Iofina Share Discussion Threads

[naphar] 15/12/2013 16:25

Cross, re this
"Regarding your post 6442 on the other thread, it intrigues me as to why you prefer direct sales to additional iodine derivatives, as presumably the total profit per kg of raw idoine is somewhat lower. Is that because it makes a statement to the market?"

Yes, partly to make a statement to the market that they can sell the "mud", it seems some people have doubts for some reason.

But also because it takes time to on board a second shift, train them etc, and also to sell the additional output into the market. Maybe they already have the demand, but I do not know on that front.

It just strikes me that they would be better to sell he excess raw iodine they have in inventory, that cannot be immediately used, when with Io1-3 running they should be producing more than they can currently use.

I would prefer to generate some additional revenue this year, generate he cash flow late 2013 or early 2014, and have lower year end inventories. I don'tike inventories to keep climbing, it's an inefficient and risky use of cash IMO

It's all a bit difficult to tell given no updates on IOC yet, they may already be ramping up on an extra shift due to demand in place for all I know.

[crosseyed] 15/12/2013 16:11

naphar,

Those ranges encompass the estimates for exit rates in my model, ie
IO#1 89 mT
IO#2 402 mT
IO#3 223 mT
Total 714 mT

Regarding your on the other thread, it intrigues me as to why you prefer direct sales to additional iodine derivatives, as presumably the total profit per kg of raw idoine is somewhat lower. Is that because it makes a statement to the market?

The assumption I am building into my model is that manufacturing capacity will anticipate higher in-house iodine production (IOsorb plants + re-cycled) but I had overlooked the very simple expedient of increasing shifts. At some point though, and as you point out, IOF have anticipated expansion with their land leases at their Kentucky site, that expansion will almost certainly occur. I wonder what would be the capital cost of, say, doubling capacity. (That's rhetorical - I shall search back to see what the Covington factory cost.)
Also the fall-back of manufacturing simple derivatives on-site at the IOsorb plants provides flexibility.

As it stands, I am making the assumption that in-house iodine will be directed for derivative manufacture up to the factory capacity (however that is defined) and that any surplus will be marketed directly. Though perhaps there is a base commitment to some level of direct sales?

Another factor in revenues that is rarely mentioned is the sale of non-iodine products. That accounted for £5.110 million (out of £16.105 million) in 2011 and £2.251 million (out of £18.644 million) in 2012. The break-down isn't given in the Interims. I discussed this aspect on the BB a few weeks ago. It was suggested that non-iodine sales might have increased in this current year: perhaps to ~£5 million (my guess through rather circuitous logic). There is no hint of what the gross profit margin is on non-iodine products (10% ?) though I understand that they might be manufactured under a few very specific contracts. Do you have any gems to offer on that?

Thanks,
c

[cockneyrebel] 15/12/2013 16:08

iofra - the directors could have bought shares the last time these dipped to this level - 5 months ago, but they never - there wasn't any corporate action between then and now so they could have bought then but didn't.

If you're saying the FD can't afford a few shares when you can borrow at around 3% - if these are set to multi-bag, then either I worry as to his financial nouse. Even £5k would be something but he hasn't bought a bean.

Share options aren't buying shares, that's not having 'skin in the game'.

Superg1 - NANO hasn't hit the heights I'd hoped for. They are AIM and I've always said that makes them high risk. Dow Chemicals has invested a big amount in the company for the rights to their technology tho, which I see as a vote of faith from someone who knows the industry much better than me. I've seen no 'hand in the pocket' vote of confidence from anyone at IOF.

I could be wrong about NANO, I'm never that arrogant to think I couldn't be wrong. Unfortunately there seems a lot on this thread that don't even consider 'wrong' as an option, judging by the way they hold far more shares than the executive board added together imo.

Anyway - just an issue I'd question that's all.

All imo/dyor etc.

CR

[noli] 15/12/2013 15:22

Naphar, Then that gives 650-850, so a good chance of hitting the 700+rate from just those 3 plants.

What will that tell the market if IOF manage to hit the target with just 3 plants running, you could probably put that down to 2 plants as IO#1 is just a baby in comparison to whats about to be rolled out as well.

Some brokers may have to revise some numbers if that is the case.

