Iofina (LSE:IOF) — 2021 Results & Company Update

0:01 Good afternoon, ladies and gentlemen, and welcome to the IOFINA PLC twenty twenty one Results and Company Update Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions at any time and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all of the questions submitted today and publish responses where it is appropriate to

0:31 do so. These will be available via your investor meet company dashboard, and we will notify you by email when these are ready for your review. Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. I'd now like to hand you over to CEO, Tom Becker, and CFO, Malcolm Lewin. Good afternoon. Great. Thanks. You very much. Yes. I'm Tom Becker. I'm CEO of the group. I've been with IOFINA, actually, with the IOFINA chemical business even before it was acquired by IOFINA in 2003 is when I started. And, when IOFINA acquired the chemicals business in 2009,

1:11 I moved into the business side of the operations and have been CEO of the group since 2014. I'm a chemist by background, and I'll let, I'll throw it over to our CFO, Malcolm Lewin, to introduce himself real quick, and then we'll get started. Okay. Yeah. So I'm Malcolm Lewin. I've been CFO of IOFINA for a little over six years now. I'm UK based, just outside Oxford to be precise.

1:34 Prior to my role with IOFINA, the preceding fifteen years, I had CFO and FD roles with various companies, some of the main companies. And I originally qualified as a chartered accountant with, Cooper's and Librand as they then were PLC as they now are. Okay. Over to you, Tom. Great. Thanks, Malcolm. I I think the purpose of today's, presentation is hopefully threefold, to give a quick, background of the company to review, where we've been in 2021 and in the past and and look at the results a bit that were just published earlier this month. And I think more importantly, talk about the direction of the company and provide an investment case, in our plans for now and in the future. I also wanted to point out to everyone on the call that this morning, we, announced, the details of our AGM, which will take place in London on the June 22.

2:29 So, if you're interested in if you're a shareholder and interested in attending the AGM, please look at that announcement that was released today. So without further ado, we'll get started here. We do have the general disclaimer slide that, we have on all of our presentations. I will assume that everyone has read this, but if, please look back at this slide if you have any questions with respect to the disclaimer. To get started, IOFINA, we are the second largest item producer in The United States, and we are a specialty chemical company. All of our operations are in The United States with expertise in halogen based chemistry. So we're talking chloro, fluoro, and iodo based chemistries, if you remember back to your lessons in chemistry back in school.

3:17 We basically have two major business lines, the IOFINA chemical unit, which is our specialty chemical unit, which produces halogen based, molecules that are that are put into a number of different applications, including pharmaceuticals and biocides and semiconductors. And we'll get into those a little bit later in the presentation. But, our our biggest and largest key raw ingredient for the chemicals business is iodine. And, what I think makes IOFINA a, important and unique company is that we are backward integrated into the production of our key raw material iodine, and that's done through the IOFINA resources side of the business, which developed and has developed technology to produce iodine from brinewaters that are produced from oil and gas industry in The United States. We currently have five operating iodine production plants in Oklahoma, and we believe we're one of the most efficient producers of iodine in the world.

4:18 And and, financially, we've had our fourth consecutive record year of revenue and EBITDA. We're very excited about that. And we've, accomplished a lot, I think, over the last few years to significantly, reduce the debt situation of the of the company and continually improve our balance sheet. And that sets us up, I think, really well for the growth opportunities and the investments, reinvestment in the company that we plan here moving forward. We're in a unique market, but it's a growing market. Halogen specialty chemicals market is growing favorably both in demand for our products in particular and just generally in the in the overall global space. And sales prices for, iodine and derivatives that we make of iodine and chlorobase compounds have risen here recently.

5:06 We are committed as a company to grow the business but evaluate things in a prudent manner so that we are being fiscally responsible in the growth aspirations of the business. And we're also committed to diversifying, the growth of the business, not only through the new production of iodine, but through, new r and d projects of chlorofluoroiodo based chemicals and even looking outside of, organic growth and possibly, add ons to the business.

5:37 Wanted to briefly talk about the, you know, what kinda what makes IOFINA tick? What what are our values? What do our business how do we view business and and partnerships? And as a specialty chemical company or a chemical producer, sometimes you get a little bit of a bad rap because you're dealing with chemicals. And as you can imagine, you know, handling hazardous chemicals is something we don't take lightly. So safety, for sure, is our number one priority as a company, not only safety for our employees, but also our communities that we serve. We, consistently are evaluating our current processes and how we can improve the safety measures, whether that's through, personal protective equipment, whether that's through increased engineering controls.

