Iofina Share Discussion Threads

[che7win] 17/6/2014 20:36

IOF must be confident about having most leases sown up when they have been so open about alluding to best locations....

[rugrat2] 17/6/2014 20:20

Bob, ref your list of points about the pods (22138) and specifically:
"- mini pad at Triad Energy's SWD NE of IO#2 – excess brine!
- existing constructed full size IO# pad at the Lohmann and Zahorsky SWD"
Taking the second point first, my two posts on the subject are 21194 and 21212. My take on the two sites was that work had abruptly stopped on them before 10th March, when the latest GoogleEarth image was taken (work not completed, particularly on the Zahorsky site, and no machinery on site ie dozer).
Well almost a fortnight before the AGM (28.05.2014) there was a satellite image taken E-W across the Woods/Alfalfa area with IO#2 pretty well in the centre.

The direct link to it is


Under the image resize tab, click to max resolution.
For those of us of a certain age (pre digital cameras), the image can be likened to a 'contact print' ie it's a low resolution look-see prior to purchase of the real thing. However the digital globe images are better than most, and bear comparison with a GoogleEarth image when zoomed to a similar scale.

Most groundworks in the area use off-white stone to produce a surface for sites, be they well pads, electricity substations, gas compressor plants... Certainly IOF, MidStates and CHK use this surface everywhere – it degrades to a yellow/brown with the traffic over it so new pads are easy to spot. Comparing the images I can say categorically that the Zahorsky site was unchanged since March, with a large part of the site surfacing not having been finished, and I'm ruling that out as one of the two new pod sites.

In fact of the eleven swd sites that I can see on the Digitalglobe image, only one appears to have any hint of a change on the ground, and that is the Triad Mary Anne swd. Immediately north of the well at 36.7113,-98.5793 on GoogleEarth you can see the levelled out site of the mud pit constructed for the drilling of the well. The previous 8/2012 image shows it clearly, post drilling. Well the Digitalglobe satellite image shows a pale coloured anomaly in the NE corner of this levelled area. It could be something going on, but I wouldn't bank on it, and I think that it was said to be Jeff who stated that IOF had only just signed up an swd a mile from IO#2. Well that has to be the Triad swd assuming that he was accurate about the distance, and I wonder if the timescales rule out the anomaly as being relevant.

I'm not sure where that leaves us with the mini pads. With the 'fairway' of better ppms apparently running north through IO#2 (if not further round to the NW), the MidStates Morehart swd comes into play, and the next would be the Sandridge paired Jessica swd wells, north of Alva. I will keep my eyes peeled for any new satellite images that might reveal anything.

[che7win] 17/6/2014 19:57

Madchick,
It certainly sounds malicious.

[madchick] 17/6/2014 19:54

Does this mean that Iofina is becoming enough of a threat for false rumours to be spread about?? I wish that were true!

[che7win] 17/6/2014 19:46

Indmin article:

The US-based company that produces iodine from waste drilling brines has suffered from operational and management problems in the last year, but denies that it slashed the price of its products in order to generate cash flow.

UK-listed iodine producer Iofina Plc has insisted that speculation that it slashed the price of its iodine derivative products in the US market in order to generate cash flow are "100% incorrect".

Company co-founder and chairman, Lance Baller, told IM "our margins are very strong year-to-date and [are]...

[crosseyed] 17/6/2014 19:15

Josh_FTM,
And what were their reasons please?
(The site requires subscription)

c

[madchick] 17/6/2014 18:20

superg - thanks. If I knew, I'd forgotten! :-)

The good thing is that if IOF give the go-ahead for the pods, we'll also know we have an iodine purchaser, so that bit of news will be doubly good when it comes (I have no doubt that it's a "when" and not an "if").

[superg1] 17/6/2014 18:06

Mr B


I thought you may be aware of something, and have yet to have a deep look. The initial digging suggests all of the interest and research has been over Japan and Korea way.

Incidentally I noticed a component part of such batteries which triggered a thought about a little UK company that few seem to realise has potential in that area, it is more or less hidden from the market for that particular business area.