[grahamhacker] 15/12/2013 15:10

From prev P&L posts:I've revised income up ($45kg from $40) 2014 Prodn = 1040mt EBITDA = £19m2015 Prodn = 1600mt EBITDA = £31mOn today's share price of 125p this gives a PE of 8 & 5 for yrs 2014/5My assumptions remain cautious. However, as a holder of QPP I'm very aware that the market heavily penalises uncertainty. To me there is far more upside opportunity at the 125p share price than downside risk.

[naphar] 15/12/2013 15:00

Crosseyed, re 12782
No worries, there were lots of statements on here at the time saying that no company statement on the topic means the target range is still valid.
Fwiw, I agree that it's probably reasonable.
If we can get:-
IO1 50-100
IO2 400-450
IO3 200-300
Then that gives 650-850, so a good chance of hitting the 700+rate from just those 3 plants.

[superg1] 15/12/2013 14:58

On a serious note now the QD subject came up, this may be worth a punt, if you can get them. Poor share price performance, but a technology the market is raving about, in this report they claim performance is better than spherical dots, less need and cheaper, Cadmium free to which is the nano key.

So if you have any nano, it may be worth a punt with these too. DYOR I haven't looked deeply but know a guy that has spoken to them at length so will check his view.




The latest results.

It could be a bet to nothing but if they gain traction and have a viable product then with the right customer, it could absolutely take off.

Given that dow have cornered nano, other big players will want cadmium free.

So a punt only but huge potential if it paid off.

[superg1] 15/12/2013 14:48

I suppose Jeff P and LB who was the Ceo with 18 mill plus between them is not a point then.

Not sure what brings CR over here, nano didn't break the £2 he predicted and sits well below the highs.

it's in impossible failure mode at the moment as nothing is being delivered.

Still good tech, but I do wonder where better colour in a screen will fit, if markets are troubled in a few years.

A long way to go there, but yes potentially very lucrative, was looking to get some myself if the right price/time hits, but not long term due to my view of expensive tech now, historically drops in price as competitors appear and other tech advances.

I doubt there are many examples if any, where technology is shown to carry higher prices in the future.

Some TV's now were many £1000's when they came out, and that entry level is now £300 in Sainsbury's but far better quality than the early £1000's versions.

Nano is about other things too though, so interesting to watch. Cost v quality, essential, need will win the day in those areas.

The nano analyst is quoted as saying nano is the only company with cadmium free QDs.

That was wrong of course, as Quantum material corp in the US have REE free QDs in the tetrapod form. perhaps the REE free bit threw him/her, or perhaps they didn't bother looking.

Patent pending, and they have recently linked up with Asia sending samples for testing etc. They also say this in recent times-:

Stephen Squires, Quantum Material Corp's Founder and CEO said, "Tetrapod Quantum Dots ultimately allow for lower display manufacturing costs due to their superior luminescence and much lower incidence of aggregation. Far fewer quantum dots are required to achieve the same level of performance. We believe this performance advantage coupled with our continuous-flow manufacturing technology will insure the lowest quantum dot cost."



Nanomarkets' August article 'Key Quantum Dots Markets' highlighted 'U.S.-based Quantum Materials Corporation" and the need for "cost-effective large-scale manufacturing techniques, which will be the key to the commercialization of cost-effective and high-performance QDs'.


But there is my hurdle to invest in nano.

nano cadmium free quantum dots MC £292m mainly due to a deal with Dow

or watch Qauntum materials corp cadmium free QDs £6m market cap with QD dots with potential customers now in Asia.


So in theory QMC with the same technology (better and cheaper they claim) at 50 times less the MC of nano.

QMC is a minnow in the US and unloved yet nano over here has a huge following.

£5k in QMC in case cadmium free dots take off, isn't a bad bet and no big loss if it didn't pay off, with potentially huge returns if the UK investors are right on the topic.

Thanks for the reminder, I need to seriously look at QMC again now time as moved on.

They seem to claim tetrapod is better than spheres as in the cadmium or non cadmium version. The C removal was down to health risks not necessarily performance, hence the interest in nano as the only cadmium free QD company, which of course is not true.

