Iofina Share Discussion Threads

[weildy2] 08/9/2013 15:01

Sunday Telegraph - interesting article on investing in the AIM.

Interesting to see that they report that IOF is the second most popular share on the AIM

[uppompeii] 08/9/2013 14:55

The simplest explanation is:
Maybe = perhaps
May be = is possibly

Our boss was sick yesterday so he may be absent from work today. Maybe our meeting will be postponed until he comes back.
He may be creative or maybe he is just crazy.

hxxp://www.woodwardenglish.com/maybe-may-be-difference/

[the librarian] 08/9/2013 14:35

What I am interested in at the moment is the impact that it will have on the share price with a new CEO in place and water rights achieved, I suppose that I will find out on the day!

Interesting too that the patent does not seem to have any value, whereas with other companies their whole share price seems to be centred around that and future possibilities (I'm not talking about any company in particular although there are quite a few I could mention).

If Arysta hadn't sold the patent with the business, Iofina would cease to exist as an Iodine supplier so personally very pleased that they have that protection.

Anyway, all will become clear in the near future.

[the librarian] 08/9/2013 14:12

I agree upp, it's good to look at the downside which I'm sure we all do often enough without posting our thoughts or insecurities and then we look for the middle ground, which PUG is doing at the moment by the look of it :-)

[uppompeii] 08/9/2013 14:02

Ah ok, I see it Lib.

Maybe its just me but contrarian opinions are great as if the argument is strong enough they are successfully countered. Sometimes though things are uncovered that others could miss and it makes for good debate - what these boards are for after all.

[pugugly] 08/9/2013 13:56

The Librarian:& uppomp... To set the record straight - Confirm I am interested - Now out but considering getting back in as I can see a lot of potential but it all now depends on execution and I am trying - not very successfully at the moment - to create a fan graph of forward REALISTIC probabilities - The possibilities have been either ramped or rubbished - as is well known.

[the librarian] 08/9/2013 13:47

Horses for courses upp, PUG has put it on here by the look of it because he agrees, so the balance has been restored? They always seem to have made up their mind before posting when they are 'new' anyway!

[noli] 08/9/2013 11:20

Statoil in the Roosevelt water app location, iof are in Section 27 T28N 56E

[pugugly] 08/9/2013 10:27

Copied from the other thread:.

8 Sep'13 - 10:24 - 6084 of 6084 re butler post no 6083

thebutler:> Excellent analysis.

Agree with all you say about production glitches and cash flow. I have seen this all too often during my commercial life.

Not so sure about selling costs. As I understand it Iodine is very much a commodity market and sold on longish term contracts. However being a commodity the price could be subject to massive swings both upside and downside in situations of over supply/lack of demand - under supply/increased demand.

On the cost front I personally find the figures supplied by the company very opaque. They of course partially depend on plant utilisation and level of iodine in the brine stream. So virtually impossible to determine without access to managment accounts also wide variences on depreciation levels.

On balance while long term potential the fair value of the shares today could be anwhere up to 50% south of the current price. (imo)

Declaration -Used to hold - sold at a significant profit and watching with interest.

[ansana] 08/9/2013 10:20

Bit of a Tour de Force there SG as opposed to a Tour de France. Perhaps I missed it but did you tell the butler about the patent.

[sandbag] 08/9/2013 09:58

As far as funding is concerned I'm happy we've now got a CFO. There must be a huge amount of outgoings at the moment so I'm pleased we've got someone keeping an eye on it.

[superg1] 08/9/2013 09:26

Sorry lib I didn't check the profile, sorted now, bang on the run up to results, we see this every year.

Clearly not one for Butler, happy hunting.


Was it IBM that knew best and didn't listen to Bill Gates. I bet WB was seen as a bit nuts with his investment methods.

I'm not suggesting IOf are anything like that, they are just examples of not listening to good logic.

However logic and common sense are the thought processes of the masses, so in theory, neither of the above had any, and that's why they were successful.

In this case the example of capex and opex v the industry, which is astounding, has been completely ignored for one individual, having looked for 5 mins.

[sandbag] 08/9/2013 09:23

"but I will choose to observe rather than participate for the time being."

Thought you might!

Great summary SG1!

