Iofina Share Discussion Threads

[diggulden] 02/6/2014 08:13

Well this is turning into one hell of a momentum play. This rise has legs it seems, I have seen similar in the past, Dec 2012 where we went circa 50p to 150p in about 10 weeks. That was on just IO1 and IO2! Only wish I have been a first timer buyer about 3 weeks ago....

[cyberbub] 02/6/2014 07:56

Anyway to a certain extent it doesn't matter to us if the iodine price bottoms out and flatlines around 40 dollars for a while, as long as Lance successfully reduces our costs to 20-25... we will still be cashflow positive and nicely profitable... while the miners struggle...What we don't want is the iodine sale price to drop to say 30 dollars. But that seems so unfeasible that I just can't see how it would happen?

[captain_kurt] 02/6/2014 07:53

Is our buyer still with us ?
Will we get a 50% increase in the May production report this week ?
Is IO6 near completion ?
Has IO5 now been hooked up to the mains power supply?

We will know shortly imo

[bocker01] 02/6/2014 07:45

Bobsworth, I agree. I'd add that I do not really see how amortization can be ignored in the medium to long run as it is the cost of eventually replacing expensive kit which in an arduous capital intensive mining environment, really does wear out. Just plucked from thin air, USD300m every 15 years, amortiozed over 15 years would add USD 10 per kilo to the costs of a conmpany doing 2000 tonnes a year. Then there are other costs to add.

Cybers point too really makes one think about whether one is comparing apples with apples when looking at publshed costs.

Plus additionally, what reliance, if any, can be attached to costs quoted by these Chilean companies whose BODs (as SG1 points out so frequently) appear to be in and out of court on fraud, theft or corruption charges on a fairly frequent basis? B------d if I know!

[superg1] 02/6/2014 07:22

Post 14497 covers comments or Cosayach listed in the supreme court and rumours of illegal water extraction that had killed off part of a desert forest.

In one recent media report it names the area affected

"According to prosecutors, the situation affected underground Soquimich rights and also Tamarugal basin."

Those reports also mentioned environmental damage done. SQM as far as I know have never produced iodine in that area. They comment on it in their 2010 report.

"To be able to use water rights that have been granted in relation to several wells situated in the ecological reserve of Conaf called Pampa del Tamarugal and take them outside the "tamarugo" forest and the reserve, ThuS reducing the environmental impact caused by the exploitation thereof. The project is being implemented."


Hence joining up the dots, the rumour about illegal extraction and damaging a forest now seem to be true.

SQM were obviously well aware that water extraction in the area may be detrimental to the environment, and were watching Cosayach more or less go about destroying the area, with rapid production and water depletion.

[cyberbub] 02/6/2014 07:20

Yes I recall that the low costs recently quoted by Chilean miners were from heap leaching ie. no mining costs included. They can only leach from the heap for so long... until the heap is gone!

[superg1] 01/6/2014 22:55

ammons

Sirocco (RB) reported costs of $35, $38 and finally $41 per kg before they then closed down their ALP plant. It's listed in their news in each quarter pre ALP closure.

It would seem heap leach doesn't get the quantities they would like but reduces costs.

They wanted 2000mt plus this year but have gone back to 1000mt. $25 is the current rate but they quote $29 expected. That no doubt will be down to the seasonal issue of the cold winter weather in the Atacama which hampers heap leach operations and caused them problems with there ALP last winter.

In fact they went as high as $46 per kg in Q4 2012.

"The installation of a SAG mill, due for completion by the end of Q1 2014, will enable the Agitated Leach Plant to operate at a throughput of 400 tonnes of ore per hour, increasing total production rates to over 2,000 tonnes of iodine per annum."

If you recall we forecast the ALP wouldn't work for them and it would close.

Algorta as posted use seawater and you can see the cost difference. It appears to be about $38 per kg for Algorta.

Hence the 150 per litre rule is important as it affects SQM in a big way on costs.

But as Ben Isaacson more or less pointed out, if costs are so low at SQM why did they let Cosayach and others take some of their custom.

As in posts the El Toco mine was only opened on the higher prices having been closed before. Now they have closed it again as the price dropped.

[bobsworth] 01/6/2014 22:45

bocker01 Your not wrong!

Cash costs, in mining, are the costs of production, at site level, per unit of output.
Cash costs include operational cash costs at site level. This:
• includes transport, refining and administration costs and royalties
• excludes non-cash costs such as depreciation and amortisation
• excludes costs not at site level (such as head office costs).

