As we know the convertible bonds are fixed-rate. There is no reference to bank borrowing facilities in the accounts.

Please either clarify your statement with evidence or withdraw it. Many thanks.

[bogg1e] 15/5/2014 14:32

roger, for now, i think any company looking to buy out IOF will be waiting to see if the model works in real business terms. The IP has to have value, as it's a unique patent protected technology, which should underpin an offer price. Cashflow is not an issue in short term, as their banking facilities allow for short term loans to the value of incoming receivables. In the medium term cash flow should not be an issue IF they hit production targets going forward, but that is where the doubt is. No-one wants to buy a company, that due to the complexity of operations and partnerships, may find itself perpetually hit by setbacks from one direction or another, and so Im sure any predator will wait for a minimum of 6 months of solid production, hitting monthly, quarterly and annualised production targets, before deciding whether the outlay, which even for IOF now, would have to be a reasonable sum, is worth the risk. The value is in the company 5 years+ down the line, they wont mind waiting 6 months to a year to be sure.

[rogerbridge] 15/5/2014 13:04

SG, I will not take up your offer whilst on hols, but what interesting reading.
There could be one or two companies running the slide rule over our "low cost producer".

[superg1] 15/5/2014 10:49

Ben's reply to that had me chuckling.

'That's very helpful'

Seriously Ben.... that was helpful?? I think he realised he had trodden on a sore point so did a tactful withdrawal.


SQM are fine they put it in their full financial report re why, but you have to work it out.

I have checked prior reports, I can not find that they have ever mentioned cut-off grades prior to the 2013 report.

It's only 359 pages long if you want to have a read.

[nixonpaul] 15/5/2014 10:39

Lot of Kind Of's in that question

[superg1] 15/5/2014 09:52

Ben's very good question (Q4 earnings 2013). As you will see he makes a very valid common sense point, and SQMs reply is ..... well.... ridiculous.

SQM just spout out the rubbish.

Ben and co have yet to spot, the cut-off grades, fresh water rules and various other aspects that explain exactly why SQM gave up their market share. It's about SQM cost issues and pending capex needed driving opex up that they are looking at long term and that is why they closed mines and shut down plants, not the Roger Melly they spout off about.

That's why it's a short, not the iodine glut. I suspect the SQM success story will start to fall apart this year.

Ben's question (Q4 2013 earnings)

'The first one is on iodine. You stated that you are prepared to fight for long-term market share, but I think it's apparent that you've actually been giving up some market share by cutting back on your volumes. So can you just kind of discuss what your strategy is right now? I mean, why not cut the price and kind of ramp up your volume and kind of get back that market share and kind of clean up this industry a little bit.'


SQM's answer. Complete and utter tosh and BS, that makes not any sense re the question posed-:


Patricio G. Contesse - Chief Executive Officer and President
Well, I think, what I said is exactly what we're trying to do. Of course, we see this [indiscernible] you suggest that was to evaluate and we decided in the long term not to go [ph] back, as you said, more gradually. And that's what we're doing even though we can lose some further market share. But we think in the net present value [indiscernible] to the best estimates we have, that was the best initiative. As I said, we are looking our position not for short term, but also the long term, what is the best for the company. Also, we have to say that the policy regarding iodine that was in place as we told before and what is going on in the market, it doesn't make decision for -- for people to make decision so rapidly even if you don't -- even if you go very aggressive. To close a company or to may -- or to pull [ph] people diminishing those volumes or what they respond in the market elasticity, those are factors to be seen, not in 3, 4 month but in the longer period. And we are continually doing that job and we can change our -- if we see the best policy toward pursuit of what we have said. And as you suggest, maybe sometime we can see that is the better alternative of what we have evaluated until today. And we will not -- we would change, we are always and will be looking forward to the best interest in the long run to have the best present value for the -- and economical for the company and care about also [indiscernible]. So just as your suggestion has been steady and we have decided, but it doesn't mean tomorrow we don't want to proceed [ph] way.

[superg1] 15/5/2014 09:45

CK

When the analysts were saying chase the Chile bubble we posted about all the coming problems re power and water.

The information was in great detail on the web. In fact the government reported 2014 predicted to be the worst year on that front.

Yet on SQM highs multiple large fund analysts had SQM as out-perform on prices over double it's current price. Now the price is half they have it as under-perform.

The whole situation is what made IOF look a compelling investment, the missing ingredient has been the promised advance rate by IOF.