[the librarian] 08/9/2013 09:01

I don't know if you have come on here to spread doubt thebutler or you are genuinely interested? I always go with the former when someone has just created a 'new' avatar to post on a thread and subtly de-ramp.

However as you can see there are a lot of knowledgeable posters on here who know the company inside out, they are a patient lot and they have addressed your concerns, anything else you want to know? :-)

[superg1] 08/9/2013 08:41

Continuing on-:

The IOF 'free' extra's

Iof by virtue of going after an iodine/gas aquifer in Montana, ended up with over 200k acres of leased land to which they have the mineral rights, along with all the 3D data.

They won't be going after the iodine there near term, as the 3rd party contracts have higher ppm rates.

However post acquisition along came the North Dakota and Montana fracking boom for oil. The boom relates to the Bakken and 3 forks.

Just in recent months, the USGS, after a survey, declared that the 3 forks will double the oil reserves in the area. IOF have over 200k acres at 100' thick and have mentioned the prospects for reasonable oil. they are marketing that to farm in a partner to develop it.

More recently we have found details of wells very near IOF land making reference to a potential oil play called the Nisku which could open up the entire geographic area. It runs under just about all IOF land. Weil resources have been active looking at it.

Then we have True Oil on the west side of IOF acreage, who as yet have a bit of a mystery well going on on a new level.

Back to Weil and they are now looking to progress a Helium play which is surrounded by IOF leases. Helium is a scarce resource and is unknown in the investment sector as a commodity due to a long standing US reserve which had been supplying the market for decades. Technology is the driver for helium demand.

The there is iofina water rights, as they plan to enter the water supply market to supply the frack industry, that is at an advanced stage and we await the potential award of the first water supply permit which is potentially lucrative.

The Atlantis aquifer amounts to 35 billion barrels. IOF achieved the almost impossible, by gaining a water discharge permit, to dispose of cleaned produced water into the river systems. That discharge permit, caused the US fisheries to engage IOF in a rights swap deal which has been achieved. That is another unique factor.

The Niobara

A mystery that one, but it came up in a report as a potential Wet gas play, right under IOF again.


So that cheap 200k plus acres they picked up has under it.

The 3 forks, oil potential.

The Nisku oil potentail.

The Atlantis, gas aquifer, iodine and water supply source.

The Niobara

Helium, again which is scarce in commercial terms, saturations said to be 1% which is good in the industry.


All the above as free extra's that appeared post cheap acquisition of the leases.


That is the short version.

There are plenty of hype prospects with leases, and no proven reserves, that look far less promising, and have nothing else in their locker.

All the above is more or less free extra's to IOF, and we don't need any of it. The iodine potential is lucrative enough.

As for A 10 PE, if IOF start rolling out plants and show the growth potential, then a 10 PE is a crazy level for such a prospect and that's ignoring all the other aspects.

IOF are in sectors that no other share in the EU area is in, so it's hard to understand for anyone trying to look in.

After many months of hard work we understand it, and can see the potential.

[superg1] 08/9/2013 08:04

The Butler.

The key is opex for others in the industry v IOF. Sirocco spell it out as a range of $34 to $38 per kg opex.

IOF forecast $10 to $15 opex.

Sirocco are a Chile based producer, around 60% of the worlds iodine comes from Chile. Some small Chile mines have opex higher than that. The big producer SQM will be lower.

IOF have mentioned their expectations to exit 2013 at a production rate as the highest US producer, that would mean in excess of 1200mt.

Using just raw product sales of $50 per kg and opex of $20, that's $36 mill profit.

In fact there is mention of opex certain plants below $10 per kg, and I have found enough 'bits and pieces' to support that.

They plan up to 6 plants this year and 6 more next, with smaller mobile pods. Some of the larger plants looks set to be 400mt plus units.

They don't plan to stop there and have over 100 sites available to put plants.


The trick is that iodine is rare in commercial terms. Japan supplies about 20% of the world demand, but they are going backwards (resource depletion) as mentioned in the ioditech report. Chile costs and problems continue to force opex up for all Chile mines.

The iodine producer market believes Chile (quoted as so by Toyota tsusho last year) is the only place left to produce large amounts of iodine, hence mines have been happy to throw millions at it, as to them their is no risk other than competing with each other with the same problems and costs.

E.G.

Sirocco are spending $34m this year then $15m in Q1 14 to add overall 800mt to their production. Opex mid $30's per kg.