6:24 And we also are communicating all the time with the communities that we are involved with, making sure they understand what we do and how we can better work with them to make sure our operations, don't affect the communities we serve. As a company and management team, we are focused on the growth of the organization. We're very proud of the growth that we've exhibited over the last number of years, and we wanna continue to do that both at IOFINA Chemical and at IOFINA Resources, which we we plan to continue to expand on the organic growth that we've exhibited over the last few years. And this is not only with the our known halogen based chemistries to create new products and new product lines, but expand current product lines within the IOFINA chemical group, but it also create additional item producing capabilities on our IOFINA resource side.

7:22 We are always looking at our r and d, creating new molecules, reinvesting in r and d so that we can grow within and create new value added products for the organization. As a as a chemical company, I think we have a unique environmental focus too and a story to be able to tell in both the chemical and resources side.

7:43 Iodine is the most, common way for iodine to be produced is through, the mining of ore in Chile, a caliche in Chile that has iodates in it that's blown up in the Atacama Desert, and it's a hard mining operation. We create our iodine in a much different way. We're using a resource that is already being produced, and we extract our iodine from a waste stream that if IOFINA wasn't there, it would never be utilized. This is more friendly than our competitors in Chile and even more friendly from those competitors that drill their own brine wells that have an environmental impact that aren't already being produced in the as a waste product in the oil and gas industry.

8:28 Another thing from an environmental standpoint, I think, is not very well known that I want to tell our audience here and will be telling audiences in the future is that there's also a focus of IOFINA Chemical both historically and currently through minimization of use of, organic solvents. Almost all of our technologies and reaction chemistries that we do at IOFINA Chemical or aqueous based or water based chemistries. And this, minimizes the amount of organic solvents that are used in processes. And and, in fact, the organics that we do use in processes are generally a lot more environmentally friendly than others. For example, we don't use any chlorine, chloro based organic solvents in the chemistries that we do at IOFINA PLC. We will continue to look for opportunities when we expand our chemistries to do that to do so in an environmentally friendly way.

9:22 Just as far as how we deal with our culture and our customers and our business relationships, it's paramount to us to meet our customers' needs, to work with our customers both on the current products that we supply to them, the quality and timeliness of, deliveries to them, but also work with them and establish relationships with them. So when they're the new new types of products, they come to IOFINA first for their needs. And to that, when we look at our business relationships, not only with our customers, but potentially with our brine supply, partners, we look for relationships that are both mutually beneficial to IOFINA and the other group we're working with. So we look at long term situations where both companies are going to benefit. That way, these, relationships can grow over time and not looking for any kind of short term gain that, could potentially reduce long term relationships.

10:17 And, I think the other core tenants that I wanna touch on quickly are continuing improvement as an organization. We don't sit on our hands and just run as we've always run. We're always looking for ways to improve, not only from safety but efficiencies and potentially new ways to create products. But we, are continually continuously looking to improve our organization. And, the tenants that myself and our management team definitely act upon are when we when we act and deal with our company, our stakeholders, our employees, our partners. We do so with we do so with integrity, with honesty in our communications, and we want to, prudently act in in in in in growth for not only our our our employees and our and our company, but also with the shareholders that we serve, as an organization.

11:18 So I wanna briefly talk about our operations. We'll get into operations and, you know, in in in 2021. All of our operations are in The United States. I'm currently sitting at our IOFINA chemical site, which is in Northern Kentucky, just South of Cincinnati, Ohio. And that's where all the the iodine and that's produced by IOFINA Resources and all the iodine and chloro and fluorobase compounds are created and then distributed and sold globally. The other, five op operations, manufacturing plants are in Western Oklahoma, and you can see some depictions of these small depictions of these, plants that we have in Western Oklahoma. They are there because that's where the oil and gas field is is is, expanding.

12:09 Large volumes of brine are being produced, and our geological team has identified, where good concentrations of iodide are in these large volumes of water. And that's why we put our plants where we do. And we also have a field office in, in Denver, which supports the, operations in Western Oklahoma. So a quick summary of some of the accomplishments that we saw in 2021, and we'll get into this a little bit more in detail. But the some of the things that I particularly look at in our management and board of directors really look at is we're very proud of the success over the last number of years as far as revenue and profitability growth. Our revenues last year increased 31% to $39,000,000.

12:57 Our EBITDA increased 47% up to just shy of $7,000,000. And you can see the trend line that we've had over the last number of years where we've had four consecutive years of record revenue and growth. I will make some comments. In 2020 when COVID hit, in the second half of the year especially, there was a slowdown in the demand, especially for our iodine based products, not so much for our fluorobase products, but for our iodine based products that if it wasn't for that slowdown, 2020 would have probably been an even better year, caused us to carry some inventories of our iodine into 2021 and gave us a bit of a benefit in 2021 where markets recovered very rapidly, and we were able to sell off a lot of that inventory that we carried at the end of twenty twenty.

