Iofina Share Discussion Threads

[che7win] 01/9/2014 11:35

"Labor day" today in the States.

[ridicule] 01/9/2014 11:12

The August update may come sooner this time if there are no problems with the numbers. I am surprised that the share price is so weak today with August figures imminent, I was expecting to see mid 60's by this time.

[orslega] 01/9/2014 09:15

August production update soon, week today maybe.....time to get the data analysed..hopefully 40MT+

[malachey] 31/8/2014 23:54

For those non advfn members who want to post links, simply replace 'https' with 'hTTps' and the link will work fine :)

[1madmarky] 31/8/2014 23:01

Bruce, the only source of price information that is freely available is hxxps://www.zauba.com/import-crude-iodine-hs-code.html
Plenty have posted about it on this thread. IMHO it shows that prices have stabilised but as it is imports to India from various countries with tax credits etc etc it difficult to get an exact price, but a relative price is on one of the charts.

[bobsworth] 31/8/2014 22:20

With six plants now in full production and pods top of their agenda I emailed Lance to say:

"I see the photo's of plants 5 & 6 on the web site still show them under construction!
Could you ask your team to update them to show the plants are built and in production?
Also a photo of the new pod design would be very welcome too.
Thanks in anticipation."

His prompt rely: "We will try to update"

[brucie5] 31/8/2014 21:52

Madmarky, thanks for that - TP's suggestion of 'over-reliance' on a single customer, in fact a distributor, may have been a hare, but it also is one way in which the posts over last 24 hours have helped me in my understanding of the business. Concerning the iodine price, is there not some chart available that could be put into the header for reference, like the gold or silver chart..? Or is the data not available..

[superg1] 31/8/2014 21:37

1MM

Good point, The good old DEA regulations. Now remember that 'permit' that held up a plant, I understand the last lot, even though they were told, forgot to apply for it, hence we had those delays.

[awolagain] 31/8/2014 21:35

That should have been

http not hxxp

[awolagain] 31/8/2014 21:33

An interesting water article....it is a big doc so grab a cuppa

hxxp://m.ceip.org/publications/?fa=56377

[1madmarky] 31/8/2014 21:29

The reason IOF use a distributor is that iodine has may uses some of which are very illegal. So if you want to sell iodine to someone you have to ensure that they are legitimate else you could get into a world of trouble. This is the service that the distributor does. They supply name and address etc and iof send it directly to the customer. It was explained at the AGM by Lance.
So if the distributor should get into trouble then IOF could continue supplying existing customers but they would have to do the necessary checks, which would be a drag but can be done. IOF would not want the hassle - that was what was implied again by Lance at the AGM.

[brucie5] 31/8/2014 19:12

Superg, fair enough - thanks.

[superg1] 31/8/2014 18:02

Another load of cobblers

'At that point a sharp drop in global supply due to multiple independent production issues looks to have caused a spike in prices which topped out at around $70/kg, which likely would have then dropped but for Fukushima which caused an anomalous spike in demand at a time when supply was just recovering'

Yes Fukushima did happen but it coincided with Cosayach going from over 6000mt to under 2000mt because the authorities closed down their illegal wells, so that was the main reason for the sustained spike.

Talk of drop from $25.

'which likely would have then dropped'

First point it wasn't at $25 it was at $33

No, the price hike allowed others to expand, they would not have done so if prices hadn't gone up so much.

Here it is in black and white from Algorta Norte. It's the only figures they have posted. It relates to H1 2013 when the prices were much higher.

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

Taking a price of $52 average for the period (quoted by SQM), that gives you 1080 mt of production of $35.92. However the prices were higher than 52 with Algorta on new supply so they may have sold at higher spot prices taking the opex up.

I have no idea if that 'operating cost' is an all-in cost, but it tends to back the rumour that Algorta have pulled back on production due to the low price.

Bullmine are said to have the highest cost of all, so the rumour that they have stopped mining is probably true.


Iodine shortage

Japan the quake struck in March 2011 later in the year Cosayach had 33 wells closed taking them form over 6000mt to under 2000mt.

Reports at the time say iodine was $33 per kg prior to the price spikes.

The situation in 2012 re movers in the production market

Cos under 2000mt
Algorta just started this year
SQM 10,900mt
Sirocco 1224 mt sold opex $37 per kg.

In 2009 Bullmine started to appear with plans to get to 1000mt which I think is roughly where they were and are.