We on here were talking seawater pipelines for all iodine producers going forward. 4 producers never mentioned them including SQM. Now every Chile iodine producer has mentioned that route, from Bullmine to SQM.


SQM were talking big expansion, there are detailed posts about that being an own goal and BS. The claim was they would go defensive around the 45-50 mark.

They went more than defensive. Over 500 employees have gone, mines have closed, an iodine plant has closed.

I don't think the analysts have the time we do to look at SQM. For the first time ever I see that SQM have listed cut-off grades.

If analysts bothered to look and understand the nitrate joint opex issue, they would see some mines are below the nitrate cut-off grade. In other words all opex is loaded onto iodine.

Ben Isaacson of Scotia Bank smelt a rat but was too polite to push the

'why hand over so much of your iodine custom' (2000 to 3000mt)

If SQM were that flush and low cost, it doesn't make sense to allow Cosayach to push you off your market. Given that Cosayach struggle themselves and SQM want to crush them, then why did SQM fold their hand

[rogerbridge] 15/5/2014 09:41

Well done SG, nice to know someone is on the ball.
It's also very interesting on the oil front, those flowrates are decent and are very postitive for the IOF acerage. I should imagine that there must be some oil companies looking at the IOF acerage, even better IOF have valuable data of what lies beneath.

[captain_kurt] 15/5/2014 09:18

Good work SG. Anyone one thinking of investing in Chile will be looking elsewhere imo.

[chumbo] 15/5/2014 09:11

Thanks SG. You're on fire today!

[superg1] 15/5/2014 09:07

That Chile tax now passed (14th May).

"In Chile today the 10% with the highest incomes pay on average an effective tax rate of 10.2%, and with the tax reform that will rise to 23.8%," Mr. Arenas said.

The lower house of Congress approved articles that will eliminate a tax exemption for businesses that reinvest profit, known as the FUT, to increase the corporate tax rate, and to lower personal income taxes.

The deputies also voted to increase taxes on tobacco products, alcoholic drinks, sugary and energy drinks, and on diesel fuel.

For the likes of SQM and others, it seems the elimination of FUT, corporate and diesel tax rises will affect them.

As much as some talk of an 'iodine glut' (months after we knew that) Chile producers are seeing their businesses damaged by it.

As much as some frown at the 'ramping up production' comment some forget that includes IOF. If they get to their desired rate of 700- 1000mt with the current plants. The upper level is around 3% of the market.

The Chile smaller players have been ramping up but they do have limits.

[superg1] 15/5/2014 08:58

Comments re Oil just over the Montana border in Alberta just popped up on a google hit.

The area north of the Border is West of IOF.

The interest being they talk of the 3 forks, which I didn't realise extended that far.

We all know the 3 forks in Eastern Montana, and that it runs under the entire IOF acreage.

Very interesting to see such apparent significant flows that far west.

Southern Alberta Bakken operator LGX Oil + Gas reports that its first well in the play went on production in late January, and averaged more than 530 barrels of light oil per day over the first 30 days. As of mid-March, the well was producing 470 barrels per day. The well, in the Calgary based junior's Big Valley play just north of the Montana border in southwest Alberta, was completed with a 20-stage frack stimulation, and LGX reported that after the well flowed back for 136 hours in a 4.5-inch diameter frack string, it produced 9,230 barrels of 31 API degree oil, for an average of approximately 1,650 barrels per day. The well also produced 570 million cubic feet of associated natural gas per day.

LGX also reported that another well drilled in the play in southern Alberta just north of the Montana border had encountered 13 meters (43 feet) of "gross pay. " The company said both of its Southern Alberta Bakken wells were Big Valley members of the Three Forks group in the play. For 2014, the Calgary-based junior is planning to drill two additional gross wells in the Southern Alberta Bakken in 2014, which it expects will be spud in the second and third quarters. The company has earmarked C$13.4 million for its Alberta Bakken operations in 2014.

[superg1] 15/5/2014 08:00

The general thoughts from yesterday (collective view) seems to be that stock was getting short. Based on those wanting to be out are out, and the traders who bought in the 20's also now churned through.

Time will tell on that front and we know it can turn on a sixpence, and a 'doh' as another big suppplier appears.

Just passing on the view.

Oh and Chile have just passed those tax measures as of yesterday so the miners will now see taxes being increased over the next year or two. A heated debate but it go through.