13:47 The other thing I'll point out on this slide is, I think, important is our net debt is now down to $3,000,000 at the end of last year. We worked very hard to improve our balance sheet. And in 2020, had a debt refinancing with a a banking institution, which is very, it's been a very good win, I think, for IOFINA. And now we as being able to reduce our debt and increase our profitability, we have the, I think, the ability now to, move this company forward more than it ever, had the capabilities of doing in the past.

14:24 And just briefly here to also highlight some of the, accomplishments for 2021. What did we actually do in 2021? We invested a lot in our chemicals business, increasing a a key product line, a fluorobased compound that's used in the semiconductor industry to improve this particular process and allow for continuing improvement of this process even into 2022 here and expansion of that process and some other replacement of equipment in order to meet the meet the needs of our IOFINA chemical plant. We've commenced we identified in the market that we wanted to expand our iodine production. We've commenced site negotiation processes for I o nine.

15:16 And, frankly, we we are disappointed that we are not under construction for I o nine yet. There's been a lot of circumstances with that, but we are we believe we're very close to the finish line to to finish the I o nine negotiations and get that started here shortly. We are able to produce 518 metric tons of our crystalline iodine. That wasn't quite as much as we did the year before, and there were a couple of factors that affected that. One is a couple of weeks in February was a deep freeze in our areas of production and which caused oil and gas wells to shut in for a number of weeks. That being coupled with oil and gas companies not as aggressive in their reinvestment into their oil and gas fields. When COVID hit and oil prices went down to zero, oil and gas companies, at least the partners that we deal with and in general in the industry, have taken the stance of of keeping cash, paying more dividends to shareholders, and reinvesting less in their fields.

16:23 As oil and gas prices have dramatically changed over the last six months, We are seeing more reinvestment back into the fields where our iodine or excuse me, where our brine supply comes through our plants. So we're very encouraged that our oil and gas partners are now reinvested into those fields. We continue to, emphasize the diversification of our products in 2021. We had a little over 30,000,000 in sales of iodine and iodine derivatives and about $8,600,000 in sales for our non iodine based products. This is a little bit down year on year for the chemistries, but we saw, I think, an uptake at the end of twenty twenty for orders of compounds.

17:10 A little bit of a lull in 2021, and that's rebounded nicely here moving into early twenty twenty two. And at this point in time, I'll I'm gonna throw it back over to Malcolm who can, review the financial financials in 2021 in a little bit more detail. Malcolm, over to you. Okay. So you've heard some of the points that are gonna come out of this already from Tom, but working through line by line, 2021 sales profit and loss account were up 31% overall on 2020, up from £29,700,000 to £39,000,000 And that breaks down into a 62% increase in iodine sales, which includes both raw iodine and derivative compound products from 18,500,000 to £30,500,000 and a 23% decrease in non iodine sales from £11,200,000 to £8,600,000 The substantial increase in iodine based sales was mainly driven by a 53% volume increase in the amount of iodine used to produce sales from 479 metric tons in 2020 to 732 metric tons in 2021.

18:21 2020 figure of four seventy nine tons was somewhat depressed by, as Tom's already mentioned, a COVID related drop off in demand that resulted in higher than normal iodine inventories at the end of two thousand twenty. It's bounced back in demand in 2021 that's reflected in the 732 metric tons of iodine sold last year. Within total iodine sales, the ratio of sales of derivative compound products to raw iodine sales moved in favor of derivatives, which used 321 metric tons of iodine in 2021, 44% of the total compared to a 155 tons in 2020 when it was 32% of the total. Whereas raw iodine accounted for 411 metric tons 2021 compared to 324 metric tons in 2020.

19:13 Prices achieved for raw iodine averaged $36.03 per kilogram in 2021 compared to $34.84 in 2020, an increase of 3% and therefore not a major factor in the increase in sales. 2022, the pricing landscape has changed significantly upwards with spot iodine prices currently, excuse me, above $60. Non iodine sales have been particularly strong in 2020 at 11,200,000, but dropped back by 23% to 8 600,000 in '21. As someone's already referred, I think, it seems one key product have been somewhat overstocked by a customer in 2020 based on COVID concerns, and there was a downwards correction in ordering in 2021.

