Added Value: The iodine produced by Iofina is in demand as an additive to salt and has many other health uses.
Brazil, the US and the Philippines may have little in common. But they are among dozens of countries that add small amounts of iodine to their salt to prevent citizens from suffering from iodine deficiency.
Iodine deficiency is the biggest cause of brain damage in the world. The mineral is essential for growth and development and is especially important for pregnant women. However, salt is not iodized in the UK. Both children and adults are expected to get their fair share from milk and dairy products, eggs and fish, but not all, and scientists have expressed concern that many people in this country are suffering from moderate shortages.
Iofina is an AIM-listed company based in Colorado that manufactures iodine and converts it into compounds sold worldwide. The shares are 23.25 pence and should rise substantially over the next few years.
The company has improved a way to extract iodine from brine left over from onshore oil and gas production. Iofina then turns the mineral into compounds used in industries ranging from health care to nutrition and technology.
Incorporation into salt is essential in many parts of the world, but iodine’s biggest use is as a component of special compounds known as contrast agents, which make MRIs clearer. Contrast agents help doctors detect problems from tumors to heart failure, and their use is growing as populations age and healthcare systems become more complex.
Iodine compounds are also found in some statins. They are added to animal feed, used in paint to keep them moldy, used in LCD screens, and play a role in many industrial and chemical processes.
Demand is strong across the board, supply is tight, and iodine prices are rising, reaching an all-time high of $70 (£60) a kilo in recent weeks from a low of less than $18 a few years ago. Such lows are unlikely to be repeated anytime soon, but CEO Tom Becker has been hard at work making Iofina one of the world’s lowest cost producers, which would make the group more resilient if prices fall from current levels.
About two-thirds of the world’s iodine comes from the Atacama Desert in Chile. There, ore is mined from underground, broken into small pieces using explosives, transported to special facilities, and converted into iodine through a chemical process known as leaching.
Iofina’s brine approach is more environmentally friendly and less expensive. The process was developed for areas where waste brine from oil and gas companies contains large amounts of iodine. Oklahoma is one such location, and Becker expects to begin work on a sixth plant later this year, with another coming soon after. By planning new plants, Becker hopes to double annual production to 1,000 tons over the next three to five years.
All the iodine produced by Iofina is used by the chemical division, converted into compounds and sold to enterprises in various industries.
The Group purchases small quantities of iodine from other manufacturers, and also manufactures compounds from fluorine and chlorine. They have similar properties to iodine and mean that Iofina does not depend on a single chemical element for all of its sales.
The firm also spends time developing new ways to use its raw materials so it can expand into new markets, such as the fast-growing semiconductor industry that uses fluoromethane in its manufacturing process.
Iofina had a troubled past. The group expanded too quickly a decade ago when the Fukushima nuclear disaster in Japan disrupted the iodine market and sent prices skyrocketing.
After a few years, they fell apart, leaving Iofina with heavy debts and unprofitable factories. Today, however, the company is profitable with a strong balance sheet. Becker is ambitious but also cautious, making sure the firm doesn’t repeat past mistakes.
Interim data released this week should be encouraging, with brokers expecting a 5% increase in annual turnover to $41 million and a 26% increase in profits to $6.2 million. Growth is projected to be even stronger in 2023, with a turnover of $46 million and a profit of nearly $8 million.
It’s also encouraging that former star fund manager Richard Sneller is a big fan of Iofina. With a personal stake of nearly 18 percent accumulated over the past two years, he is now the group’s largest shareholder.
Midas’ verdict: Iodine is an essential mineral and demand for it is growing in a wide variety of industries. Iofina not only manufactures cheap products, but also turns iodine and other chemicals into much-needed compounds around the world. Shares at 23.25p are heavily undervalued. Buy.
Traded on: GOAL Ticker: IOF Contact: iofina.com or 001 859 356 8000
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