With SQM wobbling, I'm beginning to wonder what the 150 litre per second rule would do to them. SQM seem to be getting hit from all directions at the moment. Higher capex and opex is the last forecast they need.

EG their main iodine mine area deals with 570 litres per second.

[superg1] 15/5/2014 07:44

Analysts behind the curve it seems. I have been mentioning SQM as a short in recent days because the analysts and market seem to have missed what is going on re them.

The share price had bounced mainly due to the comments by Tesla (lithium), but potash has hit 5 year lows too.

It's not just about the iodine price but how much less SQM are producing. The full SQM financial report showed that the Iris plant had closed and a mine had closed in Oct and Nov last year.

There are clear indicators which suggest production by them has dropped by 2000 to 3000mt.

I think it was 11k mt plus in sales for 2013 around 50 average. Knock off 2 to 3k mt and take the price towards 40 and it's a lot of revenue gone.

Look more deeply into into the accounts and you can see at some mines nitrate extraction (as posted) is below the 6% cut-off grade. Nitrate and iodine production in the early stages share the same processes, so the opex is offset against each of them.

At some mines it would seem on the basic figures the nitrate side is adding to iodine costs rather than reducing opex.

It may well be they have stopped the nitrates side where the cut-off grade has been exceeded, meaning all costs will be offset against iodine production at those locations.

Hence having found the above I thought the market had SQM wrong and called it a short.

Coincidence or not I don't know, but I had an email from a guy I couldn't open 2 days ago.
I haven't had one for months. New York based guy with clients heavily invested in SQM and reads this thread from time to time (finds it useful re Chile etc).

Buyers seemed to appear late yesterday for IOF and SQM got hit ???

[orslega] 15/5/2014 06:54

writz - you could have a good guess! lol

"as new supply continues to ramp up".

[writz] 15/5/2014 06:46

orslega, from that link:

"Iodine challenges continue," analysts Juan Tavarez and Andrew McCarthy said in an e-mailed note. SQM's market share "may remain under pressure as new supply continues to ramp up," resulting in a prolonged period of lower prices. The price of potash, which accounted for 23 percent of gross profit, will also be constrained by a "well-supplied market," Banchile-Citi said.

Not sure where the "new supply" is deemed to be coming from?

[orslega] 14/5/2014 23:09

hxxp://www.bloomberg.com/news/2014-05-14/chile-s-sqm-slumps-after-banchile-citi-says-sell-on-iodine-glut.html

[orslega] 14/5/2014 23:09

deleted - repeat

[orslega] 14/5/2014 23:04

sg1, indeed, SQM being squeezed....

LATIN AMERICA
Chile's SQM Slumps as Banchile-Citi Says Sell on Iodine Glut
By Eduardo Thomson
May 14, 2014 4:43 PM EDT


Soc. Quimica y Minera de Chile SA, Chile's largest fertilizer company, fell the most in six months after Banchile-Citi recommended selling the stock on predictions that oversupply in the iodine market will cut profit.

SQM dropped 5 percent to 15,999 pesos at the close in Santiago, the biggest decline since Nov. 20. The IPSA index gained 0.2 percent.

Banchile-Citi, the joint research department of Banco de Chile and Citigroup Inc., reduced its recommendation for SQM to sell from the equivalent of hold. The analysts wrote that a 21 percent drop in iodine prices this year may lead to a 39 percent slump in earnings of that segment, which accounted for 36 percent of gross profit in 2013.

"Iodine challenges continue," analysts Juan Tavarez and Andrew McCarthy said in an e-mailed note. SQM's market share "may remain under pressure as new supply continues to ramp up," resulting in a prolonged period of lower prices. The price of potash, which accounted for 23 percent of gross profit, will also be constrained by a "well-supplied market," Banchile-Citi said.

SQM's shares have increased 20 percent in 2014, leading gains among members of the IPSA index. The stock is trading at 19.1 estimated profit for the current calendar year, 21 percent below its average of the last four years.

[superg1] 14/5/2014 15:21

I think something has cracked off re the Ponce case (SQM boss) but the translate versions don't make a lot of sense.

Chile is so corrupt that I doubt charges will ever stick, something has definitely spooked SQM investors.

[superg1] 14/5/2014 15:02

SQM have opened up with a gap 3/4% down. Credit Suisse have down-graded them today as have others in recent weeks, but I can't see that being the trigger.

Down around 150 points since the mention to short it.