20:01 Gross profit percentage margins over cost of materials for '21 was similar to 2020 across product categories. Cost of operating the IOFINA chemical plant were at the same level as for 2020. There's a 13% increase in average production cost per kilogram at IOFINA resources, reflecting similar operating costs to 2,020 applied to a 15% lower production output, which Tom's already referred. The net consolidated result was a gross profit of £10,700,000 for 2021, representing 27% of sales compared to a gross profit of £8,400,000 for 2020, representing 28% of sales, an increase of 2,300,000.

20:48 After deducting 2021 SGA selling, general, and administrative overheads of 3,800,000, virtually unchanged from the 2020 number of 3,700,000, 2021 EBITDA came in at 6,900,000, 47% higher than the $4,700,000 for 2020. Depreciation and amortization of 1,700,000, 1.8 for 2020, are then deducted and arriving at the 2021 operating profit figure of 5,200,000, 78% higher than the 2020 figure of 2.9. Moving on down the p and l over two exceptional items. The first is a $1,100,000 credit for US government loans waived.

21:35 This was a covered subsidy under a scheme known as PPP, Paychecks Protection Program. The main position for forgiveness of these loans was the maintenance of payrolls at pre COVID levels. IOFINA met the criteria, and repayment was officially waived early in 2021. The second item is the 100% impairment of the 2019 investment of naught $900,000 in the hemp seed production project. I know Tom is going to say a bit more about this later, but the the project has not provided any of the returns forecast on the basis of market conditions at the time of the investment. COVID was a significant factor, and in view of uncertainty about any future income, the investment is being fully written off.

22:22 Finance costs were greatly reduced in 2021 with interest of naught 400,000 compared to 1,100,000 for 2020, a saving of naught 700,000. The reduction reflects a debt re refinancing and restructuring finalized in September 2020 with a new banking partner. There's also a one off charge of $500,000 for loan arrangement fees in 2020. Profit before tax improved by 3,800,000 from 1,300,000 to 5,100,000. The improvement mainly reflects much stronger trading driven by increased demand for iodine together with a step change reduction in borrowing costs resulting from the September 2020 refinancing. Finally, for the p and l, the deferred tax credit of 4,100,000, unusual item, reflects the estimated future value of tax will be saved by set off against profits of $19,400,000 of US federal tax losses accumulated over previous years.

23:26 These losses were previously recorded in the accounts by way of a note only on the basis that the timing of future recovery was uncertain. In light of ongoing utilization of these losses at a higher level, the value of the losses has now been recorded as an asset on the balance sheet in accordance with international accounting standards with resulting credit to profit and loss account. Earnings per share is shown as 4.8¢ through the inclusion of the deferred tax, $4,100,000 nonoperating item. If that is excluded, EPS becomes 2.7¢ versus naught 0.7¢ for 2020. So, Tom, if we then turn to the balance sheet. Okay. As regards fixed assets, there was CapEx of $1,500,000, mainly on new projects, process improvements, and replacements at the IOFINA chemical plant.

24:19 After deduction of 2021 depreciation, there was little change in the balance sheet value of property, plant and equipment. The deferred tax asset of 4,100,000 has just been discussed and will be amortized to the profit and loss account in future periods in line with the tax savings and utilization of the related tax losses. Inventories were significantly $3,460,000 higher, reflecting more normal levels after the demand slowdown during 2020. Bank debt was reduced from four point by so excuse me. By 4,100,000 from 12,400,000 to 8,200,000 through $1,400,000 scheduled repayments of the bank term loan and

25:06 the group electing to pay down the $2,700,000 revolving line of credit balance to nil. That facility remains in place for future drawdowns if required. Net debt, bank debt less cash came down to 3,000,000 from 8,900,000 at the end of twenty twenty, a reduction of 5,900,000. The generation of that cash is shown on the next slide to which we will now go. Okay. The cash flow numbers are straightforward. EBITDA profit of $6,900,000 is most of the story. Working capital adjustments were $900,000 positive, notably due to the reduction in inventories already mentioned. After CapEx of $1,500,000 and interest paid of naught 400,000, both already discussed, net cash generation was 5,900,000, the effect of which was to reduce net debt from 8.9 to 3 point naught million.

26:04 And that concludes this review of the financial numbers. Great. Thanks, Malcolm. We'll move on to the next section of the presentation, which goes over the the market, our IOFINA chemicals specialty chemicals unit, and then where we we see the outlook of the company here moving forward. So with respect to the markets and the and the things that we're that we do our business in, current iDEN market fundamentals are favorable. Item spot prices are generally well over $60 a kilo now. And while contract prices are slightly lower than spot prices, item prices are significantly up over the last nine months. And it's been a factor of very much a increase in demand in in in in markets where iodine is used, and that's been globally, but especially in Asia. And even recently with the lockdowns in Shanghai, in China, the Asian market in India, China, and Far East are are very strong with respect to demand for iodine and iodine based products.

