Good Morning,
If Iofina's (IOF) water project is such a "non-core asset", why is the share price reacting the
way it is? When investors learn to read accounts there's a difference between
positive EBITDA and being cashflow positive. The company admittedly has a
decent patent, the problem is there's an unrealistic belief in the profits (and
or cashflow) that can be made in the current Iodine market.
SQM gave a good indication of their intention at the last conference call on the 20th May 2015. Those thinking it’s
despicable to short a stock that has now removed the potential revenue
prospects for the foreseeable future, it’s wise to consider the facts. There's
a global strategy in the absence of higher prices to increase volume (akin to
the iron ore story).
When considering SQM's (Sociedad Química y Minera) (+
Chile's) approach including those of the Japanese, China, Turkmenistan,
Azerbaijan, Russian and Indonesia (we'll exclude America's production) all
aiming to produce the same if not more, the price isn't likely to recover any
time soon. With Iodine demand set to increase circa 3.5% globally, most
producers are aiming for 5+% production growth
Over to SQM to give IOF the realities of their cashflow
situation (more important than EBITDA in this case). From SQM's conference call
statement, Revenue reported for the first quarter was in line with
expectations given our current strategy; lower average prices have helped
stimulate demand, and this, along with a more aggressive volume strategy have
aided in higher sales volumes during the first quarter. Prices, which were down
30% compared to the first quarter of last year, were anticipated, and are also
in line with this strategy. Going forward, we expect iodine volumes in 2015 to
exceed volumes seen during 2014 by around 5%.
With Beowulf (BEM) test work delivering 'super' high grade concentrate over 71 per cent iron.
Normally one would get excited about such results had it been anywhere nearer
production and without a suspicion of tin rattling. EMC: Beowulf 1st June 15. With 68% prices varying, the
average quote this morning ranged between $70-100/t. It’s certainly going to
make Kallak more enticing as the costs per tonne mean anything below $90/t due
to location and wage costs is unlikely to provide any cashflow. It'll add value
to Kallak, but wise to consider how far away such a project is!
Victoria Oil & Gas (VOG) gave a decent new thermal gas connections and production update. In the
past, VOG have set some targets that in hindsight may have been unrealistic.
Their target of "10.5mmscf/d target for the calendar year 2015,"
was conversely as poor for being on the low side. Today Kevin Foo, has implied
they're going to exceed the 10.5mmscf a day." This is on the back of
gaining 3 new c customers, Dangote, New Foods and Sic Cacaos.
VOG are now focussing on additional customers in the
Bonaberi industrial area across the Wouri River. VOG's monthly average gas
consumption is triple the February average and they expect to exceed the
10.5mmscf/d target for the calendar year 2015. As always never rate the
management here, things are changing positively but the management is as much a
risk as the geopolitical issues. Target price revised towards the £1.15, having
derisk it’s a long-term hold.
As often is the case, utility companies suffer with leaks
and supply constraints, it would appear if the "gossip" is correct
that VOG's biggest leak appears to be a contractor. If so, the near 18 scuffs a day peak recently achieved
but not in the public domain will not have happened. If parties, whether investors/speculators or
gamblers wish to rely on this information, they would be wise to consider the
legalities of such info.
Finally, Foxton's (FOXT) is being punished this morning with
a nervous silence from the company. Foxton's appear to have been charging
"some" customers a commission on top of work completed. This in addition
to the alleged fee/commission that they charge the supplier/contractor whom
resolves the issue. I thought landlords knew about these practices. Having
expanded into managing the neighbouring properties of rentals near mine
recently, some are pleasantly surprised
Irrespective of the legal bill involved in this, the damage
is setting in on the Foxton's letting department practices. Anyone whom owns UK
property and utilises a letting agent is simply throwing money away, save for a
few exception i.e. living abroad or more than 250 miles away from the property.
Credit references and employer checks are between £50-100, advertising for
tenants circa £40 a void (empty property) and/or even getting on Zoopla and
Rightmove + Prime Location for around £60 a property for 3 month periods. Far
outweighing the costs associated with an agent. They merely pick up the phone
and speak to yourself about the issues...money for old rope.
Atb Fraser
Fraser- Hi, recovering from good weekend here.
ReplyDeleteRe IOF- yes, the iofina mkt is in war mode, perhaps you are right re the iron ore comparisons. That's not good for any producers for a few years and SQM have deeper pockets than most so should come out of the other side, but it will be v tough for IOF.
Re VOG- 3 more punters and the numbers look good plus they are taking the right talk. They also bought the plant for $2.6m a couple of weeks ago, which will really help their cashflow too. The mgmt. were dire until a year or so agao, the river crossing appeared to require Moses to implement it but the recent moves have been v positive so perhaps they are up to the task now. Some news re the plant expansion would be welcome but they are locked away for now here.
Cheers. The Leggie