Iofina Share Discussion Threads

[naphar] 27/2/2014 21:44

Che
on the cash flow, I agree, each new plant is like starting a new non cash business. You need then funds to cover the start up period when you burn cash with no income. But, it is also true that they can delay a plant, within reason to save the cash outlay and bring it on line later when the cash is available again. It is also possible for them to bring the cash in earlier, although at a cost, by offering early payment discounts, factoring their debts etc.

[bobsworth] 27/2/2014 21:43

Thanks for that explanation che7win highlighting its more complicated. Add in the need for inventories aswell and its quite a challenge especially using new plant technologies.

[jackster193] 27/2/2014 21:42

Possibly why SQM stock price is improving.....

Tesla Plans Boosting Lithium ETF (LIT, TSLA, ROC, FMC, SQM)

[mikkydhu] 27/2/2014 21:40

If with the next operational update they also update us on recent trading, we may have a good idea whether additional funding may be needed.

Taking a long term view, I get some comfort from the performance of IO1. The company got over the initial teething troubles there, and once they were sorted, the plant has continued to perform very well. From details about the other plants, I have the impression that there have nearly always been problems at first, but the company seems to have been resourceful in finding solutions. It is this ability to solve problems and innovate that will enable Iofina to win through. A succession of steadily producing, reliable, plants will gradually evolve. Then a time will come when most plants have a predictable output and only the newest have any uncertainty about them. As time goes on they will form an ever decreasing minority of IOF's plants.

[che7win] 27/2/2014 21:33

Bob,
It's more complicated than that; those new plants when initially rolled out will use more cash short term, that's why growth has to be managed but I agree with your post.

Hard for me to explain, but new plants eat cash for a while, staff, costs of running etc, they produce the iodine, it will sit before sales, then if sales made, another 60 days before the customers settles the bill.

It doesn't help if the plants aren't operating efficiently, that is why it's not just about plant roll out as I said earlier, but about maximising efficiency of existing plants.


It's next year when the company's operations overcomes capex and the company throws off cash, this is the year with highest capex afaik.

Agreed Mad, they can control this, but I expect they get to plant 9 with a few mobile units, that is my expectation now.

[1madmarky] 27/2/2014 21:26

I agree che7win, if cash flow is looking a little tight just back off the rollout so that each new plant is payed for out of cashflow . They should still make the forecast with IO 1to 6 up and running.

[superg1] 27/2/2014 21:01

Frog

I think they will go JV on the water, which they have continued to mention in previous updates.

With the old JV with Hal that was planned, I understand Hal would have funded depots and the like. The fact IOF keep calling it non core keeps me thinking that way.

Interestingly SQM are on a bit of a jump in price pre results, I wonder what's triggered that as iodine and potash prices are hardly flying.

[bobsworth] 27/2/2014 21:00

che7win
"It all comes down to capex spend, I think they can manage capex accordingly."

This could explain why they have scaled back on the number of new plants in 2014 beyond 1 to 6. If so these delays in plant roll out have already impacted on cash generation for new plants!

As you say che7win at least iofina management can apply the brakes on plant rollout too allow revenue/profit to catchup.

Hence IOF#4,5 & 6 go live is even more significant as it will allow the Iofina to avoid a cash call and allow the company to take the breaks off on plant roll out.

Thanks to your thoughts frog1 this is all beginning to explain now the slow down in plant rollout which for me was a puzzle and shock when they announced this out of the blue in the 2013 Review and 2014 Outlook.

[che7win] 27/2/2014 20:44

Frog,
A well reasoned post.

there are some sales carried over into H1 which will help cash inflow, also the chemical business should do better than H2.

The Numis note gives $7.1m cash at 2013 year end and $11.5m 2014.
The GMP note gives $9.7m and $4.3m.

It is clear there is no immediate cash call needed, I don't see this as an issue right now but something to watch. I don't think the company will mention this, why would they if they don't think its a problem? Neither nomad mentions it.

It all comes down to capex spend, I think they can manage capex accordingly. Perhaps they should have an overdraft facility to manage short term cash demands but maybe they are confident they don't need this. It may be something they should look at H2?

As for the water, I note the company says its non-core. I expect they will do a JV on this, my thinking is water rules are quite relaxed now, but in the future I expect there will be more legislation and controls on how water is used, managed and disposed. Any partner would quite happily provide capital if we got any of this contract, after all Halliburton was keen to give us $15m 18 months ago for a water JV.

Free cash flow will appear from next year, so it's really comes down to capex spend. For instance, do we do a prilling tower this year or next year, do we do one at all? I guess this is something the market would like to know.

[frog1] 27/2/2014 19:53

Che7
In the interims the net cash was $16m (they had just borrowed the $15m). Nett cash burn in H1 was $4.6m on revenue of $11.5m. They said they will only have total revenue in 2013 of about $18.7m (about same as 2013) so revenue in H2 will be $18.7m-$11.5m (revenue in H1) so $7.2m. If anyone assumes the same spending in H2 (which many will) that will give a cash burn of $4.6 + $4.3m - around $9m leaving cash of $7m, which will still be being burnt at a high rate. At that sort of burn rate with the amount of cash in hand, the market will be very concerned that there isn't much room for error. If the market accepts the Nomad figures, they will believe the company is getting very close to needing more money. This is the real problem with delays in bringing the new sites on line and delays in getting orders out. Money is being burnt and revenue delayed and so far there is little from the company to show the burn has stopped.