27:14 In fact, prices are even a little bit higher in Asia than they are in the rest of the world. It's driven by a lot of human health care applications, X-ray contrast media, and accept antiseptic usages, pharma usages. These are all pretty strong, and we anticipate these markets to remain strong, especially in Asia as, the middle class continues to rise, that opportunities for improved health care, become, more available to, more people. These iodine applications, will likely rise here in the future. At IOFINA Chemical, we've seen strong sales of our iodine derivatives in 2022, especially into the pharma industrial catalysis and biocidal applications.

28:02 And even these noniodine based products, which we've already touched on earlier, have seen a nice recovery into, late, first quarter of twenty twenty two and into the second quarter, especially with the semiconductor application usages of a fluorine based product. Just to get into our IOFINA chemical specialty chemical side a bit further because I think, you know, as an organization, we talk a lot about our iodine production, but I think the IOFINA chemical unit, which takes iodine, adds extra value to the iodine that we use and distributes these products around the world, is oftentimes not emphasized enough as part of the IOFINA organization. And it's an org IOFINA Chemical organization is a it's an older company. It's it was started in 1983.

28:54 It has global sales. It has a sales team that

28:58 is the hub for IOFINA sales. All the iodine, all the iodine derivatives, all the chloro derivatives, all the fluoro derivatives all go through IOFINA chemical. And it produces a range of products with a diverse range of applications, and I think that's important as a tenant for IOFINA's business plan. We wanna continue to diversify what we offer, the number of products, and the number of applications that it goes into because there are oftentimes when there's growth in areas of, applications, but there's also sometimes wherein there's a con where applications contract a bit. So if we continue to diversify the number of applications and especially focus on those where we believe there's growth in the future, it will be better for IOFINA as a whole.

29:45 These IOFINA these derivative products that take the iodine from IOFINA resources add value to it. So we not only get the margin from the difference in our production cost to the sales price of iodine, but the add on margin that you get from, the derivative prices that you're able to achieve once you create a new compound. As we mentioned, we not only create iodine based compounds, we make make chloro and fluorobase compounds, which contributes to our sales and diversification. And we're very focused on the r and d efforts here. We're currently investing in our lab situation at IOFINA Chemical across the parking lot from where I am today to expand the the capabilities to create new products, to increase our analytical capabilities, and to expand our current, product lines.

30:37 And just to give you a feel for,

30:40 the end markets that iodine is used and where IOFINA's iodine and iodine chemical products go into, IOFINA Resources iodine is moved into almost all applications around the world. The pie chart that's shown on the left of this particular slide indicates the general fields of where iodine is used globally. And frankly, with the exception of X-ray contrast media, IOFINA Resources iodine are sold into all the other pieces of the chart, whether it's into pharmaceuticals, LCD screens, or or to manufacturers that produce these end products. As far as IOFINA chemicals pieces of the pie, they're shown, where the IOFINA chemicals symbol is next to the pie chart. So we focus on, areas of and produce compounds that support pharmaceutical manufacturing, industrial catalysis, biocides, and other applications. So to give you a few examples, we create biocides that go into paints and coating applications.

31:48 It prevents mold and mildew in paints, not only in the can, but on the wall. It's also used as a preservative in cosmetics and machine fluids. It's used in we we create compounds that are used in pharmaceutical applications as an input into a cholesterol based drug. Simvastatin uses a iodine based compound that's produced at IOFINA Chemical. So, we try to create unique iodine based compounds that go into multiple different applications and grow with our customers and find new applications for iodine. This is not a a regional kind of aspect. IOFINA sells around the world with about half of our 2021 business from a revenue standpoint in North America and about half going to the rest of the world. And the and the major markets outside of North America we serve, Asia is by far the largest with also some significant sales into Europe and South America and especially Brazil.

32:57 If you've seen presentations from IOFINA and myself before, this is a chart that we continue to update because I think it gives some insight into the iodine market, where iodine prices are, where demand and production is. So the chart attempts with a red line to show production demand for iodine around the world, and the yellow line, shows current, spot prices for iodine and historical prices for iodine. And as you can see, there's continued growth in demand for iodine around the world. Right now, the demand for iodine is outpacing the supply, and that's one of the reasons why we're seeing a significant increase in price here, in the near term.

