Iofina Share Discussion Threads

[che7win] 22/11/2014 12:46

One more point.

We have been doing something similar to SQM this last 6 months - cutting costs. Unlike them, we can expand in this market and make great margins on any growth plans.

Cutting costs has been the right thing to do as we bed in the new plants, growth will be on the agenda soon.

When the iodine price starts to rise, as superg has pointed out, it will go straight to our bottom line as profits.

We are profitable now, but when iodine rises, our profits rise exponentially through gearing as our costs are more or less fixed. That will happen, I'm sure crosseyed or battery can tell you the effect with their spreadsheet modelling better than I can.

Even ACT knows he's trying to bluff, those who know the company intimately know the explosion in profits when iodine turns upwards.

It's why many are getting excited here, we need superg's Chilean posts as the market likes to look 6-9 months ahead and the picture is changing for the better on the iodine pricing IMHO.

[arlington chetwynd talbot] 22/11/2014 12:38

Well, my sentences seem to be okay? You can read can't you, thick bumpkin?

As for the maths? 10 x £2.5m + £10m = overvalued.

Not too tricky to grasp, eh?

Heartwell? Who's he?

Anything else I can assist you with? A song perhaps?

[hurricane.] 22/11/2014 12:08

Water as che has pointed is worth double the current share price with projected profits.

Not long for the full permit. 1st dec is when the drums start banging louder

[stevo2011] 22/11/2014 12:08

And if by magic it appears the troll TW fan club :) eh netters

[hurricane.] 22/11/2014 12:06

True putting a proper sentence together before you try maths heartwell aka ACT lol

[arlington chetwynd talbot] 22/11/2014 11:58

Simmy,

Is the water priced-in? Good question.

It all depends on how you choose to value the I business.

Personally I'd value I currently @10 x £2.5m and water @£10m.

So imho the I & W are already in the price... and then some.

[1madmarky] 22/11/2014 11:12

Re the Iris plant. My money is on water issues. Aquifers don't recharge particularly quickly hence the issues with getting water permits for fracking. As far as I'm aware. Plus this is a high altitude aquifer so there is a limited amount of land area above it to feed it also very little snow in recent years. Just my view.

[superg1] 22/11/2014 10:40

Mad

You forget the environmental folk who have forced suspension or the halting of multi billion dollar projects, including projects that would help solve water issues.

If continuing operations meant the decimation of a national reserve I doubt the government would support that action.

SQM have other mine locations they can move to.

In the case of disinfection other less effective options are available.

Some of that market disappeared last time around due to cost. But with low prices and availability it comes back.

One sniff of short supplies and the big end users aggressively buy which compounds any shortage.

Obviously it's only relevant if a drought in the tamarugal area results in gov action.

The point of the information is to give folk here an instant understanding of the impact of such news if it ever came about.

Hence I've done what I can to estimate how much is being produced and how much is in inventories.

It seems pre the 2011 issue that SQM had 5000 mt plus in reserve.

From what SQM said in the confernce call they expect the price to bottom out this quarter, possibly dragging into 2015 as they don't know the details of the inventories of others.

[madchick] 22/11/2014 10:26

I hope IOF don't sell the water business entirely - they don't need that much cash for a manageable roll-out on the iodine, so they may as well invest in a water business by remaining in. IMO.

As for water, IF SQM had to withdraw 5k MT iodine from the market, I think they would maybe have a case to the govt for exceptional circumstances (they could plea that iodine is necessary on medical grounds, etc, and overrides environmnental responsibilities). It would be nice, but I'm not going to let myself dream that far! That's not to say that I'm not reading with great interest and gratitude.

[superg1] 22/11/2014 10:17

Sqm

The inventory they have looked to be about 1500mt at the start of 2014.

It sounds like a lot, but SQM have contracts to meet. In supply terms for them it's 2 months worth. Knowing strikes are common and they always have to guard against earthquake disruption,I would imagine that amount is more or less the bare minimum they need to ensure they have supply cover for their business.

