Iofina Share Discussion Threads

[simmy1699] 21/11/2014 23:44

Exciting timesOn the basis that the permit is a dead cert, does anyone else think the share price already prices this in?I think it makes us an ideal target for shorters to quickly sell come first week of dec and get this dropped only to come back in.

[rogerbridge] 21/11/2014 21:41

Some excellent research SG and I too am very contented to be invested and also being able to top up.
2015 should be a good year for IOF and the water rights will make a good Christmas present.

[dcgray21] 21/11/2014 19:02

Thanks SG . I'm sure the irony of IOF's impending water rights isn't lost on SQM.

[superg1] 21/11/2014 18:46

Now add in this (something I held back on)

On 22nd October various financial entities discussed the copper industry with a Chilean government minister. The subject of water scarcity was prominent.

'expressed her concern that water availability will likely be one of the largest challenges the mining industry faces over the next several years'

'When pressed on the question as to whether the administration would consider requiring other existing mining operations to begin using seawater, she stated that at the moment the government was not yet in a position to require miners to cease using ground water and spend capex to build out pipeline capacity to utilise seawater.'

Comment by one of those present

'However, we believe that further government regulation in water remains a particular risk for copper miners in Chile. We doubt any future mining projects in Chile will ever be given environmental approval without committing to use seawater. Additionally, political pressure within Congress could push legislation around water regulations ahead. Earlier this year, a number of congressmen proposed requiring miners using more than 150 litres/second of ground water to switch to seawater'


Law changes in October included this comment.

'Chilean President Michelle Bachelet's administration introduced amendments to the nation's water code before the lower house of congress in order to make human consumption and sanitation a priority.

The amendments would make it possible to limit water rights temporarily under special circumstances, such as a drought, according to a public works ministry (MOP) release.

It also states that water rights cannot be granted for resources within environmentally protected areas or national parks, and seeks to improve efficiency when collecting payments from rights holders for not using water.'


So YES the chance of SQM losing their rights at Neuve Victoria is a real one.

For the iodine industry end users, such an event would be catastrophic.

[stevo2011] 21/11/2014 18:45

Some good digging in the last few days SG

[superg1] 21/11/2014 18:23

dcgray

I guarantee you I could give you the winning lottery numbers, however it will take a list of about 14 million possibilities.

On the Tamarugal

Here is my quandary on that one.

Back in May Cosayach were dealt with for theft of water from the Pampa aquifer. At the AGM Lance said they were in trouble for water extraction where they killed off trees at a protected desert forest.

SQM went after Cosaych for the theft of water. SQM have the rights to the aquifer Cosayach were stealing from.

In addition to the theft claim there was a another case covering environmental damage as a result of theft of the water.

'This resolution adds to a civil case that carried out the State Defense Council against Cosayach for similar crimes, and in which the Supreme Court found the existence of environmental damage.'

The Tamamrugal national reserve is nearby, and we have no need to guess if that's right as Cosayach in the original EIA application had to cover that.

'Therefore, the assessment of impacts needed to justify that no significant adverse effects on natural renewable resources, particularly those in the National Reserve Pampa Tamarugal'

So Cosayach with illegal extraction from the aquifer damaged the National reserve.

BUT that's the aquifer that SQM have rights too. So if Cosayach caused the aquifer level to drop and affect the reserve, how does that impact SQM who take their water from that aquifer ???

SQM have listed that they have 2 sites at risk to any changes in the water laws, or restriction to their water rights. One site is to do with potash, the other is Neuve Victoria (5000mt of iodine) which is near that national reserve.

Within the last few months Chile water laws have been changing. That included a right for the Chile Government to suspend water rights in areas where national reserves may be affected.

Currently Chile continues to report severe and worsening drought, and has added areas of concern to the list.

If Cosayach was doing damage by taking water from an aquifer SQM have rights too, then it's seems very plausible that SQM continuing to use that aquifer may cause similar damage. In any case if the Tamarugal becomes an area of risk through severe drought, then it's likely that the government would suspend water rights in the area.

5000mt produced by SQM, and everything produced by Cosayach would be affected.

So to answer the question based on the information out there, it seems there is a fair chance rights will be suspended. It all depends how quickly that aquifer replenishes, very slowly, I suspect, if at all.

It seems a fairly high risk situation to SQM's iodine business to me.

Looking it another way, think that the company relying on that aquifer was IOF, and consider what heart and co would say.

On that basis then, it would be a dead cert suspension of rights and pending bankruptcy coming.

[woolybanana] 21/11/2014 17:31

Mr Big, have you been promised a post in the UKIP cabinet?

[arlington chetwynd talbot] 21/11/2014 17:28

Good or bad eh? Well, it forces prices down. So it's bad but... if you can survive this price-war then if and when prices do eventually settle and start recovering you can benefit.

Read the above very carefully.

[y1phr] 21/11/2014 17:20

Will it affect it in a good or bad way?

[dcgray21] 21/11/2014 17:15

So if the tamarugal reserve were to be removed from the equation then that's another 6000 tonnes (70% of say 9000 ) out of the iodine world supply at the drop of the hat. If so then that makes things very interesting.SG - tough question but what would you rate the probability of that event occurring....and as you are on a roll , what are the winning lottery numbers for tomorrow please.

