Iofina Share Discussion Threads

[1madmarky] 11/6/2014 08:36

Che7win - those production numbers seem about right
So we will need 2 or 3 mobile units in order to make the 1000 Mt for next year. It looks pretty good as a growth rate and certainly achievable

[naphar] 11/6/2014 08:35

Che
same here. I just think the wider market may wait for more stability and maybe even some mobiles or IO7 before really pricing in next year's potential. Also not sure the market will price in iodine price rises in anticipation, without some proof.

Time for me to fly. Will catch up later.

[naphar] 11/6/2014 08:31

Alpha
no worries. We were discussing over drinks yesterday the different interpretations of what had been said about the "regular" updates. No guarantee my interpretation is correct, but it was shared round the table, as previously posted by SG

[che7win] 11/6/2014 08:31

Some assumptions coming up:

If we produce 1000mt, iodine recovers to $50kg, our plant costs at conservative $20kg.

Margins would be 30kg, so $30,000,000 profit, £17.6m profit around current exchange rates on raw iodine side.

13p EPS or so, even fully diluted assuming loan notes converted and share options etc, with 150,000,000 shares in issue still around 11.7p eps.

A lot of this fed into the chemical side where margins are improving too, I find it hard to work out why the wider market doesn't catch on here.

[alphacharlie] 11/6/2014 08:24

naphar, apologies if I've mis-understood; your update was very thorough so I accept your interpretation as above (and there were one or two others that suggested at least a July update) as opposed to some I read that gave a slightly different slant and had me thinking they would stop.

[naphar] 11/6/2014 08:14

Alpha
I don't think the plan is to stop the updates to stop volatility.
I think updates are there to bring in stability of expectation based on stabilising production. Once production stable and expectations in line with reality, updates may be reduced, as should not be so necessary. Not sure I agree, but it's a different logic to what you outlined.

[alphacharlie] 11/6/2014 08:09

Thanks for all the updates from those who attended, particularly naphar; BUT some very woolly management thinking going on here re production updates IMO. The notion that to 'cease' them at some future point to stop share price volatility is daft and will prove to be akin to shooting oneself in the foot.

Going through the plants one by one as per the June update adding plants and minis as they come on-stream, can only be to the good. Better to know where there are glitches and shortfalls with relevant explanations – I can handle that with absolutely no probs - than to be left in the dark for months on end – we've been there before remember. There are a lot of very savvy people on these boards who don't need mollycoddling. They just need facts.

[che7win] 11/6/2014 07:50

1mad,
Sounds like it:

171mt last year
427.5mt this year
1000mt plus next year.

Run rate would be higher, they can easily manage new plants at the right time to hit those figures.

What price is 150% growth worth, at some stage we will rerate.

Also pleased with the thoughts on the water application, all in all, looks like we are firmly back on measured growth path after falling off track the past year.

[1madmarky] 11/6/2014 07:33

I believe that the 150% growth was to do with the increase in iodine production year on year.

[bogg1e] 11/6/2014 01:58

This article goes a long way to explain why there may be a large Japanese customer/partner in the background. Note that incidents of thyroid related cancer/health issues are 40 times higher than normal and precancerous tumors are becoming increasingly apparent among Japanese youth effected by the fallout from Fukushima:

hxxp://www.truthdig.com/report/item/newsflash_fukushima_is_still_a_disaster_20140603

[cyberbub] 10/6/2014 23:33

I am not really one for charting, but I notice that after 9 months of the 20SMA being below the 50SMA, the former is about the cross the latter... a weak Golden Cross (as the 50 is not [quite] climbing), but still a good sign of growing strength IMO...

Overhead resistance on the 200SMA is at about 108p...

No advice intended...

[cyberbub] 10/6/2014 23:21

Excellent detailed post naphar, thanks very much!

Superg1, could you provide a link to post 21926 from the header please? Would be great for future reference back... there have been a number of good posts about the AGM but 21926 is the best and most comprehensive IMO

[naphar] 10/6/2014 23:10

Mid teens may still be possible as an average, but I would not be planning on it at this stage, not with IO3-6 only being average 150 ppm sites due to not being on the "fairway"
Note to self, don't mention fairway at next presentation, Lance will have forgotten it was his analogy (as was the case with "ping"

Talking of next presentations, Jeff was pushed to have a PI presentation in September when they are next due over to talk to instis (interims I guess). He is open to the idea and seems to enjoy the PI interactions like today. No promises though.

[che7win] 10/6/2014 22:53

Thanks for the correction Naphar,
I didn't expect our costs would get below $20 kg, it bodes well.

[naphar] 10/6/2014 22:42

think it s safer to work on high teens Che, until we start getting mobiles up and running, at which point their lower cost base should also help reduce the average

Ors - no worries, nice to be able to give something back occasionally

Monty - really not sure about the 150% topic this end

[che7win] 10/6/2014 22:36

I second orslega, great posts from everyone today.

Naphar, really appreciate your last post, the company is moving into a new phase, much stronger and more certain.