Yes lithium iodide has been around for years in medical device batteries, they need safety, reliability and long life capability.

In short lithium iodide batteries, double the charge, so halve the weight, and have great potential safety profile re combustion, fire risk etc compared to current lithium batteries.

I'll so some more digging

[josh_ftm] 17/6/2014 17:59

Anyone seen this article? hxxp://www.indmin.com/Article/3352893/Iodine-derivatives-price-cut-rumours-incorrect-says-Iofina.html

[superg1] 17/6/2014 17:58

Bob

I do the research for my own benefit on investment decisions whether to hold, buy or move on etc.

What was forecast by us to happen in Chile, has happened, contrary to the dozens of top analyst reports saying 'buy Chile'. There are some posts way back warning anyone with investments in Chile mining.

Now the market says flat prices but the evidence building suggests a shortage is coming. Shortages which can't be filled without higher prices.

Mad

I think you know the answer to the $25 per kg question, and take it as a general point to cover for others.

Chile was cheap labour 5 to 10 years back, and didn't have the power and water problems.

Strike after strike came for better pay and now Chile mines pay good money to miners who spend their cash on luxury goods

Truck drivers at mines on $80k per year, mining costs up 40% over the last 5 years, power prices up 11% on average every year for the last 13 years.

That's why they can no longer afford iodine production 5 years back at $25 per kg. Algorta quoted figures which indicated $35 to $38 per kg costs.

There is a quote by the Chile gov somewhere saying it would get worse by 2014, now look at Chile, they were spot on.

That was without the new gov arriving with a planned 5% tax rise, removal of the FUT tax avoidance scheme, and without the 150 rule. I note a huge dam project for power has just been blocked.

[1madmarky] 17/6/2014 17:45

Nap -I. Agree, having staff on hand to baby sit the first one would be sensible

[bogg1e] 17/6/2014 17:45

Cheers SG for info.

From AGM notes, Iofina are "Looking to convert some of the debt".

Did Lance mean pay back some of the debt or converting the debt into shares? Thanks

[spike_1] 17/6/2014 17:30

Well, the share price didn't collapse at the end of today. Maybe we are at or close to the bottom?

Best wishes - Mike

[mister big] 17/6/2014 17:22

Super g , I was looking at a very interesting piece on lithium iodide batteries and a new project with major funding relating to electric cars - it seems that these batteries have been in use medically for years ( pace makers , etc ) - but major research money pouring into this area .
The effect long time would create interesting demand for iodine. . The interest is in japan , but this project is in the uk with major funding .

[naphar] 17/6/2014 17:15

Maybe but when it's been mentioned IO2 could have pods... might be a prime site for the first one... staff on site to keep an eye on it.

[1madmarky] 17/6/2014 16:30

I thought that io 2 had additional filters. Also this is an unmanned pod, so I would assume that they would have enough to do without having to change filters on a regular basis. I don't know but if you have the choice of clean or dirty at the same ppms. You would go for the clean supply, it's less work.

[naphar] 17/6/2014 16:18

1MM

If the filtration processes etc are the same in the pods, then why not?

[1madmarky] 17/6/2014 16:13

Would not have thought Io2 would be a good location due to dirty brine. Unless it would be with a different supplier

[beercapafn] 17/6/2014 16:04

Madchick.. Thats interesting question..

I think not enteriley revelent as things move so quickly.

But thought provoking.

In reality, winter weather, or a tornado, or an earthquake in Japan are more relevant.

Beer.. more beer, except netly.

[madchick] 17/6/2014 15:39

How did Chile cope previously, when iodine was approx USD 25?

I understand that all the legal changes coming up will increase OPEX, but the Chilean companies must have been making profit when iodine was steadily at around 25 USD.

[bobsworth] 17/6/2014 15:22

Sg thanks for your detailed insight into Chilean Iodine production that indicates the iodine market is rapidly moving from an oversupply to undersupply situation in the coming months.

If SQM is looking to hold back on production to force up prices, they clearly do not see Iofina as an immediate threat to offset their undersupply plan!

Knowing what we know about Iofina's latest Pod technology and their ability to target rich ppm sites, this strategy could prove to be a very significant oversight on their part.

