The stock market has a habit of making mugs out of all of us at some point or other and today I have been wiping copious amounts of egg from my face. Having written only last week that I felt Iofina’s prospects were significantly de-risked from a year ago, they today provided an end-of-year update that has reset expectations for 2014 and the share price reaction has been negative (down 27%).
So what does the future hold for Iofina (IOF.L) now that expectations have been reset?
It would seem that each large IOsorb plant (excluding IO1) can be expected to produce an average of around 200mt of iodine per annum once optimised. Three plants are currently producing, a further three are planned to complete during the first quarter of 2014 and a further three during the remainder of the year. They also plan to introduce mobile IOsorb units during 2014. This should take Iofina’s total annualised production to around 2000mt. Current production is being sold via their in-house chemicals division (IOC) and as production increases in 2014, more iodine will be sold on the open market as a raw resource. This includes a decision to push ahead and build a prill tower that is scheduled to be completed in the second half of 2014.
In terms of the global iodine market, Iofina are clearly an emerging player. Their opex appears to be the lowest in the world at $10-20 per kg and their capex for each new plant offers a compelling return-on-investment. House broker Investec estimate 2014 revenues at $77.5m rising to $117.8m in 2015 and have reiterated their buy rating with a target price of 230p. If Iofina deliver on those numbers they will turn out to have been a decent growth play.
With the share price now reset to where it started this year and expectations reset around average plant production and rapidity of plant build, each milestone that is achieved should provide upward momentum throughout the year.
There are other potentially positive factors that could come into play throughout the year. I am loathed to mention these for fear of accumulating more egg on my face, so readers should regard these points as possibilities to look out for throughout the year ahead rather than likely events.
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