"We sold some raw iodine this month at a great price ($42.kg)"

Excellent price....it seems we will move in mid-teens costs whilst iodine price recovers, the future looks exciting.

[orslega] 10/6/2014 22:15

thanks for all the AGM feedback, very comprehensive indeed, in particular special thanks to Naphar. Great summary.

Sense LB is firmly in control - onwards and upwards : )

[montyville2] 10/6/2014 21:57

I put the comment about 150% increases! but it was hard to decipher my notes! as he would have moved on to the next slide. From memory though it was a comment about future growth as I recall and related to the existing wells. Ie he could see substantial growth of these magnitude just by optimisation. Have I got that right ...directed at those that attended?

Another point not really covered was about the non core water project. It was implied that the regulator rejected the licence as a high number of UK callers pretending to be employees of the company...presumably some of them in today's audience!

[rugrat2] 10/6/2014 21:57

There are two new presentations on the MidStates website which have a long awaited map of their brine disposal network. I have copied it and annotated with the swd names.



As a reminder of my recent comments on the mid March GoogleEarth image (adv 21194), there was a full size IO# pad almost ready for construction to begin at the Lohmann swd, and possibly one at the Zahorsky swd. It remains to be seen whether or not they will now be utilised, and if so by what means.

According to the interactive map on the Baker Hughes website, 6 rigs are now operating for MidStates (one has moved up from their Anardarko Basin leases). Comparing the BH map with the brine network map there is one drilling in the Longhurst network, two in the Dacoma network and three in the Zahorsky network. The five wells are all on the road that runs passed Zahorsky.



You will notice that in addition to the swd wells I have marked the 'Budy pad'(at 36.709,-98.604). MidStates bought their lease position from Eagle Energy, who in turn had bought the basis of the position from Special Energy Corp. SE put in the original swd wells at Dacoma in 2006 and Longhurst (site for IO#2) in 2007. From permit dates it appears that the original choice for the second swd was at the Budy site (a mile or so NNW of Longhurst) in 2006, but they let the permit expire. The site is currently used at a pipe yard, but it is apparent from GoogleEarth that there are also all the surface works associated with an swd well in place, and have been since 2008 (from looking at historical images). So I think that it is used as a hub to gather the brine, skim it and then pump either south to IO#2 at Longhurst or north to Lohmann. In the 2008 image you can see the line of the then recently installed pipeline running down to Longhurst.

The network looks rather 'twiggy' around Longhurst and Dacoma because those first two swd wells were drilled when the leases were being accumulated as a Hunton play, with vertical wells. So all the little stubs are lines out to the few Hunton wells that were drilled before the Miss Lime became the order of the day. The Lime horizontals are of course drilled from pads at the edges of the E-W roads, so the brine lines running to the swd wells drilled 2011 (Zahorsky) and later, generally appear as straight lines along the roads.

There are a number of other new slides, a couple covering the down spacing that I have mentioned before with up to seven laterals per section. I was going to incorporate the slide showing their well positions for comparison with the brine network, but decided against it as for some reason they have mapped the bottom hole positions (ie the far end of the laterals), rather than the surface locations, and I feel that is rather confusing

[rugrat2] 10/6/2014 21:50

Wow Naphar, that's a hell of a lot of detail - very impressed. From those fairway comments I take it that the best ppms are probably on a N-S band through IO#2. That would take in the two pads seen in the March satellite image at Lohmann and Zahorsky, and also the Triad swd.

Very encouraged by all the comments today.

[naphar] 10/6/2014 21:28

My notes FWIW, please excuse formatting and typos:-

Present: Lance, Jeff, Bill Bellamy and company secretary whose name I forget.
US produces 5% of global production currently, use 80% imported iodine, implies to me that US usage is 25% of global production or about 8000mt.Japan produce 21% and Chile 58%
Algorte Norte mine has driven iodine price down. Through discussions with SQM they had anticipated prices would drop to about $37/kg.
Currently selling raw iodine as crystalised iodine and as prilled. Learnt from Jeff afterwards that's still relatively low volume, maybe circa 5-10mt per month if they have produced enough (my numbers but Jeff agreed to range).
Now "we have traction of scale"
IO1 is 80-94% extraction efficient
IO2 phenomenal plant and 88-95% extraction efficient; record month in May
IO3 away from "fairway" area (think golfing, fairway being the optimal ppm area); record month in May
IO4-6 on outer edge of fairway
IO3&5 most affected by fracking schedule
IOC very strong first half. Will scale back on recycling to put lower cost output through IOC some time in second half (I assume they can use the recycling staffing/time etc to produce derivatives as well). IOC currently using 350mt pa moving to 400mt pa.
35-45mt/month output range til IO5&6 online. Have ways to improve those numbers (not specified). Getting cost of production to low 20's, looking to get it down to high teens on average (costs largely fixed at a plant so higher output has benefits on cost/kg)
Continue to increase derivatives margins (my take was that's on top of the benefit of internal produced iodine)
Production now stabilized and looking for controlled growth.
Mobile units are key going forward. Mobile design recently completed, great progress in last 2-4 weeks especially. This is not the same design we were told about 2-3 months ago. They have reviewed and improved to reduce costs and increase to 10k bpd. Mobiles will be placed at SWD sites, not at well heads (change to my prior understanding). Cost $600k for the mobile plant plus $250k for electric hookups etc. 30 day lead time from order to delivery of plant and another 30 days to install etc, total 60 days til running (I would personally anticipate a bit more til its proven). Mobile pads and electric hookup being done in prep as that whole process can take 6 months. 2 are practically ready to go, and just need plant to be ordered (no orders yet made)
Prilling unit design complete. Will cost from $3.5-4m. No selling prilled iodine with a prilling agreement in place with a 3rd party. Will delay building own prilling plant until really required as opex is similar to the current 3rd party prilling agreement (win win for both companies).
Strong indications that Japan want to buy IOF iodine.
Market was flooded with oversupply of iodine (from Chile??). They see that over supply stopping.
See no reason they will not get the water permit in due course, but it will probably take more time after the hearing. It has taken so long because the person in charge is nervous, they have had so many calls from UK about the application it has made them nervous so sent it to hearing.