33:45 IOFINA is keen to increase its iodine out output, Whereas in the rest of the world in 2022, we don't see any real increase in, production growth, from the iodine suppliers. The IOFINA excuse me. The iodine market tends to grow at about a three to 5% output year over year. That would put it anywhere between a thousand to possibly 1,500 metric tons of growth year over year. And we do believe there will be some additional investments in Chile to increase supply, but we believe that the supply of iodine compared to the demand is gonna be very tight while the demand will continue to grow, especially in these human health care applications here moving forward.

34:31 And the historical trend of the iodine price is also showed in the gray line, so it's not unreasonable for iodine prices to be at or where they are today. So when we look at what our future trends of iodine gonna be, are they gonna be at these levels in the future? Well, we don't know that for certain. We do believe they're gonna be at high levels throughout 2022, but it's unreasonable to consider iodine prices well above $50 a kilo, moving forward into future years.

35:03 So where are we going as an organization? What are our goals not only in the near term, but, you know, its growth as an organization? So as a specialty chemical manufacturer, you know, with a a stronger balance sheet, generating cash, established technologies, how do we grow as an organization? We're gonna well, our plans are to continue to grow as an organization organically through our current business model and also look for opportunities similar to where our business model is and potentially add ons for the organization. So how do we go over IOFINA Chemical and its offerings? We're investing in r and d efforts in our laboratory to produce and have the capabilities of supporting existing products and realize new product development.

35:51 We are investing in non iodine and iodine based products at IOFINA Chemical, including a product that, you know, we partnered up with a customer that purchases an iodine based compound. They use it in their process, and most of the iodine is consumed, but not all of it. So we have a partnership with them where we actually take a stream of their output of their process and re isolate the item and then provide them more products. So we have this circular kind of relationship with them. It it's advantageous for both groups, and, it's advantageous for a long term business relationship because we provide not only front end but back end solutions for their, particular needs.

36:41 How do we grow on the IOFINA resource side? We grow on the IOFINA resource sides by creating new investments in iodine production, and we are committed to doing that at IO nine. We are we are in negotiations with I o nine. We've said this for a long period of time, and, unfortunately, we haven't quite reached the end line yet. As we've said recently, I'm very optimistic that we will reach the finish line here shortly for I o nine, get I o nine online and in production for 2022. There's been a number of different, changes, COVID related, personnel related on our partner side that has caused a a bit of delay for these negotiations. And these deals are never done until they're done, but I'm extremely optimistic that we'll get I o nine done and, under construction here in the short term.

37:31 At the same time, we're also looking at opportunities, especially with an improved balance sheet, a iodine market, which is ever expanding, to look at opportunities for I o ten and beyond. So while we're looking at, finalizing I o nine, we're concurrently working on projects for I o ten. We've learned lessons from the past not to move too quickly, but I think, our recent successes at I o seven and I o eight, our, ability, from a financial standpoint to be more sound as an organization, we'd be looking to bring on I o ten more rapidly than we would have in the past, since I've been in charge of the organization. And we're also committed to look at all different types of projects with rapid payback.

38:17 As as I keep alluding to, our our reduction of debt, our partnership with a new financial institution that we we accomplished in 2020 is a major object is a major win for the organization. It allows us more flexibility to, reinvest in the in the company, But we are committed to, financial, frugality to make sure that, any project that we reinvest has rapid payback, that while there's always risks in every project, that we do our due diligence to make sure that these risks are minimized, and that we have the proper debt to EBITDA ratio here moving forward as an organization. With respect to debt, you know, we keep reducing debt, but I think it's healthy as an organization if you have projects that can continue to grow the organization, that a small amount of debt compared to your profitability is is a prudent way to run business moving forward.

39:15 As we continue to look at the outlook of the organization, where are we going? We're committed to growth in all all areas with our improved financial position. Sorry. One second. The specialty chemical market is strong, including the strong recovery in the Iodine market. So we're in a we're in a in in a space where there's a lot of demand. And currently, that demand is outpacing supply and prices are high. That is a benefit to IOFINA, especially as an iodine producer because we are we feel we're one of the lowest cost producers of iodine in the world. We have a stable model that we can produce iodine. And while there are inflationary costs to us and to all the other iodine producers in the world, we are at a production cost well, well below the current market price of iodine. So we gain margin on our iodine from that.

40:14 We will continue to invest in our IOFINA chemical, company, which I've already covered, and invest in our IOFINA resource side through our continual model of producing iosorb plants that take, iodine from produced water of oil and gas companies. We're finalizing this agreement for IO nine. We're concurrently working on, agreements for IO number 10 so that when those are ready to go and we're ready to pull the trigger to produce another iodine plant that those are being able to be accomplished in a timely fashion. And we're looking at other aspects to be able to improve and increase our item production, whether that is through controlling the brine water, potentially drilling brine wells, controlling saltwater disposal wells, looking at, more mobile plants at smaller sites.