2012

2000 + 10,900 + 1224 + 1000 = 15,124 mt missing Algorta as I don't know what they did that year.

We know Algorta planned to do 3000mt in 2013 but the figures they released didn't support them being on track.

In the price hike year SQM reintroduced the El Toco mine and the Iris plant, which they then closed again in late 2013.

Cos were on 6000 plus pre 2011, fell to under 2000, got back to a reported 3750 rate earlier this year, and have been recently hit again on the illegal mines. A virtually identical situation that took them from over 6000mt to under 2000mt.

So 2013 assuming Algorta did 3000mt + 1500 Sirocco + 1000 Bullmine + 10,800 SQM + 3000 Cosayach (they didn't start nicking water until April).

Total 19,300mt v 2012 15,124 plus Algorta.

I would imagine Algorta at least achieved 1500mt.

So the production difference from 2012 to 2013 seems to be + 2,700 mt.

The situation as it seems to be now.

Sirocco -500 (1000 forecast)

Algorta plus Cosaych = what Cosayach were on pre earthquake, so no gain. However 38 wells were closed a couple of months back, which had a big impact last time. So it's highly likely there is a deficit in play now.

Bullmine 1000 mt as before but talk that they have stopped mining.

SQM -2500 mt as they have closed the El Toco mine and Iris plant, they quote why they did that ('to optimize our production facilities with lower production costs).

2013 19,300mt estimate produced by that lot.

2014 estimate SQM 8000 to 8300 + 1000 Sirocco + 1000 Bullmine (could be less if they have stopped, 6000 for Algorta and Cos, but Cos had 38 wells closed so it should be less.

At best 16,300mt, but we are forgetting something and that is the 3.5% each year demand rise, which adds around 3500mt to 4000mt for the years 2011 through 2014.

It is likely Bullmine have stopped, It is likely Cosayach have been hit hard and it is likely Algorta pulled back, but none of that is in the figures.

In other words the producers are currently running at a production rate quite a few thousand mt under the demand rate, and when the inventories empty, there WILL be a problem.

The inventories of SQM, Sirocco and Iofina all appear to have gone down.

There are a host of issues that have appeared this year for the Chile iodine producers.

As we enter and move through 2015, if the circs stay roughly as they are there is going to be a mad scramble to grab iodine stocks.

If the end users realise what is coming, they will soon speed up the shortage issue.

If the iodine market is currently so flush with iodine on the producer side, why are multiple iodine end users showing strong interest in long term supply agreements from little IOF.

SQM down 2500 this year

Sirocco down 500

Demand up 3500 to 4000 in the years 2011 to 2014.

That's 6500 to 7000mt.

Algorta appeared quoting they would get to 3000mt last year, but that's what Cos lost in production.

Bullmine 1000 but any have stopped

If someone would like to tell me where the 5000 plus extra mt is coming from next year to prevent a shortage I'm all ears.

I have excluded ACF Minera as they have more or less been at static rates prior to the problems and since. I think they are on 2000mt.

Chile do 60% of the market.

60% of the market come next year is 20,000 mt.

There appears to be a shortage coming, but to know that you have to go through the SQM forms 20-F and various other pieces of information out there available.

Suggesting the price could fall below $20 is just plain stupid, no-one in the country supplying 60% of the world market can get anywhere near that.

In fact of you look around SQM state they could go as low as $30 if pushed and they claim top be the lowest costs producer in Chile.

However if you dig deeper, you will see they play games on how they spread their opex. At Neuve where they produce 70% of their iodine, the nitrates (joint opex) are below the cut-off grade.

So when reading SQM comments, know that there is a bit of competitive bluffing going on.

AHA!!! but then know that they didn't produce any nitrates at Neuve, so all costs there in theory are against iodine only, so their opex for iodine alone is higher than they quote.

It's in their last update.

'A significant portion of SQM’s costs of goods sold are costs related to common productive processes (mining. crushing. leaching. etc.) which are distributed among the different final products.'

It is cheaper to produce two products from the same method, but for 6000mt of their iodine all the cot is for iodine, but they use that small print point to spread costs suggesting they have a lower iodine opex than they actually have.

At Pedro they do produce iodine (3,200) and nitrates, at Neuve (6,100mt iodine) they don't.