That said, with or without the likes of Iofina, it looks like SQM have no choice now but to go down this undersupply plan to force up iodine prices.

Ironically this will hopefully force some buyers to start knocking on Iofina's door for guaranteed iodine supplies.

Note!! the Japanese have already started knocking on Iofina's door!

Knowing this is likely to happen and soon, this could explain why Lance and his team have, despite all the current issues to resolve, been very focused in the last 2 to 3 weeks in checking their leases and getting the design of their productive new pods finalised and ready for ordering to meet this new expected demand.

Assuming this happens and Iofina can then supply in the time scales that present, It will be interesting to see what Iofina ends up charging for this new supply demand.

Play their cards right and not get too greedy on price then Iofina could, very quickly grab more of the iodine market by continuing to squeeze the Chileans slowly out of the iodine market on price in the coming years.

Let's hope SQM's undersupply strategy happens and it opens the door for Iofina to supply the likely demand with their new pods.

With an army of pods to call on, let's hope it's a battle that Iofina can win!

Talking of Pods. Thanks to Naphar AGM feedback here is a quick summary of their current status:

• New design recently completed in last 2 to 4 weeks
• New design uses proven and tested technology that works
• New design is more pod like – movable & simply craned on & off sites
• Being moveable allows them to avoid interruptions to brine supply!
• Significantly improved to reduce both Capex and Opex costs
• Capacity has been standardised to handle 10k bpd per pod
• Versatile to target brine sites ranging from 200 to 1,000+ ppm
• Ideal to target Iofina's majority of sites in the 250-500 ppm range
• Designed also to be placed at SWD sites
• Fully automated and supplied and serviced by roaming staff time to service & supply
• Housed on concrete pads with electric hook up point
• 2 pads built so far
• Possible new pod sites could include:
- mini pad at Triad Energy's SWD NE of IO#2 – excess brine!
- existing constructed full size IO# pad at the Lohmann and Zahorsky SWD
• Pads can take multiple pods e.g. a 40 bpd site = 4 Pods
• To be supplied locally using existing plant fittings
• Cost $600k a pod + $250k per pad & hook-ups
• 30 day lead time from order to delivery of plant + 30 days to install
• Factory built and therefore not prone to weather related build delays
• No orders for Pods placed yet!
• Placement of orders is subject to when the iodine demand in place.

[chumbo] 17/6/2014 12:26

Thanks SG. If it's viable for us to install capacity at these price levels while others are falling by the wayside or unable to invest then that says a lot. Also, in the longer term the Chileans will need significantly more than opex level prices to be viable so it looks like there's a fair amount of market share up for grabs. And that's without the effects of the 150 rule.

[superg1] 17/6/2014 10:17

Chumbo

Neuve Victoria is in the Pozo Almonte area.

SQM have rights to 570 litre per second, in 2013 they produced 6,100 mt there.

Taking out El Toco (closed 1500mt)

In 2011 Neuve Victoria was 5,100 mt, but they re-introduced the Iris plant at Neuve Victoria, that also closed late 2013.

So it would seem Iris may have been around the 1000mt mark.

So all they left NV and Pedro. Pedro has only upped by 165 mt since 2011, so that probably just down to normal year to year variations.

The total of the 2 gives about 8,250 mt, 60% of it coming from NV.

Note NV is in Pozo Almonte where SQM have the 570 litres rights. Pozo Almonte is where all the Cosayach operations are with no rights. That's why SQM won the water theft case, Cosayach had been nicking water they have the rights too.

Due this month are the water law proposals which include forcing mines using over 150 litres per second to use seawater.

We wait to see what impact that will have.

Sirocco not using seawater, forecast $29 per kg. Algorta using sweater and getting far more production look like they are on $38 per kg costs (H1 2013 figures).

My guess was that seawater adds, $5 to $10 per kg to costs and seems evident in the Sirocco Algorta case. Sirocco using the ALP which is energy hungry then had costs of 35 to 41.

$5 to $10 wipes $40 mill to $80 mill off SQM iodine profits at these prices. They would need $50 plus it seems to stand still, but are not happy with these prices.