I saw an article from a bear at the turn of the year that raised this very issue and was why they thought the price will fall. IMO if IOF can meet the current plan, they should be able to avoid running out of money. The problem is that the last 8 months is one of delayed revenue while costs continue and so there is a clear risk they will need money. My experience of investing in small oil companies shows any risk of this can be disastrous for a share price and while there is this risk the price will not rise. So if they will not need any funds, they should say so. IMO that statement would do wonders for the share price

[freshvoicem] 27/2/2014 19:40

jcs
I agree you haven't lost till you sell.
But if you don't sell and price goes down to 50p you lose more

[rogerbridge] 27/2/2014 19:30

Well, I for one am not concerned about an rns tomorrow.
The main focus should be obtaining the maximum production from our four installations.
I would have thought another couple of weeks would have been required for optimum production, but if we have an rns tomorrow I will not be expecting production details of all four installations.
We will receive news when it is ready until then relax.

[flying pig] 27/2/2014 18:49

Those that work or have worked in the finance industry will know BUT BBefore a company issues an RNS it must be vetted by the NOMAD. This is boring and tedious as statements must be verified.

The NOMAD MAY BE VERY SENSITIVE TO THE RISK THAT THE RNS OVERSTATES THE FACTS. The NOMAD has reputational risk and will not win new business if clients get it wrong. IOF has "form" and the level of proof may have increased. The number of RNS's will decrease.

Relax and enjoy the chance to buy more at a price that may prove a real bargain on the medium term view.

[johncsimpson] 27/2/2014 18:08

SHONNY - thank you for the reply. A lot of people expecting an RNS tomorrow just because IOF have implied io4 will be up and running this month end with io5 not far behind.

To the extent that they fall short of these 'inferred' targets (if they do) the share price will respond accordingly, equally no RNS tomorrow might well be even more detrimental.

A sleepless night for some perhaps, but those who are still invested from times of £1.50 + haven't lost money yet. . . You only lose when you sell - as you well know.

[che7win] 27/2/2014 17:30

frog1,
which Nomad numbers are you referring to?

I have not seen either the nomads or company mentioning needing more money so why would you expect them to mention it?

All the notes I have read show year end cash for 2014.

[frog1] 27/2/2014 16:49

superg,

Even if the water comes in, I reckon the market believes there will have to be a fund raising so no jam today before more money requested. The longer we go without hard facts from the company, the more likely the Nomad numbers look accurate. Those figures suggest the company will need more money and with no indication to the contrary from the company that's what will drive the share price

As I said previously, if the company really wants to stop this slide they need to give hard numbers and say NO ADDITIONAL FUNDS will be needed at the next update. Until there is no threat of a fund raising, I can't see any large scale buying except from those closing very profitable shorts.

[shonny] 27/2/2014 16:26

I think you'll find that there's a few bob left here for the shorters yet. This one's a busted flush I fear. I feel sorry for rampers like superg1 and anyone else who may have suffered large losses here but they should have quit six months ago when it became obvious that management were leading them up the garden path.. I think they should call it a day and write off their losses. This is only going in one direction and it's not north.

[johncsimpson] 27/2/2014 14:13

'Candy from a baby' I think you'll find SHONNY but close enough for you eh . . ?

added at 3:12 pm : So SHONNY would you advise shorters to close this afternoon or keep the bet going?

[ramsey11] 27/2/2014 12:50

I don't believe itLike taking candy from a kidThere's just no hope for himPoor jonnyshonny

[shonny] 27/2/2014 12:47

One missed target after another here. Management never fail to disappoint the shorters. More easy money today. Like taking candy from a kid as they say.

[freddievas] 27/2/2014 12:13

SG, it's TRT isn't it?

[superg1] 27/2/2014 12:10

Sweet

Glad someone got the hint

Interesting find by someone re spot prices for 2013 giving the range across the year.

Relevant as SQM quoted Algorta as the reason for their pull back, and Algorta released H1 2013 details late 2013.

They reported just over $10m profit for H! 2013 but talked about 3000mt anticipated production for 2013.

In truth due to revenue levels it looked more like 1000mt for H1, and maybe 3000mt forecast was a bit of smoke for SQM.

1000mt would have meant roughly $10 per kg profit

1500mt would have meant around $7.50 per kg profit.

So what have they done in H2 where the average spot price seems to have dropped $10 per kg across the period.

The H1 13 period may have included sales in late 2012 too where the mid spot price was over $70.

But just sticking to the $10 difference for H2, in theory Algorta are on break even at best.

SQM and the ACF Minera/Algorta set up cover near half of world production.

[sweetnodude] 27/2/2014 12:01

RNS Friday then...

[neddo] 27/2/2014 11:35

turning into a jam tomorrow