Reference: Page 15 of RB Energy 2013 ful yr results – section Iodine
It states:
"Results In 2014, production of iodine is estimated at 1,000 tonnes at a cash cost of approximately $29/kg."

[bocker01] 01/6/2014 22:26

Thought the lower costs quoted by Chilean companies were cash costs not full costs. May be wrong of course. But if right, should point out, cash costs will not recover fixed overheads and are not sustainable other than in the short term.

[crosseyed] 01/6/2014 22:19

engelo/ammons,

To some extent, my question re unit production cost was rhetorical. IOF have the implemented technology to beat anybody, it would seem, as of now. Perhaps $20/kg is a modest target.

c

[ammons] 01/6/2014 20:47

The cost of production published by Chilean companies that I have seen are not $40 per kg or anywhere near it. RB Energy quoted $25 recently and in their operations update previous to that the same company quoted $29 per kg. I have only been able to find quoted numbers for RB Energy, not the others.

I asked about this in post 20195 but did not get a response.

[superg1] 01/6/2014 20:42

Engelo

This is what Algorta Norte said for H1 2013.

"In this period the company had revenues of U.S. $ 56.2 million and an operating cost of $ 38.8 million"

Throughout H1 2013 industrial minerals reported prices of 55-60 then later 60 to 65.

Going for the lower 55 rate, that put Algorta on 1020mt and a cost of $38 per kg.

Algorta are currently the only producer with a seawater pipeline.

Like for like now on 1000mt with iodine said to be around $40, it's not so great for them.

[engelo] 01/6/2014 20:00

crosseyed (21524)

"It is clear that IOF's unit production costs from IOsorb plants are very likely to fall rapidly when such matters as steady brine supply and operation at something approaching capacity are attained, from around $30/kg to $20/kg.

How does that compare with competitor's unit production costs?"

SG has quoted various estimates of Chile miners' production costs so is a much better authority, but from my recall:

- Most are on production costs of above $40 per kilo so uneconomic at current iodine price

- Recent claim was made for production cost in the high $30s but that's the lowest I've seen

In short IOF are not just ahead but miles ahead of Chile on OPEX. And as you say IOF's OPEX is likely to reduce and in Chile the reverse is true.

[superg1] 01/6/2014 18:48

Bob

Many of them translated read-:

Chile boss imprisoned for passing water !!!

No stag nights in Chile then.

[hurricane.] 01/6/2014 18:14

Chilean iodine mining imploding its seems

All very good news for Iofina.

[bobsworth] 01/6/2014 16:53

Lots of News articles appearing about Cosayach



A prison sentence for the Director!

The owner of the mine, Francisco Errazuriz Ovalle, accepted the conditional suspension of proceedings to change the closure of 38 wells.
Thursday May 29, 2014 -. A penalty of 61 days in prison was sentenced Contreras Carlos Quispe, director of Sociedad Contractual Minera Company Nitrate and Iodine Cala Cala (Cosayach). The punishment was decided by the Court of Pozo Almonte Warranty for the crime of counterfeiting reiterated waters. enterprise owner, Francisco Javier Errazuriz Ovalle, and two managers accepted the conditional suspension of proceedings, given by the prosecution. In exchange, the closing of 38 wells in the areas of Cala Cala and Negreiros ordered.

[superg1] 01/6/2014 16:53

WRITZ
1 Jun'14 - 12:16 - 21527

SG, how does securing ownership of the water rights impact on SQM?

I'm not sure what you mean there.

SQM have rights to 570 litres per second at the Neuve Victoria operation.

SQM just stopped cosayach using water (38 wells to be closed) on the basis that Cosayach water use would impact rights they have.

The key point to be confirmed or quashed, is whether it is current water being used in production or it's old news.

As the details of last April's water case has been found. Cos can use water, and now, 38 wells have been ordered to be closed, it seems it is current and relevant.

It would be pointless for SQM to pursue a case where Cosayach weren't using water.

Ove the last few months there has been a rumour that Cosayach have been up to their old tricks and breaking the law.

One Cos boss just got sentenced to 61 days in prison over water use, and I note they also say there has been environmental damage caused by the water use.

In other words those 38 wells will be closed and will be staying closed.

This is what is said in 2012 re the 2011 illegal wells

In mid-September last year, the regional attorney in charge of an investigation into the company, Hardy Torres, ordered the closure of 33 illegal wells being used by Cosayach, which is owned by local entrepreneur and former presidential candidate Francisco Javier Errázuriz.

