SMALL CAP IDEAS: Iodine maker Iofina pushes forward with enlargement plans

SMALL CAP IDEAS: Iodine maker Iofina pushes forward with enlargement plans to double manufacturing

Straitened financial instances can lead to enlargement being placed on the again burner, however AIM-listed Iofina is one small-cap decided to push forward with its plans.

Already the second-largest producer of iodine in North America, Iofina just lately introduced a technique to double manufacturing over the following few years.

Iodine is a uncommon component however important for people, with its makes use of various from antiseptic and prescribed drugs to x-ray distinction media and different industrial means.

Iodine produced by Iofina is utilized in salt in addition to for antiseptic and prescribed drugs, x-ray distinction media and different industrial means

Iofina has developed a know-how, IOsorb, that permits the chemical to be extracted from brine introduced up as by-product at onshore oil wells.

5 vegetation are in operation already and floor is anticipated to be damaged shortly on its subsequent Oklahoma-based IOsorb iodine plant, dubbed IO#9.

‘What this may do for Iofina, is it can enable us to start out executing our development technique to have the ability to put new iodine vegetation in a brand new core space in Oklahoma and within the subsequent three to 5 years, double our iodine manufacturing,’ mentioned chief government Tom Becker.

Higher nonetheless, the plant ought to be capable to pay for itself shortly.

‘We do a superb job of sourcing the place massive quantities of brine water with good iodine concentrations are,’ he added and as a ‘low-cost producer,’ the brand new plant ought to be producing a revenue inside two years of operation.

Construct instances are roughly six months and manufacturing is anticipated to begin within the second quarter of 2023.

On the earnings aspect, Iofina’s half-year leads to September confirmed the progress it has made just lately.

Underlying earnings have been a file for the corporate, underscoring a 6 per cent improve to $3.7million.

The money place is now considerably stronger and on the half-year level was $4.7million, chopping its internet debt place to $2.8million from $7.2million.

Uncooked iodine gross sales volumes have been decrease because the inventory build-up attributable to the pandemic ironed itself out however hovering demand and costs helped offset this.

Gross revenue elevated by 5 per cent to $5.7million as a consequence of an 89 per cent improve in worth per kilo of iodine and a 36 per cent improve in gross sales of by-product merchandise.

Trying forward, Iofina is decided to maintain constructing. Becker’s ambition is to extend the corporate’s portfolio from 5 to seven vegetation within the subsequent 12 to 18 months.

Analysts at dealer finnCap have been paying explicit consideration to Iofina’s building pipeline.

‘The beginning gun has been fired on Iofina’s subsequent development part, with new brine provide agreements for its newest iodine plant enlargement (IO#9) concluded, paving the best way for building to start,’ mentioned Jonathan Wright, director of power analysis at finnCap.

‘This will likely be Iofina’s sixth working iodine plant; with an anticipated building time of simply six months and an anticipated capability of 100-150 metric tonnes (MT), it can quickly and materially increase iodine manufacturing and ship a quick payback on funding,’ he added.

finnCap famous that IO#9 can even additional diversify the iodine manufacturing enterprise, which in equity is already working nicely: The most recent manufacturing output of 143MT was consistent with expectations, preserving the corporate on monitor for complete manufacturing steering within the second half of 2022 of 255-275MT.

The dealer’s goal share worth is 33p towards a present market worth of 21.3p.

True publicity to iodine spot costs, which have moved considerably increased as a consequence of more and more tight provide and traditionally low worldwide inventories, could make it one thing of a proxy.

And having shot up roughly 40 per cent this yr, iodine spot costs have possible plateaued, although Iofina expects them to stay regular all through 2023.

However one thing that is not plateauing is Iofina’s ambition and with a doubling in manufacturing output and an enlargement of its speciality chemical substances vary in its sights, it’s one to regulate.

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