Full steam ahead at Iofina

Iofina has now successfully built and commissioned two iodine extraction plants, one each in Texas and Oklahoma, although the company did not meet production guidance for 2012 due to delays in completing construction of both plants. Chairman Chris Fay did not disclose production or cost figures for 2012 or first-quarter 2013, but noted the plants are currently yielding about 800 to 900 kilograms of iodine a day combined, which equates to around 300 tonnes a year. Broker Investec Securities has maintained its 2013 production estimate of circa 400 tonnes.

Importantly, Iofina's roll-out of further plants is progressing well. Construction of the third and fourth plants in Oklahoma should begin shortly, with the fifth and sixth to follow later this year.

Yet significant risks remain. Iodine prices are presently stable, but could fall if more production comes onstream; patents might not be granted; technical issues with Iofina's technology could develop over time; operating margins may not be as good as initially forecast; and permitting delays could stall the company's plans to deliver water to the fracking industry in Montana.

Investec's conservative sum-of-the-parts valuation of 230p a share assumes Iofina builds 12 plants by 2016 (the broker ascribes no value to the proposed water operation at this time).