[crosseyed] 15/12/2013 14:34

naphar,

Re your post 12774 relating to my early post indicating that IOF had re-stated the eoy target, you are quite correct. There is no such statement either confirming or changing their earlier target of 700-1000 mT exit rate stated in the 2013 Interim report, and that was based on 6 producing IOsorb plants by year-end.

I apologise for that and honestly thought I had read to that effect. Perhaps I did read something, but not in a RNS or formal IOF statement.

However, the improvement in the supply to IO#2 with the new 50,000 bpd capacity pipeline would suggest that IO#2 is now processing to its 30,000 bpd capacity of higher concentration brine. That along with indicated improvements in IO#1 and also IO#3 producing since November mean that an exit rate closer to the low end 700 mT per year equivalent is still a reasonable possibility.

c

[iofra] 15/12/2013 14:34

CR
None of us know the personal financial circumstances of the people mentioned and whether they have surplus funds.
For the record George Lantz owns 26,433 ordinary shares in Iofina (bought before he became CEO) and has 250,000 share options given to him by Lance Baller and Jeff Ploen directly.
Dr Fay a director of the company holds 1,250,000 Ordinary Shares
Buying shares as you know is regulated on the basis that news is not imminent - and we hope it will be.Take a look at the remuneration being paid if you think this is some sort of gravy train operation unlike many others.

[tiger20] 15/12/2013 13:41

CR I dont hold these shares but remember your comments when they where well above £2-you proved correct-CR definitely worth listening to.

Tweleve months from now might look completely different - all about level of risk-not for me.

[plasybryn] 15/12/2013 13:36

New IOF Chart on the FXD thread thanks to Tradesmarter.

[cockneyrebel] 15/12/2013 13:23

I posted this on the other thread but it was here I spoke last so re-post here, sorry:

Do you not think it unusual that if the shares are so cheap and have so much potential the FD holds none. The Chief Exec has just 25K and Forest Dawn, the other executive director has none.

The share holders are all the non-execs.

If the directors at the 'coal face' are not buying when these are supposedly so cheap then why not?

Seems there's a lot of people on here that hold more shares than the entire executive board added together.

Just something to ask yourself perhaps.

CR

[superg1] 15/12/2013 13:04

Graham

re the figures best to wait for an update as mine suggest they can hit the 700mt rate with just io1 to 3 running, with io2 and 3 needing to be on the upper end of the 30k bpd range.

They hit a 310 rate back in May. io1 12k bpd and io2 18.7k bpd. IO1 however is a low production plant we have known that all along.

So most of the .85 can be attribute to io2, at least .7 mt per day from research and facts reported.

in may it was around 30k bpd total. If io2 and 3 are on 300k bpd, then it goes to over 70k bpd.

Which means, the 700mt as a daily rate is in site under those circs, excluding recycling which they seem to exclude form production figures as that is the chem div activity not io plants.

So the 700 figure for 6 plants looks like a low figure, as indeed does the 1000 figure for 6 plants in play.

I would hope, and expect a production update soon.

[meadow2] 15/12/2013 13:03

hxxp://leg.mt.gov/bills/mca/85/2/85-2-311.htm
This is place to be if anyone wishes to read about the criteria for issuance of a water permit, and good luck in your interpretation of any outcome under these rules!

[naphar] 15/12/2013 12:42

Grahamhacker,

I could see that as being a fair conclusion based on your conservative estimates.
I still hope to be pleasantly surprised on output in 2014, which should have a knock on effect on 2015.

It's all down to delivering on commitments. Q1 will now be a big test I suspect, and either I still faith in the new management, or destroy it.

[naphar] 15/12/2013 12:24

Cross eyed,
"I would also comment that IOF, in their recent RNS, confirmed guidance of an exit rate of 700-1000 mT/yr at this year-end just with #IO1-3 operational, though I would go for the lower end of that range at the moment."

Where did IOF say that? I don't recall them stating that,specifically.

Sept 25th they said:
"The Board expect to complete construction of IO#3, IO#4, IO#5 and IO#6 by year end. With these plants fully operational, it is estimated that the annualised production rate will be between c.700-c.1000 metric tonnes of crystallized iodine which would see Iofina become one of the lowest cost and largest iodine producers in North America, enabled by its patent protected WET(R) IOsorb(TM) technology."

