Iofina Share Discussion Threads

[tsmith2] 22/1/2014 10:57

So you can throw in at least a further potential 50p on to the TP - prilling and water permit

[tsmith2] 22/1/2014 10:55

Water permit - You would have thought so, though a higher price/share has been mentioned

[alphacharlie] 22/1/2014 10:52

Lets put u guys out of your misery -

Iofina (IOF) is segmented into two core businesses, and is vertically integrated across the iodine chain. Iofina Resources is focussed on the extraction of crude iodine from third-party upstream produced brine water. Historically, this resource has been monetised by Iofina Chemical which utilises crude iodine to manufacture higher margin speciality chemical derivatives. A ramp up of production of crude iodine has enabled Iofina to commence external sales, where it feeds a number of high growth markets including: X-ray contrast media, LCD manufacturing, medical applications and biocide manufacturing.

We initiate coverage on Iofina with a Buy recommendation and 156p/share target price. With Iofina's shares trading at recently depressed levels, we believe this represents an excellent entry point to a business with a unique business model and significant growth potential. In our view the market has taken an overly cautious view on plant roll-out, iodine price and/or cash margins.

Despite a softening of global iodine spot prices, Iofina's unique business model remains robust and looks to deliver peer-leading returns. We expect to see a re-rating towards our target price as Iofina delivers on 2014 production and cash flow expectations. Furthermore, we see significant valuation upside (35 - 45p/share) in the event Iofina installs a prilling plant, a process that turns crystalline iodine in to pellets, increasing the realised price Iofina can receive for external sales.

■ Iodine supplied in to high growth end markets: We estimate global Iodine demand to grow at c.3.5%pa, in-line with historic annual growth rates, driven predominantly by the LCD, x-ray contrast media and medicinal markets. Our analysis suggests that global iodine supply is expected to keep up with the pace of demand ensuring that the market remains well balanced. Barring production outages in Chile or Japan, we forecast that prices will remain close to current levels at around $45-50/kg with the marginal cost of Chilean production at up to $44/kg acting as a price floor.

■ A step ahead of the competition: We believe that Iofina's competitive advantage stems from to its strong relationships with US upstream operators, industry knowledge, understanding of safety and environmental regulations and its access to iodine rich brine streams. The company's proprietary IOsorb process strategically located at operator water re-injection sites, significantly reduces operational cash costs which are expected to total just $21-23/kg, (including royalties), relative to $35-45/kg for Chilean mined production.

■ Valuation: We initiate on Iofina with a Buy recommendation and 156p/share target price, 56% above the current share price. Based on our NAV based valuation we believe that the current share price embeds value for the company's planned roll-out to 2016 (we forecast 12 fully operational IOsorb plants) but little beyond this. In our view, the current share price offers investors an excellent entry point for a business that could re-rate towards our 156p/share target price over the next 12 months as Iofina meets short term production expectations.

ends

No mention of water permit - update just a week or so away - got to be worth something if it comes through - >20p perhaps. Wouldn't want to be short even if it doesn't

[superg1] 22/1/2014 10:50

Lot's of detail in that and yes conservative. But a new point that hasn't been mentioned anywhere, and I'm curious why it has been said it the note. It's always been an option as the formation water has little in it other than low salt levels 5/6 times less than sea water.

Incidentally, the oil and gas industry has previously struggled to
commercialise gas discoveries in the area due to a lack of water to supply the industry. Thus, this offers the state of Montana an opportunity to kick-start its fracking industry. This field has the potential to produce up to 80,000 bpd of water, which Iofina believes can be sold for c.$1-2 per barrel at ambient temperature, rising to c.$4-6 per barrel for warm formation water.
Iofina Resources currently holds the lease rights to produce iodine, co-produced water and natural gas at the Atlantis Field.

In addition, the company owns 34 wells and a pipeline which links its operations to the TransCanada pipeline system, and has subsequently secured the sites for an out-take water depot, multiple truck distribution terminals and potential waste water disposal sites in Montana.

[engelo] 22/1/2014 10:49

frog: your first 2014 is 2013 I think.

[n3tleylucas] 22/1/2014 10:48

Of course IOF pay Numis to put out a buy tip.

You all said Investec were too cautious.

Wonder if they'll bang a sell note out, hope so.

Be good to see an honest appraisal here for once.

[engelo] 22/1/2014 10:48

Thanks eddyeagle.

jointer/dig: conservative, yes. Unfortunately the prilling tower was kicked into the future by the Misery RNS:

"The earliest expected completion of any prilling unit is second half 2014."

To a sceptical market that means 'Q4 if we're lucky, but smells of 2015'.

Lets hope that with the gap in the programme after I06 they could start building it for completion 1st July :-)

[knackers] 22/1/2014 10:45

Brokers doing a good job so far today. Following this mini 'stock-shuffle' we should see the start of a steady re-rate. Clearly oversold at these prices but here's where brokers/interested parties have negotiated the transfer price. Onwards and upwards.

Numis initiate/buy note very timely.

[tsmith2] 22/1/2014 10:43

numis - presumably water permit in a nil..?

