Iodine producer Iofina (IOF:AIM) falls 2.7% to 8.6p as house broker finnCap warns it could be in for another ‘difficult year’ in 2017.
A 20p price target, reduced from 24p, implies the shares could more than double but analyst Raymond Greaves admits the stock will ‘tread water until prices start to recover’.
Iodine is a relatively rare element used in several products and industries, including pharmaceuticals, animal feed and disinfectant.
PATENTED TECHNOLOGY
Iofina produces iodine from the waste brine water produced at unconventional oil and gas fields in the US. Its first two plants came onstream in the second half of 2012. The group’s IOsorb technology is patent protected.
A battle for market share between major Chilean producers (the country is the main exporter of the mineral) has depressed iodine prices. Spot prices stood at more than $90 per kilogram in 2011 and are now below $20.
Iofina also recently announced (12 Dec) a hit to production from its brine feedstock being used in fracking and water contamination issues.
NO PRICE RECOVERY
Greaves concludes: ‘We had hoped the iodine price recovery year would start in 2017: we are now assuming this is not the case, and on this basis we expect the business to continue to operate around the EBITDA breakeven level.’
