One could be accused of being overly sceptical on Iofina if their Balance Sheet wasn't the way it was. The change in my view is to tap a few investors for a few quid. The question is what amount of funding is required, with dilution or not? Historically Iofina have always placed funds well, however the story is getting harder to sell at a premium. As an investor, the question always has to be revenue/potential revenue, so far Iofina haven't delivered on this, despite Iodine being at such a high price they did not achieve much in the way of sales, more so increased inventory. You'll note other producers did not have the same issues with regards to sales.
Time will tell...Atb Fraser
Edited: Change is specific to NOMAD not currently broker, however perhaps there's a change coming there as well!
Edited: Change is specific to NOMAD not currently broker, however perhaps there's a change coming there as well!
Fraser- yes, my concern with IOF has been the lack of outside sales- they appear to use the product in house, which is fine but they will eventually need to develop a pathway into the major iodine users and this isn't apparent at this stage. We all agree that they have potential to be a gamechanging technology in their field, but delivery hasn't been in line with v optimistic targets they have set, targets that in some cases seemed unrealistic at the time. I guess they need to get some of their revised targets met over the next few months before they will get the support of major shareholders for a fundraise. Lets see.
ReplyDeleteCheers. The Leggie
Iofina currently have capacity for 400Mt per annum to go through Iofina Chemical, their derivatives division.
ReplyDeleteOne would think that with new plant plants due online this quarter, by spring they will be producing more Iodine than they can use in house, only then will they begin to sell outside.
The US currently uses 6000MT of Iodine a year, with the majority coming from Chile, but with most Chilean producers cutting back production due to increasing costs, I'm sure US customers would prefer to deal with a US supplier, the path to market for Iofina shouldn't be too difficult once they prove their production capability, but their lies the important bit, they need to prove that first.
All my opinion of course, will be interesting to see how this year pans out. I don't happen to think there will be a fund raising, but time will tell.
Mr Anonymous, It pays to leave a name for consistency. The balance sheet means something has to give. One would hope the sales and/or revenues will improve. Lets see how Numis acts as Joint NOMAD (not broker as I had stated) for the company. Iofina is of a size that doesn't warrant the need for joint NOMAD, save for the courtesy of giving notice to the other; albeit I could be wrong (and willing to be).
ReplyDeleteThe books speak volumes, if April 2013 was their best month, then that accounts for near 1/3 of total revenues, leaving an average for other months of $1.56M less costs. I agree that capacity can increase, but what about sales. Not forgetting the “14 sites are identified” this requires a certain amount of funding and acknowledged as speculation. Having sold, I have no position to declare.
I'll follow the story but its clear there’s a number that believe IOF has further to fall (Currently by their short position). I have great hopes for Iofina but scaled these back, I’ve learnt along the way missed targets and reduced guidance impact on the SP and remember, its AIM. I need clarity to justify valuation, currently I cannot long or short on IOF.
In Iofina's favour they have protected dilution as much as possible and shareholder interests, a credit compared to a lot of AIM companies including the terms of the ‘Convertible Loan’. Just some rudimentary maths for you; If Iofina produced 62,500 Kilos of Iodine (62.5Metric Tonnes (MT) to June 2013. The revenues of $11.56M and inventories of $7,67m, the carry value of stock is either extremely low or the profit achieved per kilo equivalent is low. Take your pick, but one thing is for sure, cash is king and the cash burn will increase as production/plants come online, one assumes sales will increase. Its akin to ramp up for an oilie, I acknowledge that with $16,189,567 cash at end of September, they have monthly costs of just over $½M (Approx) per month based on June results (only including quarterly interest and admin expenses) and excludes ALL plant costs. I haven’t allowed for revenues…something has to give and I hope for holders its an increase in revenues/cashflow.
Ramp up is still ongoing…I don’t envisage Stena Investments being an issue either, it’s a related party transaction and the rate is significantly better than what most would have achieved; however related party transactions have their own risks as we all known. Time will tell with Numis as Nomad on board…I wonder if they’ll take a new role soon from Investec? Numis have their own issues at 18 times earnings, theirs pressure on them to perform, they’ve performed well with good revenues, can this trend continue and rub off on IOFina…
Anon- Like Fraser, I would like to see some evidence of external sales contracts/MOUs with some of the big global users of iodine, as the current evidence of stockpiling may indicate that the big Chilean producers have their main production tied into multi year contracts, which will obviously impact on IOFs expansion plans or at least their warehouse capacity. We have all heard that certain producers have mothballed due to the falling price of iodine, but it would nice to see IOF selling that stock and naming some contracted purchasers. Just my view.
ReplyDeleteCheers. The Leggie
At this moment in time iofina only have 2 large plants i.e IO#2 + IO#3 with IO#1 being the baby in Texas. Before iofina can sell iodine in the open market they need inventory, until further plants are built and producing that will be difficult with just the 3 plants mentioned above. Once IO#4, 5, 6 are up and running its a different story. At present Iofina are supplying IOC, IOC were using around 400mt pa, so Iofina has to supply the 400 mt pa or 33 mt per month to IOC whilst building an inventory.
DeleteAs we move towards the end of Feb and into March 2014, inventory will build as further plants come online. That is when sales will grow, at this moment IOF have already announced that they have sold into the open market so they are producing more than they are letting on. The Gov contract kicks back in so an revenue there that was not reported in the last results.