RB don't need inventory they have no contracts.

[superg1] 22/11/2014 10:09

1MM

The one strange twist in the SQM story is the suspension of the Iris plant.

It's located at Neuve Victoria which is the main mine. It looks like it contributed about 700/800 mt.

Why close it?

Theories

Perhaps the water situation forced them to pull back on how much they were producing there.

Intentionally creating an eventual production shortage.

It's a high opex plant.


El toco/Maria Elena is easy to explain as that was a closed mine opened in the price hike. As soon as the price hit 50 they closed it again, so production costs are an issue there.

Cosayach have lithium assets and have talked about exploiting them. There was a court battle in recent months over who owned the leases, Cosayach won. SQM want those leases. So yes if Cosayach are near finished then I expect SQM to go after them.
The Cosayach iodine mines are near Neuve Victoria, so on that front they are of no use to SQM as Cosaych don't have legal access to water. They do have that pipeline in the background as you point out which would be of interest.

However the SQM plan in the last 2 years was to leave the area and move all operations to pampa blanca in the 665 mill move. That was all put on hold but will have to happen some time due to the life of the mines in the area they are currently operating.

[woodpeckers] 22/11/2014 10:06

The great thing about posts like Simmy's is that we get reminders from the likes of SG and che of the outstanding investment case here! (should we need to be reminded!)

[y1phr] 22/11/2014 10:03

I. Am a new investor here I am long, I have got 5years to wait good luck all longs. I suppose I was lucky enough to get in @40p.

[1madmarky] 22/11/2014 09:19

Yes the big question, did cosayach take the aquifer over the edge?
My thinking is yes and SQM know it hence the bond issue and the determination to take cosayach out of the market completely and nab their pipeline.
GLA

[henry9th1] 22/11/2014 09:18

Those that got caught in the recent bear trap will want to talk it down, it's just the opposite perspective of going long, can't blame them for trying and maybe the mm's will try to tempt them to add more. It's a nasty game, but long term here for a long position seems very good in my opinion, says he from one who is now long on the share! Kind regards, William.

[woodpeckers] 22/11/2014 09:11

Great post che!

[che7win] 22/11/2014 09:04

Simmy,
I'm afraid your two line comment classes you with those stock market manipulators looking for a quick trade.
Sounds like you want to add and were hoping to buy in the 30's.

How is anyone meant to take that comment seriously? Put your argument forward with reason and logic.

You can see the drop below 40p was both sharp and quick, the rise back above 40p equally sharp I.e. it was either stock market manipulation or just plain panic, but the market quickly saw sense and took advantage of the price anomaly.

Some people like Mr Big were gifted shares on a plate, we all had that opportunity; I also bought at an incredible value price. Irrational markets sometimes do silly things, HAWK is another one I thought 50% undervalued when I read the update this week ( I don't own).

In future, stick to the fundamentals and let that influence your decisions. It's the reason why I'm steadily building a position here, I like the outlook and I like the safety of the oil, helium, gas hidden value. Patent granted this week is also another known unknown.

We are 50% undervalued on Iodine profits alone if we assume zero growth in production and an iodine price normalising to $45+ and our costs per kg reducing to under $20kg, assuming 150,000,000 shares fully diluted. I like the opportunity here.

That is on a poor outlook, I would think we double production as the minimum expectation over the next two years (without any additional capital to the $7.5m) which should indicate 120p is a fair price over the next 12 months once the market works out the iodine price is in a rising trend and starts looking past its nose.

You are looking at the share price and movements in the share rather than the fundamentals.

No offense, but I don't think you get it, despite discussion on these boards, which gives me great comfort as to me, the market is ignorant to the potential of the water grant.
Otherwise, we would be double the current price IMHO.

Setting aside the additional water profits for now, the water underpins our $6m expense on the water venture which we would probably have had to write off if we hadn't been successful.