The controversy led to the resignation of the regional head of national geology and mining service Sernageomin, Héctor Tapia, for failing to properly supervise Cosayach's operations.

The company was then found guilty of illegal water extraction by the supreme court, which ordered Cosayach to stop extracting water from the wells and to regularize its operations.


The recent case is an order to close 38 wells, 61 days imprisonment for one boss, and a 'ceasing of proceedings', whether that means ceasing of court proceedings against the Cos chief, or ceasing of operations in the relevant area is unknown.

However if those 38 wells were in use for current operations, then Cosayach production rates just fell off a cliff.

[superg1] 01/6/2014 16:30

Sancler
1 Jun'14 - 10:21 - 21523 of 21528 2 0

If Cos was, in effect, pinching water from SQM might that not have affected SQM's production downwards? And then if Cos stops pinching that water might not that downward effect on SQM be reversed?

It's not a case of pinching water. As demonstrated in the SQM details post the mine and plant they have closed have been offline before on lower prices. The price rose so they were able to make El Toco viable.

They talked of cost efficiencies. They had planned to move to new areas and $500 mill of capex, but the potash and iodine circs helped shelve all of that.

The Cosayach situation is simply using all means available to SQM to protect their position in the iodine market.

If you recall, recently SQM tried to do battle with Cosayach over leased land previosly held by SQM but the court ruled a natural expiry and hence Cosayach kept the leases (nitartes and the like not iodine).

Then for months a Cosayach supreme court case kept appearing in listings, with no details.

Now we know what it is. SQM revenue had been hit by some over-supplying the market and it was Cosayach.

SQM it seems just wiped them out with that water ruling.

SQM were not struggling for water, Water is scarce and they were obviously claiming that Cosayach would deplete water reserves that SQM had rights to and Cosayach didn't.

Not forgetting of course that SQM fired about 700-800 staff in total at the end of last year, in their cost cutting measures.

On SQM 8000 mt rates an iodine price rise of $5 per kg is worth $45m if we call 40 the current rate. Adding 1000mt at the 40 rate is worth $40mill.

SQM don't want these low prices they have made that abundantly clear in their actions.

They may well just have solved the problem by a much cheaper route.

[1madmarky] 01/6/2014 13:22

Thanks SG, for the continued coverage of chilean woes. Looks like the only way is up wrt the price of iodine. Hopefully then IOF will be able to demonstrate that they can meet their potential.

[writz] 01/6/2014 12:16

SG, how does securing ownership of the water rights impact on SQM?

[jointer13] 01/6/2014 12:09

very serious water problems in chile...has to take its toll.

"Authorities have acknowledged that the water situation in Chile is worrisome following a five-year drought. Region IV in the center-north, for instance, is facing its worst water crisis in a century, while in some areas over-utilization of aquifers has depleted water resources dramatically"

[jointer13] 01/6/2014 11:59

"Chile is in the grips of a five-year drought that is affecting northern regions in particular"

[crosseyed] 01/6/2014 11:13

"Improved plant and process design resulted in higher recovery efficiencies and further cost reductions. IO#3-IO#6 include improved automation designs that reduce the largest cost components at each plant, specifically chemicals and labour. Average production cost per kg for the year was less than $30. We expect to see significant improvements in production costs with the addition of higher volume plants comparable to IO#2, which produce at a more favourable cost in the low $20 per kilogram range. The recent addition of IO#4 and IO#5, and the addition of IO#6 in Q2 2014, will significantly increase production over current levels and is expected to decrease average production costs in the year 2014 and onward, growing shareholder value."
Excerpt from the Chairman's Statement in the 2013 Annual Report, ie written by Lance Baller

It is clear that IOF's unit production costs from IOsorb plants are very likely to fall rapidly when such matters as steady brine supply and operation at something approaching capacity are attained, from around $30/kg to $20/kg.

How does that compare with competitor's unit production costs? My understanding is that they are likely to be somewhat higher giving IOF a relative advantage, though it is true that well-capitalised large companies can sell at a loss for some time. It is really in IOF's own hands to attain the production performance as advertised.

c

[sancler] 01/6/2014 10:21

If Cos was, in effect, pinching water from SQM might that not have affected SQM's production downwards? And then if Cos stops pinching that water might not that downward effect on SQM be reversed?

I appreciate that it would not be anything like as simple as Xmt of the SQM's drop in production being balanced by the Xmt increase in production by Cos.

But I still wonder whether something ought to be added back on the SQM side of the equation as well as just taking production off the Cos side.