Neuve will reduce due to the closed Iris plant. Pedro and Neuve is all they have running currently for iodine

[brucie5] 31/8/2014 17:15

Hmm.. I'm always very quizzical of pis who ascribe sinister intentions to anyone who dares (courteously) to raise the profile of opposing povs... Yes, I admit it! I'm trying to undermine confidence! (Why would I do that??!) Ah! To buy more shares!! (Nope. I've got a quiver full already.) The reason I posted it is because the more I read, the better I understand the important variables, of which Iodine price, access to brine, as well as opex appear to have caught many investors here on the hop. (Or am I wrong?) And this seemed to be a very detailed account, by someone of a more sceptical persuasion, which is always good to read.

In the meantime I'm very attentive to the knowledgeable posts here, particularly by Superg and Boggle. Thanks for your responses, which is all grist to the mill of my very limited, but rapidly expanding knowledge about the co..

[tim3416] 31/8/2014 09:30

Pretty obvious that is why it was re posted Bocker! Ps preferred your first draft of last nights post :-)

[bocker01] 31/8/2014 09:16

The fact is that the post you quote Brucie was written with the sole intention of misleading people.

[superg1] 31/8/2014 09:08

A couple of things on that

He actually states iodine prices could drop below $20.

Well in that case no iodine producer on the planet will make a profit, they will all produce at a loss, so that rather tells it's own story.

SQM couldn't make a profit at the closed plant and mine under 45-50, that's why they closed.

RB forecast is 27 to 35 per kg costs.

Algorta costs reported last year were 35 to 38, so that tends to support the rumour that they have pulled back on production.


Algorta use seawater, they have no access fresh water hence the high costs. I have recently conformed that Bullmine use seawater. It was always thought they did but they are listed at using it. That means they truck it in as rumoured, as they don't yet have a pipeline. That is why they have the highest costs of all and supports the rumour that they have ceased mining due to the price.

The full comment states

The major problem with commodity cycles are that all the suppliers tend to hang on to their supply, expecting other producers to cut back and expecting a few lean years in the meantime. This tends to produce severe oversupply and a continuing price drop until some producers have cashflow problems and go bust. If the Iodine cycle follows this, prices could drop to under $20/kg.

That is a general comment on commodity markets, EG

'suppliers tend to hang on to their supply'

No..... we have demonstrated how SQM have closed a mine and a plant, production has dropped by around 2500mt, RB have dropped 600mt, but are 1000mt off where they wanted to be.

We hear Algorta have pulled back, Bullmine have stopped and Cosaych 38 wells closed.

That bunch accounts for 58% of the market, Japan reserves and production is in decline, that's 90% of the market covered.

Supply was outstripping demand purely down to Cosayach illegal activities, stealing water, a matter which they have been prosecuted on and had their wells closed.

Current production looks to have dropped below demand levels and as demonstrated in RB news and SQM news, they are eating into their inventories. IOF are seeing the same thing re their own inventory.

So imo we are still on track for a 2015 production demand shortage. A matter which SQM seem to infer in the conference call.



Water/oil

Did anyone understand this one

'Having many contracts to take water from multiple shale producers should mean that IOF has plenty of opportunity to sell rights to its shale prospects. This hasn't occurred. In the 2013 annual report there was not even a hint of a mention of the Bakken shale or anything related to shale prospects (first time there was no mention).
- One customer (a distributor) accounts for 49% of revenue. Relations are good, but one hopes that the distributor is not experiencing any business difficulties.'

Has IOF got contracts with multiple 'shale producers', that's news to me. They have a contract with Halliburton and oil services provider for more than double what the first permit is for, and they have demands from others.

On the shale prospects, we all know they are there, but IOF have clearly stated many times that they are concentrating on getting the iodine business up and running. They even call the current water potential 'non core'. The shale prospects are there in the background and yes they may well feature. EG I expect Helium to potentially feature, if it is under their acreage, but at no expense to IOF.


The post has incorrect details in it, so what other parts are incorrect?

[bogg1e] 30/8/2014 22:38

Brucie very quickly. I disagree with the idea of iodine dropping to $20 per kilo. There isn't enough inventory to over-supply the market to the reach that price considering the production drop ahead. I don't agree with the idea that Iofina wont be able to meet payments, even with 6 plants, when optimised both in terms of production and costs, plus a rising iodine price ensures that funds will be available to meet repayments. The numbers are different-ish, but essentially I agree that costs were an issue, that there is money in the bank, the company is running at a profit and providing it improves stability, Iofina is fine looking forward.