Secondly, if the result of the grant is that we do a JV, we could gain $10m minimum as an upfront payment for any deal, ( that seems too low a payment to me).
That alone instantly changes the growth profile for IOF, how about another 3 or more full sized plants or 12 mobiles? Just with the water money, ignoring our current $7.5m cash?

You really think this is priced in, then go look at the step change in growth, another $20-30m to the iodine related bottom line.

That of course might not be the route we take. If we do take the route above, we would still get some royalties on water produced, so you have to go back and add in water revenues in 2016 or towards the end of next year, going straight to our bottom line i.e. pure profit.

We could go it alone on the water, probably get project financing and reap all the profits ourselves, but that is unlikely I would think, it still is possible.

So, on the water profits, I can only go by the Allenby notes I have:
"ATLANTIS WATER PROJECT:
Iofina’s water project remains something of a wildcard and is emphasised as non-core by management but does remain a very attractive opportunity given the potential to produce high margin revenues of c$1-2 per barrel on an initial 80,000bpd of water production."

I think we were granted something like 77,000 Bpd.
Let's assume we have profits of between $0.7 to $1.7 per barrel sold (costs 30 cents).

If we sell that amount (and I hear we have every expectation to sell the lot quite easily), that is a range of $19.6m to $47.7m gross profits.
Take 30% tax and 1.56 exchange rate and we have the following:

That's £9m profit or worth 7p EPS on the lower amount or £21.5m (16.5p EPS) on the top amount.
So the water business is easily worth 100 - 150p on its own if we retained 100% ownership.

It gets better...I'm ignoring that we will be producing hot water which has $2 to $3 margins per barrel.

Arguably, the water business is worth x4 the current market cap, anyone doing a deal with us is going to get a bargain whatever way we look at it.
My guess is that we will get $10-$20m upfront payment, the plant cost for water (estimate $10m) will be paid by our partner and we get 10% royalty.
Sounds poor if you look at the figures, but let's see what management come up with.

IOF could become a formidable water business if they wanted to and rocket upwards in price, the potential is there, and you Simmy come out with a short prediction?

[simmy1699] 22/11/2014 08:55

Listen, Stevo, buddy. Just take everything with a pinch of salt. I don't have to remind you what happened when this dropped from the 1.80s. Everyone was gunning for super and he wasn't responding. But now there's lots of posts from him and well dones to him. I mean I too find his posting fascinating and am in awe we're on a dead cert share. But we also were on a dead cert share when this was in the 1.80s and the 90s and the 65s. The point I'm making is there's nothing wrong with questioning things about this share so everyone can chip in and understand this share more, its positives and its negatives. And where else to do it? With the wife in the car to the in laws? Or on a forum about IOF? And if someone does post something positive, we need to question. Remember previously? All that malarkey about "oh they don't want to tell production figures to stop a take over". You may have lost a lot but I too - but I don't mind pulling out hence the uneasy questions which you also probably have but don't have the b*lls to ask. GLA

[stevo2011] 22/11/2014 08:36

Simmy I've been in here ages, find your posting very odd, as if you are pre empting things. This year has been painful for all (if you are long that is ) if you are long it is irrelevant if people short ref water ? I wish you well with your investment if that is the case.

[simmy1699] 22/11/2014 08:24

Stevo. I've held since the 90 pences so calm down. Your response isn't really a sophisticated one. All I'm asking is water is a dead cert and a halli JV seems likely. If anything now is worth a punt rather than mid dec when the price could be much higher. You catch my drift? And big deal if I question the weather. It's a genuine question. This doesn't have to all be positive. I hold over 200k shares and seen this drop so there's nothing wrong with bracing yourself.

[henry9th1] 22/11/2014 07:31

Plenty of options to survive any price war Arlington and with my limited knowledge of the company even I could point them out, but I would hazard a guess that you know that. Kind regards, William

[stevo2011] 22/11/2014 06:46

Ok " simmi "Tried the production questioning , then the bad weather , now the water.We don't know the details of the water deal - (if no objections ! ) so how can you work out if something has been priced in.Short away , going to desperate lengths I see.