[freshvoice] 21/11/2014 17:00

I think Mr Big wants iodine to dye all the Kipper tshirts!
Lol

[y1phr] 21/11/2014 16:17

Dose the situation in Chile, affect iofina.

[che7win] 21/11/2014 16:16

This feels poised to move up much higher in the short term.

Superg, excellent analysis of the Chile situation, I have to digest all that over the weekend.

[orslega] 21/11/2014 15:27

great research sg1

......roll on 2015, Lance Baller's vision getting clearer by the day : )

[mister big] 21/11/2014 15:04

Act - thanks great result. Screaming loonies joined our party after the result . No chance of a coalition though , over the years they have become more establishment !
Up the purple revolution

[superg1] 21/11/2014 15:03

Cosayach

We know they were on 6000mt plus pre the 2011 well closures.

Then we can only rely on comments from those within the sector.

The talk was 1800mt post that event, they had to lose a lot of staff. In April 13 as stupid court ruling left Cosayach thinking they 'exploit' some free water. As we know in late May this year the SQM and the EIA won a case re the water extraction.

It is said they may have added 1500 t or more of production in that period. So 1500 to 2000 t potentially added on top of the 1800.

It went on for roughly a year and drops the extra production and any inventory into the current period.

Illegal extraction put them about 2500 t under their pre 2011 best.

Bullmine

All we know is potentially 600mt to 1000mt that has been around for a few years on high costs. They put in plans for a seawater pipeline when the costs were high to expand, but the price has dropped to levels above their opex so it won't happen.

Acf Minera. Little detail but they have a talked of limit of around 3000 mt that has been in play for the last few years, they have not materially added.

Algorta (linked to ACF) is the only one that actually added to the market. Initial plans for 4000mt.

They claimed they would get to 3000 t in 2013. For H1 13 when iodine was about $52 per kg they reported $56 mill revenue with $38.8 mill costs in a media release. So around the 1000mt mark for H1, making 3000mt for the full year unlikely. The revenue v costs put them around $35 to $38 per kg opex, which is roughly the market price now. The weak peso will have helped drop that slightly. They use seawater.

So estimated production in Chile in 2015 is likely to be no different to 2009. That's assuming RB and Cosayach stay in the game. Yet demand has risen around 3% per year.

Last but not least, IOF. They went from 300 to 400mt per year buyers, to producing that amount. They too have sold more than they produced this year, as they had inventory at the start of the year.

There was an inventory bulge for various reasons across the scetor, but it's being sold as the demand is higher than production. When the inventories run dry there is a problem.

The inventory levels don't have the same cushion they had pre 2011. Any further upset in the production market and it just closes the gap to the time of the bottom and price turn.

If RB suspend operations they have 2 quarters of standard production to go or 18 weeks of supply based on their Q2 and Q3 rate of sales.

In Q1 SQM said they saw increased volumes in sales of iodine. For the first 9 months this year they say revenue drops are in line with the price drop suggesting equal volume of sales. They sold 9,300mt last year which is around 1000mt more than they are set to produce this year. In theory half of their 1500mt inventory has therefore gone. Compare that to 2010 and 2011 as when the trouble hit they sold 5,300 mt more than they produced in those 2 years.

RB and Cosayach hitting some serious trouble now with SQM sitting on an inventory probably under 1000mt now v 5000mt plus in 2009.

Hopefully that all gives some good detail of what has been in my head and scribbled in notes.

That's why I keep saying 'the figures don't add up, a shortage is coming'.

SQM analysts probably won't have the slightest clue about any part of the above. They see dropping prices and assume production increases are responsible, the true picture is far different.

[rogerbridge] 21/11/2014 14:48

Well done SG

[sandbag] 21/11/2014 14:17

I'd like to add my thanks too Sg1. Terrific work!

[germanicus] 21/11/2014 14:16

Looks like the SQM thread with that opening/header post...what a waste of space!

Surely the first post should contain info regarding IOF?

G

[superg1] 21/11/2014 14:07

For Sirocco (now RB) there has been no change in 5 years other than the inventory bulge being sold this year.

2010 produced 1256 sold 1244 (+12 inventory)

2011 produced 1122 sold 1134 (-12)

2012 produced 1224 sold 1226 (+2)

2013 figures not released in full but we know the first 9 months they produced 1070 t and sold 476 t having stopped selling any for the whole of H2.

They then said they had near 800mt of inventory for 2014 meaning they must have produced around 1200 t. They never gave Jan 14 figures but that got them to near 800mt of inventory.

This year so far they have produced 811 t and sold 1011 t. In the last 2 quarters they have sold around 300mt more than they produced. 885 mt sold in Q3 and 4.

Overall they should have had around 600mt (Q1 they sold less than they produced), of inventory left at the start of Q4.

Things being equal they will sell around 1000mt more iodine this year than they did last year but their production has not gone up.

As we know within months the company is likely to fold. In any case they are on their limit, with an enhanced supply rate in this year, only due to the inventory build up post no sales in H2 last year.

[bobsworth] 21/11/2014 13:54

Yes big thanks from me too. What's the betting that SQM will soon be knocking on Iofina's door!

[1madmarky] 21/11/2014 13:05

Thanks for the header update. Brilliant detective work! :-)