IOF have identified sites, where if they put a plant, they could get to 19000mt per year, it's in a presentation, but most haven't realised the meaning of that entry yet.

Take SQM's production rate in recent years, 12000mt.

For iof to achieve that at 250mt per plant average they would need 48 plants.

That would mean about $100m capex.

Sirocco are spending near half that in the next year to add 800mt, and if they want seawater, which pushes up opex, then they have that cost down as $50m, that's the $100m done.

I hear SQM would need $250m for the seawater pipeline they need they need. IOF could cover the entire market needs with that spend.


Toyota spent around $75 mill grabbing a share of Algorta (25.5%) of a them 2000mt set up, but then spent big helping out with a pipeline, so well over $100mt contributed for what is basically a 500mt share of the production.
Algorta are also spending $25 mill in 2014 on solar panels for one third of their needs.

The capex costs for Chile mines compared to IOF is huge.

However as said earlier, in their minds, it's just a fight between the Chile mines so the capex opex problem isn't an issue.

On here we forecast all the Chile issues and they have come to pass.

Now we see SQM have shelved some production to protect their position, Sirocco are not going to supply for 6 months to build an inventory, they have other problems too such as plant wear. I predict Sirocco will close within 2 years. SCM Bullmine who have high costs should close too, and any smaller mine with high costs. They can not survive potential lower prices.

The recent ioditech report mentions a few mines producing low grade iodine, I heard that happens when they come across caliche with clays in it.

Months back ioditech said some small mines were already at break even. Now they say-:

'all the small mining companies have managed to stay open even as prices have fallen.'

'managed to stay open' doesn't sound good for that lot, if prices pull back.

That's another major factor, iodine is a niche market of 32000mt growing at a rate of 3 to 5% per year. Those smaller mines going takes 10 to 20% out of the market.

They will close imo, because they have chased a boom and any cost and will be caught out. As recently posted the Chile government see the infrastructure issues causing more problems for a few years yet, then a slow climb over a decade to meet power demands. they have already quoted that 2014 will be worse than this year.

So with that facts above, it a case of, how can many Chile mines survive an aggressive IOF.

[che7win] 07/9/2013 22:51

hxxp://www.willistonherald.com/news/oasis-expands-bakken-holdings/article_17b1991e-170b-11e3-ab08-001a4bcf887a.html

[n3tleylucas] 07/9/2013 22:44

Monty,

Think you'll find FC has 2013 eps 1.6p and 2014 eps 10p.

[rogerbridge] 07/9/2013 22:37

Avery good read in todays Daily Mail on the Bakken oil boom in North Dakota. 8000 wells forcast to reach 50,000. Page 34 & 36. Lots of people becoming rich around Williston.

[che7win] 07/9/2013 21:49

Thebutler,
Quick post why are you using 15% as your profit margin?
With largely fixed overheads, from memory the current gross margin is around 20% on the chemical division (and should increase with efficiencies due to increasing turnover) so 15 % net profit would fit with that.

However, the raw iodine profit margin will be much higher, we won't need anywhere near £200m, a quarter of that should be enough at $50 kg.

You have to remember, iodine is a rare substance, only found in large quantities in three countries and a bit of a cartel operates in Chile IMHO.

In Chile, cost of iodine extraction is over twice that for IOF ( that is the current expectation).

As an example, look at Sirocco, they have extraction costs of $34 kg of iodine and selling at $51 kg, we expect less than half that (gross profits). So our margins should always be high without competition in the US (hopefully our patents and leases will ensure this is long term).

hxxp://www.siroccomining.com/s/OperationsUpdate.asp

IOF have disruptive technology capable of upsetting the iodine industry, margins are extremely high and defendable due to our patented technology but how high? We expect/hope for details in the upcoming results.

A bit too early to deduce the net profit margins until we have some more plants rolled out e.g. we will be recruiting and training heavily during this period of expansion.

[monty panesar] 07/9/2013 21:25

Since they are the lowest cost producer in the world they can make huge margins.

[thebutler] 07/9/2013 21:14

$100 million = approx £60 million, and 24p EPS = 50% net profit percentage. Such a high NP doesn't make sense. I am interested in compelling small caps as you can make some serious money if you get it right. But I need some convincing regarding IOF - as I say the numbers just don't stack up at all.