41:07 These are all ways that we'll be looking in the future to, continue to grow our item production side of the organization. In the short term, we do expect to produce, 225 to 240 metric tons in the first quarter of twenty twenty two, which we've, set as our goal at the beginning of the, year, and we're on track to meet those internal expectations. So what's the investment case for IOFINA? We believe we have a unique technology in a unique and growing space. We've proven this over the last four years. We have growth plans to continue to build iodine plants, increase the amount of products that we manufacture at IOFINA Chemical in such a way that, we expect in the next few years to be the largest producer of iodine in North America.

42:02 And with this increasing, need for iodine and ion based compounds, our unique technology, our unique way that we can grow, quickly with smaller plants than our competition, all puts us at an advantage to, expanding our operation. As I said, iodine, our non iodine derivatives are commodities in demand. Despite a brief slowdown that we saw in iodine demand due to COVID in 2020, demand has bounced back very strongly. It's reflected not only in, in what we've seen in volumes, but also the prices of iodine and iodine based compounds. We're not some startup. We have proven our technology. We have five plants in operation. We plan to build more iodine based plants, and, we continue to, look for new opportunities to produce iodine and iodine based compounds, specifically with iodine using our geological team and modeling, which is unique in the space.

43:02 So we know where the large volumes of of brine water are that have high concentrations of iodine, and we follow where oil and gas companies are growing. And we'll be continuing to use that model in the future. We have a strong balance sheet, which we've improved significantly over the last few years, record setting revenues and EBITDA, reduction of debt. All these improve our balance sheet to be able to have us reinvest in the company, here moving forward. We continue to wanna diversify our business. We are our our key raw material is iodine. Our key products that we produce are iodine based, but these go into a number of different applications, and we will continue to diversify those applications of products that we offer. And we also offer, other halogen based chemistries as well. We believe this diversification is smart. It's prudent. It allows for ebbs and flows in in how econ of how things run.

44:00 And, you know, who knows what's gonna happen in the economy here over the next two years. While things are all moving forward currently in the Oddin world, there could be, conflicts around the world. There could be inflation based recessionary things that happen in in in the future. And the more we diversify our business and control our cost, the better off we're gonna be. And, lastly, before we get to questions, I I I wanna say that I I think we've built a great management team with a diversified expertise, whether there are chemists, oil and gas operators, geologists, financial experts, experts in debt and m and a. We have all those on our on our team, and I think that gives us perspective into not only operating our company efficiently and doing well, but also look for growth opportunities in the future. And I wanna just say before we get to question and answer, I wanna thank our, our audience today, and I wanna thank our investors for, IOFINA.

45:08 I think it's a unique, time for the organization, and, we look forward to growing the organization here over the next few years to be the largest item producer in North America. And for that, I will now throw it back to start our question and answer period. Tom, that's great. And Malcolm as well, thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the right hand corner of your screen. But just while the company take a few moments to review those questions submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Tom, Malcolm, we did receive a number of pre submitted questions ahead of today's event as well as, as you can see, number of questions that have been submitted throughout today's presentation.

46:00 Firstly, can I thank all the investors for submitting their questions? And, Tom, Malcolm, if I could just hand back to you to read out those questions and address them where it's appropriate to do so, and then I'll pick up from you at the end. Thank you. Yeah. Thanks for doing that. We have looked over the presubmitted questions. We'll we'll look briefly at these questions that were submitted today, and I'll apologize if we don't get to some or all of the questions that are submitted today in the time that we have. But we did look at the and if we don't get to those questions today, as as what we said at the beginning of the presentation, we'll attempt to, answer those questions in writing on the IMC platform, if it's appropriate to do so. There are a number of questions that were submitted, before the presentation. What we've done is we grouped these questions into a number of different categories so they can be answered, as a whole, And, Malcolm and I will go through those now. So, there's two areas of questions that are currently really, not part of our core business that the company is planning here in the future, and those are, questions related to Atlantis and IOFINA EX. And I'll I'll just start with those real quick.

47:09 There were a couple questions with related to our former Atlantis project in Montana and whether we still held assets and leases and whether the company intended to, continue any kind of business there. For those investors that aren't familiar with the Atlantis project, when we went public in 2009, IOFINA was, had leases for natural gas production in the state of Montana, and it was a dual concept model where IOFINA would be producing natural gas and also extracting iodine from the brine, coproduced with a natural gas. We did that for, the first few years of of being public. At the same time, natural gas prices during that time plummeted in The United States, and that project became unviable over a period of time. We did learn lessons for, iodine extraction with the technology we used at that time, but that project has been closed for a number of years. We did decide to not renew leases in that particular area, and there's no intent even as natural gas prices have risen here risen here slightly in The United States. Their company it's not part of our core our core business here moving forward.