[bocker01] 30/8/2014 22:23

New technology businesses, starting from scratch need funds Brucie! Nothing surprising about that! Actually pretty normal! Simple fact of life! Another fact of life is that things rarely run smoothly!the most important phase for all such businesses is turning promise to reality and fortunately, IOF is now pretty much in the tail end of that phase! With the lowest cost base in the business - by a country mile!

[brucie5] 30/8/2014 21:45

Boggle, may thanks for your research document! I'm taking the liberty of copying a post by the quaintly avatared 'Tentative Predator' on the ii site, from 27/April. In that respect it's already out of date, but I'd be interested in reading your response, since it offers a contrasting view. For those in a hurry, you may wish to start at the end where he summarises his pov.

----------------------------------------------------------------------------


Message
2013 results
1. The slight increase in revenue of $18.9m (was $18.6m) was offset by a bigger increase in cost of sales $15.8m (was $15.1m) to produce a decreased gross profit of $3.1m (was $3.5m). A little odd, but not concerning, that is most likely related to a dropping iodine price (the chemicals division buys at one price, processes and then sells, but by then prices have decreased so there is a higher cost of sales).
2. Group costs consisting of admin expenses and the interest on the $15m loan are up considerably at $6.9m (was $4.7m) meaning an increased overall loss. But that's paper, not cash, let's move to cash.
3. Cash+equivalents of $5.7m at the beginning of 2013 was added to by $14.6m (proceeds of the 15m loan) to make $20.3m available to the group. At the end of the year, there was $8.2m left indicating that $12.1m was the net outgoings in the year.
In the year $11.6 was spent on the new IO units, $0.6m on share allocations, $2.8m on admin, $0.3m on Montana water rights, $0.8m interest paid, making $16.1m cash outflow from costs and capital investment. Inflow from profits were $3.1m, and a net $0.6m from trade receiveables/payables, plus $0.3m miscellaneous covers the remainder.
4. Q1 2014 cash balance is $2.3m, which is a decrease from $8.2m at end 2013. Capital commitments of $3.5m account for more than half the decrease, and it's likely that at least another $0.5m was required to be spent, also that up to $0.5m could be due to interest payments depending on timing. That indicates $1.5m of outflow that can't be restricted. It's likely $1m was admin costs. The recent RNS indicated cutbacks are now being initiated. But this is a high figure to get down from.

Worth noting:
- They'd built up $6.9m of inventory at end 2013
- They owe $15m, due May 2017, with interest of ~$0.9m-$1m/year in the meantime
- 171T iodine produced in 2013
- 570T of iodine derivatives shipped in 2013 (up from 520T in 2012)
- Iodine prices now at $40/kg (Q1 2014), cost of production was $30/kg for 2013
- Expecting 400T iodine production in 2014, and expecting cost of production to decrease towards $25/kg
- Montana water rights have been refused even after revisions that were supposed to make the application more acceptable. IOF is appealing. If successful, the potential revenue would require financing
- Having many contracts to take water from multiple shale producers should mean that IOF has plenty of opportunity to sell rights to its shale prospects. This hasn't occurred. In the 2013 annual report there was not even a hint of a mention of the Bakken shale or anything related to shale prospects (first time there was no mention).
- One customer (a distributor) accounts for 49% of revenue. Relations are good, but one hopes that the distributor is not experiencing any business difficulties.

2014 base forecast
Revenue of $28m based on $20m from derivatives (using 200T iodine) and $8m raw (200T at $40/kg). Gross profits (cash inflow) of $6.5m based on $4m from derivatives and $2.5m from raw. Costs: $1m interest; $0.5m Montana; $2.5m admin; $1m misc; making $5m. Capital outflow also $5m. Indicating that net cash outflow would be $3.5m ($10m-$6.5m). However, the Q1 2014 result of $6m outflow in that one quarter means I'm obviously missing something - even assuming $4m of the capital expenditure happened in that quarter, this forecast would put cash at end Q1 2014 at above $3m.

Beyond 2014
The profitability is massively dependent on iodine prices. I can't assign any income from water or shale based on current knowledge. Current iodine price levels and below would leave the company unable to pay back the convertible loan by 2017, even assuming they stop their high capital outlays. It's highly likely that part of the 2013 loan restructuring made the loan a preference loan, meaning that if by 2017 the company can't raise sufficient finance to pay back the loan, the loan holder will be able to basically take full control of the company without any remuneration to shareholders.

