Iofina Share Discussion Threads

[che7win] 24/2/2014 20:23

gadolinium,
Prices for March are the same, a narrowing of the price spread.



IM Prices March 2014 Feb 21, 2014
... spot, $/kg $45-50. Iodine crystal, 99.5% min, drums,. contract, $/kg $45-50.

[cyberbub] 24/2/2014 20:02

Thanks... that's a reasonably encouraging price for Iodine IMO...

[gadolinium] 24/2/2014 19:43

Just for interest:
According to the Industrial Minerals link below, dated 29.01.14 (the day when the strikes were supposedly resolved), Chile iodine exports do not seem to have been affected by the recent port strikes. Interestingly it gives a price for iodine crystal.



'Prices for iodine have remained steady after industrial action at Chilean ports failed to disrupt South American exports of the mineral.
Spot and contract prices for bulk orders of iodine crystal (99% min, drums) are reported as being $45-50/kg, unchanged from last week.'

[cyberbub] 24/2/2014 16:14

The share price is swinging wildly from moment to moment in the upper 70s range. I don't want to tempt fate but I think there is a clear trade-off going on around here suggesting that the share price is bottoming? Could these 1-2p swings indicate Ennismore buying back chunks of their shares from hapless T-traders?NAI GLA

[meadow2] 24/2/2014 16:12

The only real facts we have are from the RNS of 17th December, 2013, and even these are tentative, are that "Overall revenue in 2013 is LIKELY to be comparable to 2012 levels" and "EBITDA excluding share option charges, will LIKELY be similar to 2012 levels". Note, likely, not certain!

Any calculations made regarding future activity and profits are simply speculative and, surely, it is better to await concrete figures before getting too excited.

[bogg1e] 24/2/2014 15:16

I should be fairer with the above statement. I have in my notes that opex is $12-15 per kilo. If this can only be achieved with a full production rate then this must have been known by the BoD when the figures were stated and that production rates would not be sufficient to justify those figures at the time. Therefore instead the opex must be a projection or target. I'm aware there is the possibility of a cynical twist in there but I shall not rise to it ;-)

[bogg1e] 24/2/2014 14:57

Its the target opex rate stated by the BOD; $10 - 15. $12 is my average. I dont trust the figures enough to get the calculator out yet! I shall wait for the quarterly update and see if there is anything we can glean from that. As many have pointed out, we need a reliable constant to measure against; without an extraction rate and production rate, all future revenue targets are going to be wildly varied. Then trying to work out a "fair" share price on the basis of it becomes guessology.

[engelo] 24/2/2014 14:51

boggle: thanks for that analysis. Sure that IOF themselves have said OPEX 'likely to reduce' and sounds like you have identified the main reason why :-)

Since the old days of ca $10 OPEX has been moving up in leaps and bounds, now $21.5 in 2 broker notes so presumably obtained from IOF. (I mistrust this as being on the high side.)

But where is the $12 target from ?? If we achieve that then improves margins in a big way, eg if iodine selling @ $50 then margin is $38 rather than $29.5 per kilo, ie profit 27% higher than the figs brokers are using.

[bogg1e] 24/2/2014 14:32

opex is a fixed cost (electricity, wages, etc) so the high opex we currently have is because the production levels per plant are low when averaged across the year, which in turn is due to a whole string of delays, which should not recur as the plants and the processes to bring them online are now standardised. As plants reach full capacity in terms of brine volume and iodine extraction rate, opex will naturally drop toward the $12 target.

[bobsworth] 24/2/2014 14:30

Hi frog1
In answer to your questions:
After lots of email correspondence with Lance in the early days when I asked what the benefits would be to the Chemical Division using home made iodine I was told that due the variable impurities in imported iodine, Iofina would with higher quality iodine be able to significantly extend its range of more expensive iodine derivatives that are in demand and thus benefit from increased revenue and profit with a much lower opex costs on conversion. Right or wrong I have assumed Iofina have started doing this in its extended Kentucky plants. The problem we all have is that Iofina have not revealed much in terms of data and confirmation of what its done with extra acreage it bought to extend it Kentucky plants. The figure of $85/kg for iodine derivatives is derived from notes I have taken from peoples postings and article read. Having read figures as high as $95/kg and as low as $75/kg I have simply taken an average. As I said in my piece time will tell if these figures stack up but like all of us, right or wrong, I can only go on snippets of info acquired.

[frog1] 24/2/2014 12:39

Bobsworth

Thanks for your figures. I was wondering where the price of $85 per kg for derivatives comes from and if that is the case why you think they can go up from $22 million revenue for the chemicals last year (actually about $19 million but some revenue lost to this year). I cannot find actual numbers for amount of derivative produced or selling price. Also, why would the IOF chemicals business suddenly produce so much more when using internally produced iodine compared to externally bought in iodine.

