If one were to view the share price or read the bulletin boards, it seems to be all doom and gloom surrounding Iofina (IOF.L) at the moment. It began as a slow decline in the share price following the operational update on 20th November, accelerated last week on news that the iodine price was softening and became a bloodbath today when news broke that the Montana Department of Natural Resource Conservation (“DNRC”) Water Resources Office has issued a preliminary determination to deny Iofina’s application for a water extraction permit.

On the surface, this looks like a string of bad news and it is easy to see why the share price has reacted negatively, especially with a seemingly large number of private investors running leveraged positions. It is at times like these that I believe solid research combined with a calm mind throws up an excellent investment opportunity.

Let’s take a closer look at those three things the market is perceiving as negative:

  1. The operational update on 20th November told us three things. First, that the build for IO4 and IO5 would not be completed until Q1 2014 (I subsequently gather that both could be completed in January). Second, that the three existing plants had achieved record iodine production (although precise numbers were not given). And finally, it was reiterated that the company were considering the feasibility of locating IO6 near to IO2 based on the surplus brine stream at that site (the subtext here is that IO2 is a very high brine stream site). Out of these three points I personally perceive one to be slightly negative (although a month delay for plant build is well within tolerance for execution risk) and the other two to be positive, albeit masked in a layer of ambiguity.
  2. I think it was last week that the Financial Times ran a story about the iodine price falling below $50 per kg. Interestingly, I have spent some time this week researching the reason for that fall and was planning to write a full article about it today before events took over. Suffice to say, the Chile producers appear to have caused the price decline through their internal competitive actions with it would seem, the aim of taking out some of the producers with higher opex. Rather than being bad news, this rather plays into Iofina’s hands on several fronts.…

Unlock the rest of this article with a 14 day trial

Unlock with Email
Unlock with Google

Already have an account?
Login here