Iofina tanks as fracking hits profits

23rd Apr 2014 09:22

Shares in Iodine producer Iofina fell by more than half in early trading after it warned that production will be significantly below market expectations as it is temporarily supplied with less brine water due to nearby drilling.The primary operator in Oklahoma who supplies Iofina with brine has been aggressively fracking in the first quarter and now looks to continue at similar levels through to the end of 2014.The reduced brine supply would curtail plant runtime for four of its six plants, IO#3, IO#4, IO#5 and IO#6, with plants IO#1 and IO#2 unaffected and remaining profitable as they continue to produce iodine as planned. The group said it anticipated that production for the current calendar year will be circa 400 metric tonnes (mt) of crystallized iodine, which is a significant increase over 2013 production but materially below current market expectations.House broker Numis had forecast 718 mt for the year and said that, although management were taking appropriate steps to reduce costs, curtailing production at IO#5 in the near term, reducing plant staff, reducing production payments to the operator and putting mobile plant deployment on hold, the reduced production will have a significant effect on projected iodine production and as a consequence "there is a significant risk to Iofina's profitability for 2014".Looking to the long-term Iofina said that while the increased drilling has a significant impact on current brine supply, it is "a positive indication of the operator's view to continue expansion, which should bode well for the longer term prospects of the company". Shares in the company were down 54.7% to 25.25p at 09:30 on Wednesday.OH