Iodine prices
Iodine seems to be following a normal commodities cycle. The demand has gradually increased, the overall increase in supply has matched that, and is linear running at an additional 1MT/year since the current trend started in the mid 1990s. Prices had been relatively steady, moving back and forth across $10/kg and $25/kg from 1980 until 2010. At that point a sharp drop in global supply due to multiple independent production issues looks to have caused a spike in prices which topped out at around $70/kg, which likely would have then dropped but for Fukushima which caused an anomalous spike in demand at a time when supply was just recovering. As a consequence, it looks like prices remained high for a couple of years, before now dropping back. Commodity spikes can leave the price stabilised at higher levels than previous after the spike is complete, but there is no consistency to make a forecast. Supply is currently outstripping demand (hence the large price drop, now back down to $40/kg). The major problem with commodity cycles are that all the suppliers tend to hang on to their supply, expecting other producers to cut back and expecting a few lean years in the meantime. This tends to produce severe oversupply and a continuing price drop until some producers have cashflow problems and go bust. If the Iodine cycle follows this, prices could drop to under $20/kg.

2008-2012
From the past annual reports (each year starts with an extract from the first line of the chairman's statement)
2008: "made substantial progress in 2008". £15.1m raised, for iodine and natural gas extraction. Bought equipment and started drilling. Started with 61m shares, ended with 84m on float.
2009: "2009 was a year of great change for the Company". £5m raised. Started gas and iodine production. First mention of Montana water sourcing rights. Gas prices have dropped to a third of previous values, but the company expect these to increase.
2010: "highly active and successful 2010". Nothing raised for a change! Seeks a JV for development of fresh water source in Montana & confident that issues will be resolved. Expressions of interest in the Bakken shale (spelt Bakkan), plan to actively market the rights in 2011. Gas prices marginally increase, despite low prices "Iofina did not experience pressure to discontinue production." Iodine prices increase dramatically from $33/kg to $60/kg (corresponding to a large drop in global production from 30MT to 25MT). Expects prices to remain flat for 2011 and weaken in 2012 as global "production upsets in both Chile and Japan are sorted out".
2011: "transformed into a much stronger and scalable business". £2.8m($4.5m) raised. JV discussions encouraging and "believe that a conclusion is imminent". Continued expressions of interest in the Bakken shale. Iodine prices remain firm, $65-$70/kg as a consequence of demand after Fukushima, board expects markets to remain robust. Withdraws from gas production and sells equipment (including frac units).
2012: "a breakthrough year for Iofina". £4.3m($6.9m) raised. 127m shares now in issue. Expecting 300T iodine production for 2013. Montana water JV discussions terminated unsuccessfully; proceeding "on a stand-alone basis", permit expected Q3 2013, "Some three years of hard endeavour have been put into this project to deliver circa 200,000 barrels/day of water for industrial use". For the Bakken shale expressions of interest seems to have changed to "Interest in the deep Bakken potential under our acreage position in Montana remains available to interested parties." Iodine prices "stabilised in 2012, remaining firm between $55-$65/kg".

Summary
Including the float in 2008, they have raised £27.2m ($45m) through equity placement, and a further $15m through a convertible loan. After 6 years, $58m of net expenditure, and multiple revisions of business plans, they appear to have achieved a close to stable business model which could be profitable if the commodity cycle turns in their favour. I won't invest currently. If they turn sufficiently cashflow positive, I'll review.

Good luck to holders.
TP

[woodpeckers] 30/8/2014 19:44

Production with new technology is bound to follow a learning curve but I'm confident that this BOD is not only learning from past mistakes but is savvy enough to "play the game".

At the end of the day, it's all about sales and cash revenue. That can increase rapidly now that we have past the initial 'teething problems' stage.

[superg1] 30/8/2014 19:29

So when people moan about 25 mt last month, I think of the bigger picture.

Based on what has been said re revenues for May, June and July I'm most happy as it seems in that time they have achieved 35% to 40% of the revenue for the whole of 2013.

In H2 2013 they did $7.375 mill revenue.

In the last 3 months they seem to have done near that.

If they don't hit 40mt this month, I really don't worry about it. They have the tech. they have the progress and they will hit hurdles, but they certainly seem to be hitting sales.

On top of that they have multiple end users wanting to sign supply agreements.

So I'm happy.