If we assumed no internal production and IOF chemical produced 400mt at $85 per kg that would be a revenue of $34 million and a GP of $5.6 (assuming the current 20% GP is maintained). Last year they did less than $20 million revenue.

An email I received indicated they were using produced iodine when it was over 1mt per day. Thus I am very interested in the prices you are using.

So my questions raised by your figures are:-

1. Your big jump in revenue for IOF chemcals suggest you think they were constrained last year while using bought in Iodine. I would tend to view it that IOF Chemical may grow a bit and the GP will be increased by internally produced iodine as I can't see where the constraint was.

2. Where the $85 figure comes from.

3. Currently they operate at just over 20% GP at IOF Chemical. Assume $85 is right. That gives a COS of $70 for IOF Chemical. Even at $50 for bought in iodine that is $20 opex at IOF Chemicals. If the Iodine price is lower, then opex is higher, but that would at at least $10 onto your cost.

Personally, on what we know currently, I'm not sure the latest note from NOMAD is far out for the Iodine business. Having said that, the situation on production, costs and prices is far from clear.

[rogerbridge] 24/2/2014 09:44

I Agree with your comments about IO3, there was a hitch with the brine, however it will mean improved brine availability for the future.

[ansana] 24/2/2014 09:19

"I03 not achieving anywhere near its full production"Not sure about that, I understand that the drop in brine volumes at IO3 is only temporary and even though it dents the production for a short period of time the drilling of new wells will add volume to all the plants in the area in the long term. Consolidation is key and that's what they are doing. No point in having shiny new units without the brines now and in the future day in day out .... they have the brines in place for the new plants. Near term we are going to jump from 3 to 5 working units.

[pugugly] 24/2/2014 09:08

Bobsworth:> Not sure you are correct re top-up. OK Old Mutual were adding rns 24/6/13 but latest 28/1/14 they were reducing to below 6% and all indirect.

GB00B2QL5C79 From 7888298 to 7888298 7060838 Now 5.55%

[meadow2] 24/2/2014 09:05

I sense an over-optimistic mood creeping in - again! Let's await concrete facts before we return to the good old £2+ days.

[rogerbridge] 24/2/2014 08:23

Me too Bobsworth, we just need our little beauties purring away and good news on the water front would help as it is not priced in.
Thanks SG for highlighting the problems our competition are having.
IOF should be coming to the boil nicely.

[bobsworth] 23/2/2014 23:21

Rogerbridge the ones I take note of are the Institutions who have like me have topped up recently and like me plan to be here for the long term gains and dividends.

Roll of the day Iofina leaves the AIM market!

[rogerbridge] 23/2/2014 21:58

Thanks Bobsworth for your input.
It has been stated that IO3 has not been able to achieve anywhere near full production due to drilling taking place. Io1 & IO2 should be running at full capacity with IO4 & IO5 up and running up to full capacity within a couple of weeks or so.
Until we have all of these installations running at maximum rate with time out for maintenance, we do not know what the cost of production will be.I would not be surprised if it was lower that the figures that have recently been advised.

Personally, I believe that management have left a bit up their sleeve and the production costs will be lower than advised. Of course this depends on several factors but until we have installations purring away, we will not know.

On another matter, IOF are not the only AIM share that has took a hammering recently. OFI, GKP, Blinx, and the list goes on. QPP has dropped over the last few days and Cloudbuy is another with great potential, but little revenue, could it be next, who knows.
One thing is for sure, you need a strong stomach to invest on the AIM. We ought to take not of the II,s who buy low and sell high.

[superg1] 23/2/2014 21:57

PUG

As bad as the promise has been v actual delivery it's still progress and should put them in a great position going forward if opex is as forecast.

Yes the price has dropped but that has been an own goal by the Chileans, some of whom may have opex at or above the current price.

It's hard to call the exact situation of Algorta Norte, who SQM quoted as a reason for their pullback in production. They quoted $10m profit in H1 when the price was more than $5 higher than now, they also claim they will do 3000mt this year.

Was the $10m profit from 1500mt ??. If so they were making $6.60 per kg. IE. probably break even now if true, due to the price drop.

But on the point of delivery, they are on the build to greater production and cashflow (assuming sales).

So on that point, there are a host of one trick ponies on my watch list, some no further forward after a decade of promises. Most I still can't see how they will materially progress in the next few years, having supposed to have made the break into solid cash flow years ago.