When they announced 4-6 would shift to Q1, they did not mention the impact on that target, so people (maybe rightly) assume it is still valid for IO1-3.

[bazzerp] 15/12/2013 12:22

You know it makes sense -

Jackabite 14 Dec'13 - 15:01 - 12696 of 12772 3 2 (Filtered)

Jackabite 14 Dec'13 - 15:02 - 12697 of 12772 2 2 (Filtered)

Jackabite 14 Dec'13 - 15:12 - 12698 of 12772 4 2 (Filtered)

[crosseyed] 15/12/2013 11:56

grahamhacker,

IOsorb operating costs are indicated in the range $10-20/kg from a number of broker sources. My own model suggests the higher end of the range at the moment when compared with actual 2012 and H1 2013 accounts, though the OpEx/kg is sensitive particularaly to the iodine concentration of the received brine.

Being conservative, I would use a figure of $20/kg (£12.80/kg). However, I think the $40/kg market price is probably very conservative. superg1 posted earlier that the present price is more like $50/kg.

[Section re 700-1000 mT target withdrawn - c]
c

[crosseyed] 15/12/2013 11:40

Monty Panesar,

Re 12762, as I posted yesterday, the 2013 Interims indicated that new sales of crystalline iodine commenced during H2 2013, probably in September (my guess, though the report was distributed in late September). Logically, that would imply that derivative production may be running at capacity since otherwise IOsorb/re-cycled production would preferentially be processed in-house for greater profit. With increasing production from IO#3 and from IO#4 and 5 in Q1 2014, according to latest guidance, the economic case for expansion of the Chemical derivative facilties must be compelling.

c

[grahamhacker] 15/12/2013 11:27

My conclusion, which assumes no water, is that an share price today of 150-200p is not unreasonable, & for the long term holders it is low. This of course assumes my assumptions come true, but being an accountant I would like to thing my conclusions are conservative. Off to lunch with the family now, so will look at further calcs later!

[naphar] 15/12/2013 11:23

Graham,

I see your reply in he other thread as follows:-

"
Naphar thank you for feedback.
Having looked at the accounts & your comments on derivatives, I will assume o/hds £3m pa & derivatives £3m pa

Without trying to pinpoint exact financial yrs this gives us the following based on 1yr with 1-6 & 1yr with 1-12 running. IOF have suggested 6 more are lined up.

No. of units 1-6 1-12
--------------------
Gross profit £14m £28m
Derivatives. £3 £5m
Admin. -£3 -£4m
---------------------
EBITDA £14 £29m

PE based on
Sp £1.25 11 5
Sp £2.00. 17 8
Sp £2.50. 22 10

All the above assumes a pice of $40kg & assumes no water"

So you have added some share prices and some PE's. what so you think of those? Which of your 3 share price and PE calculations looks most reasonable to you?
And whilst you may believe £14m profit for 2014 is low, if they double it in 2015, do you see that as good growth or not? (I know most would allow to see better!)

[noli] 15/12/2013 10:28

Just for any doubters about world iodine and the secrets associated with it, notice the production numbers held back. Its happened twice, 1984 to 1987 and 2006 to current.



These numbers show Chile world iodine production declines, then consider SG recent comments of all the problems in Chile, with water, electric, mines shutting down etc etc. It will reduce further and has already started reducing.

[naphar] 15/12/2013 10:26

Grahamhacker
See my reply on the other thread

Edit: my reply on t'oher thread as follows:

naphar 15 Dec'13 - 10:19 - 6430 of 6434 1 0 edit

Graham,
Ignoring tax as you do, which is possibly not an issue next year, your calcs look correct to me.

How realistic your assumptions are is a matter of opinion. There's another £5m of profit availae if the price is $50 per kg for example.

Will they only do 800mt next year? I think that's the bare minimum if they have io1-6 running by end Q1 and assumes no additional plants in 2014.

Your assumptions ignore the derivatives mark up. I also ignore that in my calcs, as they were roughly break even H1, so I assume the derivatives mark up will mostly if not totally pay for general and admin overheads.

So does £14m seem low? Not based on you assumptions, which are roughly in line with my worst case scenario view at this time. The question the. Is what PE would be market attribute to that, which is anyone's guess.