SQM need to spend $250 mill on pipelines. They need $665 mill total for the move.

The above is why a couple of us are forecasting $60 to $70 probably come mid 2015 on.

I believe SQM planned ahead, IE any pipeline applications were for the new area. It would have made no sense to build a pipeline to depleting mines they are about to leave.

However it is all on hold, so there is more potential trouble for SQM than the SQM analysts realise. I doubt the analysts are aware of the 150 rule.

Interesting times ahead. The market doesn't get it, I and a few others do.

[superg1] 17/6/2014 09:56

Chumbo

It's a point that keeps coming up hence I went through the figures of produced iodone v sales. That's why I went back to 2010.

2010 El Toco 200mt 2011 1700mt. The overall didn't change much as they closed pampa Blanca in prior years.

The reason for increased production from the El Toco mine was to fill the market gap with the Japan issue. Don't forget prices flew up to $100 per kg on the spot price, buyers would not have been contracted, they would have been Japanese customers buying almost at any price to meet their contracts.

As soon as the price hit near $50 they closed the El Toco mine once more.

This sentence tells us the costs are high at El toco

"In December 2013, mining operations at El Toco were temporarily suspended in an effort to optimize our production facilities with lower production costs."

The mine and plant closed ion Oct and December. In Oct SQM did this

"SQM: restructuring would include laying off 400 workers". They did lay off others, around 700 plus.

In the market crash year there was a big drop in iodine sales, which meant they had a big inventory which was them wiped out through 2011 to 2012. They sold over 3000mt more than they produced in those years

The high costs mine production came on line into prices that saw $75 to $100 per kg.

Why would SQM bring production back online, they only did so because of the crazy prices.

They have a 12.5k mt capacity, so yes they could bring on production, but that extra production looks like it costs more than the current iodine price.

back to the maths. If they cover all the extra need prices wouldn't go up, but it seems it could be a loss making extra for them.

Let's say they added 2000mt.

Picking a figure of 8000mt now at $40 per kg, if they let the shortage bite and it rose to $10 per kg. That would be $80 mill extra profit with no capex or effort whatsoever.

If they added 2000mt, and it stayed at $40, they would add $80m revenue, but would be break even or worse it seems, judging on previous actions. They would have to find employees, and restart mines. Start up costs would bite too.

Adding 2000mt would probably send profits down due to the higher cost mines.

The logical thing to do is let prices rise, not to try and fill the market gap, they would make far much more money that way.

If the price went to $60 to $70 plus, then it may start to make sense, just like it did when the price took off.

That is why the mines came back as the price went so high. At these prices it's not viable, at $50 it's not viable.

At the AGM Lance suggested their costs at those closed mines were $52 per kg.

Don't forget SQM want out of the area due to depleting resources. They planned a $665 mill move this year, to a new area.

That was out on hold, and in fact the only spends this year are maintenance only.

For the move when it does happen, they state phase 1 would take around 21 months.

The rumour was that SQM did not want prices below $45-$50 or mines would close. It's all in posts. The price was hit and they closed the mines.

Production increases to meet any potential shortage over the next year are not viable to them unless the price is much higher.

Any previous plans they had to expand and boasts of 12 months ago, have all been shelved. They have fired over 700 staff, they have closed high costs mines.

So NO, whichever way you look at it SQM would lose money by trying to fill the gap.

They could choose to take a hit and keep prices low, to force others mines to close, but if they were going to do that, dropping production, firing staff and losing customers was not the thing to do.

So logically, to me, they are allowing a shortage to develop and behind the scenes have attacked Cosayach on water use and won. That was a far cheaper way to get their revenues up by reducing Chile production to get the price up.

In short it is not financially viable for SQM to add production at these prices, they need the prices to be much higher, they have fired the extra staff they had for the higher production.



It's easy for the market, Analysts and indmin to say

'Hey SQM will simply up their production'

They haven't been through SQM reports like we have, the details are not in the year end financial reports they look at, they are in the F 20 forms, which give much more detail, those come out long after the analysts get bored of reading the financial results. Hence they remain clueless to what is going on.