All comments from here onwards are based on Q&A session
Anticipate more Chesapeake brines from mid August ish time onwards with full brine supply coming online.
There are 170k bpd in the Chesa system, but they flow more to the low spots in the area, IO3-6 are in higher spots, so re-routing brine more challenging than one might expect.
150ppm is still a model plant. 2 plants are higher than that and 2 are lower (currently in 60-100 range). IO5 is much higher than the average. IO3&4 are lower than the average, IO3-6 overall should meet that average.
When Lance came back "no-one had a budget in the whole company". Budgets have been re-instated. To fix production "we just put everything back to how it was last April".
"Don't think it (new CEO) will be someone with much PLC experience". Seems to me that's because they rate industry experience as being much more important and PLC experience easier to learn. Strong candidate list and a high preference for someone currently with the company, but wary they must get it right this time. Lance wants to get the right team in place to effectively put himself out of a job.
Board not concerned with the likelihood of an aggressive takeover. But if it is attempted "we can deal with that". Not going to sell out too cheaply. More likely to be attempted now than it was a few months ago.
Plant expansion plans – mobile cost of production is less so focusing on mobiles.
IO3-6 costs were appalling.
Growth :–
- Not growth at any cost
- Need to focus on profitability
- Even with just 6 plants we will have great year on year growth
- Need to stabilize what we have and optimize before building more (IOs). We will build mobiles.
- Envisage one more big plant with IO2 type numbers and costs
- Not going to sit on inventory by growing production too fast, will grow production with mobiles when they have the demand in place.
Regular updates til stabilized and regular output so as to avoid wrong expectations. Reular does not necessarily mean monthly.
Large amount of Lances shares went into family trusts, but because for grandkids, great grandkids etc who are not even born and not close family, they are not a "beneficial interest" so not reportable, even if Lance is still basically in control". All done through professional advisers at the time.
Sales made 2 ways. Firstly as derivatives to companies like Dupont, Eastman, BASF and Schering Plough. Mostly one year contracts with fixed margins (and variable prices) to allow for fluctuations of input costs. Secondly, raw iodine sales to derivatives companies and to very large trading houses like Mitsubishi and Toyota (could implement long term contracts with fixed prices which would allow them to raise finance). No such contracts are locked in yet. (I don't know if they would want fixed prices if they believe we are at the trough price wise...)
We sold some raw iodine this month at a great price ($42.kg)
Mobile sites from 200-1000+ ppm, with a good chunk of the sites in the 250-400 ppm range.
IO6 to do list electrics, office space/labs, brine tie in
We are profitable now, the $5m bond was an "insurance policy"
Don't have capital for a prilling plant, it would need to be financed by a partner and paid back through a discount on sales price over time
Would be disappointed if review not done by Autumn. Getting it sorted pretty good.

[supreme mo] 10/6/2014 21:23

Thanks all for updates - very much appreciated. Currently away with limited access to internet and feel reassured.GL all.

[dcgray21] 10/6/2014 21:07

FWIW , Mr B and Lance have known each other for quite a while according to Lance.

[1madmarky] 10/6/2014 20:51

Think mr big is away polishing diamonds

On our growth expectations, this month Lance sold raw / prilled iodine at $42 per kilogram. Probably not a lot of it but sell it he did.
Our current costs are in the low $20's
So even at the current low price we are making around $20 per kilogram
There for if an io plant can produce 150 tpa then gross profit wise it pays for itself in a year. that is pretty good.

Now the mobiles are a third the cost and a third the capacity but will be located on brine that is two or three times as concentrated. So should pay for themselves in four to six months. This is the sort of growth I was hoping for.

All we need now is for Chile to self implode, which does seem likely and it is very much game on.

Anyway aimho