Many literally have one trick, and in some cases not only unproven businesses, but it's debatable if they would catch on even if the product/service is proven, so while I like the ideas a lot and think the industry may like product X, then it could turn out to be a complete dud.

I can't help but consider some BODs are just happy to take £100's of 1000's in salary every year for 10 to 20 years, pop out some share options each year, and just keep life stress free, keeping the promise (salary) going, and enjoy the rich rewards. CEO's can have a very successful and prosperous life without one oz of business success.

So mentioning water as trick number 2, yes many say ignore water, but that's because we have another trick, but why ignore it. What's it worth.

3 years ago, 30 to 50 cents pb to IOF on a max 200k bpd in in Montana and ND.

$60k bpd to $100k bpd.

80k bpd pending and I did a bit of digging with the locals recently. 1 to 1.50 for cold, and $6 for hot water.

Hot water costs $2 to $3 on opex, so it seems there are some good margins there.

So half the water for that depot at just $1 pb is worth near his price it seems.

In terms of where the iodine price is, as the experts in the marker report, it would seem to be the floor.

There is no evidence out there to suggest the Chileans have low opex, and if there power costs (11% rise per year for a decade) and other costs keep going, then the price has to go up and is unsustainable for them. They provide 60% of the world demand.

The affect of SQM closing mines/reducing output. The nitrates/potash price is important to SQM and others as some aspects of the opex are shared between the two products.

On that point 5 years back SQM were reporting being the lowest cost iodine producer in the world, and as said some aspects of the opex are covered by other.

In that time power costs have gone up 11% every year, wages have taken off after many strikes and shortage of skilled workers.

But potash in that time has dropped from about $880 per mt to about $320 for them with the main players squeezing it down to $305 recently.

So it's clear the situation for Chile producers has become very tough in recent times, and they simply don't have the margins to cope with it.

[engelo] 23/2/2014 21:26

Bobsworth: thanks for your efforts on valuation. Re Opex believe 2 broker notes used the same value of $21.5 , so a strong inference they were fed this by IOF. Imo likely to be overstated in the new management's style.

[engelo] 23/2/2014 21:14

cyber: Sounds reasonable :-) The T/O value is one thing we can all be optimistic about imo. Apart from the patent protected core business there is the value of the 100s of exclusive contracts with the major oil companies to be added. Then (assuming the effing permit arrives) there's the water business which could be worth the current mkt cap on its own, and the potential value of 300,000 acres of Montana Bakken/3 Forks/Nisku etc.

[cyberbub] 23/2/2014 19:27

Surely if the company was to be valued for a takeover, the IP for the extraction process would be worth GBP100M on its own??

[bobsworth] 23/2/2014 18:54

Thanks for "work in progress" PUGUGLY.

Your right to question depreciation costs. In using a high OPEX of $25/kg and £35/kg respectively I have assumed plant depreciation costs are included in these cost. That said I should have stated this in my assumptions.

Pleased to read you think that Iofina is actually producing more than I have assumed as I deliberately played this down to avoid being accused of ramping the production.

Either way my point that the market has lowered Iofina's P/E significantly, still stands for which Iofina now have a lot of work to put right.

Iam hoping Iofina publishing quarterly data will avoid us having to work in the dark on their production performance and immediately rebuilds the markets confidence in Iofina.

Time will tell!

[pugugly] 23/2/2014 18:20

Hi Bobsworth.

My p/e ratio was back derived as to what post tax profit I suspected the market would require to justify the current share price and for the sake of the projection assumed 15 should be reasonable for a potential growth company with patent protected low cost IP.

By back calculation
EPS NEEDED FOR TARGET P/E 0.0600
Implied profit frs3 £ 7,637,064
FORCAST P/E 13.00

Or
EPS NEEDED FOR TARGET P/E 0.0520
Implied profit frs3 £ 6,618,789
FORCAST P/E 15.00

While I cannot fault the maths of your calculations I cannot see where you have accounted for depreciation which given the rate of plant build could be in the region of $1,500.000 for fy 14 and reduce your calculated profit to about £10.255 million. It really comes down to margins and sustaining capital.

I think your assumption that IOF 1& 2 are supplying all the chemical requirement may be on the high side as the 2013 Review and 2014 Outlook stated that "the three combined plants are averaging in excess of 1,000 kilograms of iodine per day, satisfying the Group's internal iodine demand while building inventory for future outside sales. " which – assuming no down time is only about 365M tonnes PLUS a little over and you have assume 400mt for chmeicals - which seems a fair assumption if they are to grow the business. .

Please treat the above as "work in progress" . I suspect your costs may be on the low side but given the lack of clarity from the company they are "very fair" assumptions and I have more digging to do.