[frog1] 22/1/2014 10:41

Much more realistic figures IMO that I suspect have been driven by the FD.

In my model, I get roughly these figures assuming production of 700mt in 2014 and 1250mt in 2014, so at the bottom end of guidance from the company. This gives eps 2013 of just over 7p, and eps 2014 of just over 13p, with some potential upside based on current production guidance from company.

[n3tleylucas] 22/1/2014 10:14

Their target is 100% above mine. Let's see who's closest.

[diggulden] 22/1/2014 10:10

I'm happy with conservative jointer, it's the way a broker note should be in my opinion. Clear value added for a prilling tower, but even without that, and without any value for any potential water permit, we have a target price with a 50% uplift from here.

[jointer13] 22/1/2014 09:46

a touch conservative in my view.

but add the prilling tower 35p-45p and possibly the water it should take us up around our highs of 2.50 ish imo. for starters.

[che7win] 22/1/2014 09:39

Eddie,
Thanks for your post, excellent summary, the extraction costs and selling prices seem to be more or less in line with my expectations at this stage for the business.

Interesting as to their price expectation on the prilling tower.

Their share target is lower than mine however, I expect it will be surpassed as the company delivers.

[eddyeagle1979] 22/1/2014 09:36

Got hold of the summary:


We initiate on Iofina with a Buy recommendation and 156p/share target price. With Iofina's shares trading at recently depressed levels, we
believe this represents an excellent entry point to a business with a unique business model and significant growth potential. In our view the
market has taken an overly cautious view on plant roll-out, iodine price and/or cash margins. Despite a softening of global iodine spot prices,
Iofina's unique business model remains robust and looks to deliver peer-leading returns. We expect to see a re-rating towards our target price
as Iofina delivers on 2014 production and cash flow expectations. Furthermore, we see significant valuation upside (35-45p/share) in the event
Iofina installs a prilling plant, a process that turns crystalline iodine in to pellets, increasing the realised price Iofina can receive for external
sales. With six operational plants in 2014 and a further three under consideration, we expect revenues to grow from $18.8m FY13 to $39.9m
FY14 and $60.4m in FY15. Whilst global supply additions should keep pace with growing global demand, we expect the market to remain well
balanced in the medium term, with a price floor in the mid-40‟s supported by the relatively high cash cost associated with Chilean mined iodine.
Iofina‟s operational costs, including a royalty paid to the upstream operator, are estimated to be $21/kg, compared to Chilean iodine mining
cash operating costs of closer to $35-45/kg. High operational margins support out forecasts of significant near-term free cash flow generation.

[eddyeagle1979] 22/1/2014 08:57

Ive heard there's a Numis note out today regarding IOF... anyone seen it yet?

[scrutable] 22/1/2014 08:41

superg
It is unusual to see you in the role of misanthropist but yesterday's RNS from parent company Green Dragon Gas contains all facts and no opinions and confirms a giant leap forward taking place at GDL now in progress. My post today says it all:

SCRUTABLE 22 Jan'14 - 08:02 - 4033

from yesterday's (Jan 21) detailed and very bullish RNS from Green Dragon Gas, a 304% Y on Y increase in gas production to 7.19 billon cubic ft,(=1.2 million barrels of oil equivalent) .........signifying a striking increase in GDL's main client's cash flow......along with CEO Randeep Grewal statement....." We remain confident of achieving our target exit rate for this year of 18Bcf"
.
That's a promise of a further 150% increase in production during 2014,


also the paragraph ......"During the closing days of the quarter, we successfully raised US$35m through a convertible bond, issued to GIC Private Limited, the Government of Singapore sovereign wealth fund. This enabled us to launch the 2014 drilling programme....."

That secures finance for the first 25 wells of the 150 well contract to be executed by Greka Drilling from GDG secured last week.

This is all confirmation of my post 4024 that GDL is now well on the way to a rise in revenue to a minimum $170m-185m for 2014, compared with $61m in 2012 and less in 2013.

That's without counting orders yet to crystalise out of the $330m pipeline of planned drilling dependent on tests for two Chinese Super Majors not yet completed.

This looks like a massive lurch forward in growth for GDL in 2014

...........................................................................

superg: you are I am afraid still concentrating on the empty half of the glass and extrapolating from it!! You should reduce the certainty of your negative views. This not a Chilean iodine resource

[escapetohome] 21/1/2014 19:00

Nice action on nccl today. Cce, agl, grph all tipped by me , making substantial returns. ( and another) without hours of research undertaken.

[festario] 21/1/2014 16:57

Festario has left the building...... thank you, and goodnight.

[writz] 21/1/2014 16:56

Festario, so you did. I must have read your mind even if I couldn't see you.

[crosseyed] 21/1/2014 16:50

Having written my posts on gold, I came across this newsletter of this weekend from Mauldin Economics that is apposite and might be of interest:


c

[sandbag] 21/1/2014 16:44

Is Festario still around then?

[testuser123] 21/1/2014 16:38

Tell you what, it's quiet on the boards at the moment. I was at least expecting to see a couple of posts from the regulars such as Festario.