48:25 The only asset that we still currently have up in Montana is there is a building that we, have tentatively sold to another, company. And as long as they continue to make payments on that particular building, that title will move to them in the future. So, essentially, the Atlantis project, is is is a is a nonfactor for IOFINA here moving forward. With respect to IOFINA EX, there are a number of questions regarding our, IOFINA EX and our seed investment, regarding why we took on the project, what we learned. Is there any value still there, and whether we would do, related party deals in the future. And I I would say as we're always looking for growth opportunities in our specialty chemical business. Back when we first had this, project presented to us, with respect to looking at, CBD manufacturing from hemp, that market was a booming growing market, and it was booming a lot before COVID.

49:27 We investigated opportunity that would utilize our chemical knowledge, our batch processing, distillation extraction, analytical chemistry, which is all which are all things we do at IOFINA Chemical to see if, IOFINA could be a, cannabinoid CBD, CBD, CBG extractor. We also investigate other opportunities in this space to see if we could be a complete seed to sale solution from from from growth of seeds to plants all the way to the end customers. We quickly learned, in the extraction investigations that we did that it was unlikely that we were gonna differentiate ourselves from the competition. So we stopped that pretty quickly. We also knew that there would be a lot of upfront investment that would be needed to be a strong player in this, and we just felt like the risks there were too much.

50:19 At the same time, we were looking for, opportunities internationally for this seed to sale kind of business and evaluated those opportunities. And and and after our risk assessment, we decided it was too high of a risk. The seed opportunity was an investment opportunity that was, brought to us that we decided to invest in based on the market conditions at the time. It was successful in creating seeds, over 20,000,000 of organically, certified seeds. However, the business, of selling the seeds and the competition of seeds changed dramatically. And, unfortunately, we have not as Malcolm touched on during his, presentation, we have and reason for impairment of the seeds, we have not found a solution to be able to sell these seeds into the marketplace.

51:05 So the seeds have been, written down on our, on our financials, but we do have these seeds that are viable and are attempting to sell the seeds. So I I don't know whether there's going to be any value of these seeds in the future. We will attempt to monetize these seeds, but I think we've learned lessons from this. The lessons that we've learned are we need to really focus on products that are more core in our chemical business, our specialty chemical business. We are not farmers. We are not growers. We do not understand that business as well. So we wanna focus here in the future on those areas of business, specialty chemical production, iodine production, in the future. Will we ever do a related party transaction in the future? I would say that is very unlikely.

51:53 I would never say never, on business opportunities in the future. There are also a couple of questions, and we covered a lot of this, I think, already, about the item market, and there were two questions in particular. One had to do with what are the likelihood of item prices in the 50 to $60 kilo range versus the 30 to $35 kilo range in the future, and also assess, IOFINA's position in the marketplace. So, it's always difficult to predict the pricing of, things in the future, especially with the volatilities we've seen in the global economies over the last number of years with COVID, with political tensions around the world. You know, we've we've seen a strong recovery after COVID. Now we're seeing inflation.

52:43 So how that how's that gonna affect, demand for products in the future? It's it's it's difficult to predict. Right now, we're seeing strong demand for, iodine and projecting high iodine prices in 2022. Demand is strong and supply is steady at best. What the future holds is less certain, but I personally feel and I believe the company feels that prices in the thirties are less likely than prices in the 50 long term as this is in line with historical trends and as production costs for the iodine producers continue to rise and the largest applications of iodine use continue to expand like x X-ray contrast media applications. IOFINA's position in the market is a low percentage with great opportunities. We feel we're a low cost producer compared to our competition. We do it in a more environmentally friendly manner and in a more stable government situation in The United States versus where some of the other, miners might have some difficulties with the current political situation in their company in their country.

53:47 And we have the ability to expand our, operations in a small but relatively fast way compared to our competition with low upfront costs and rates of growth that should not disrupt the supply demand dynamics. And, also, as a specialty chemical producer, we gain margin both on the item we produce and any other kind of specialty chemicals we produce in the future. So, we like our position in the market. We will continue to grow our position in a way that, doesn't disrupt the market, but, is also within our our core our our our core mechanism of how we do business. Malcolm, I'm gonna throw it to you for the next set of questions. Okay. There were a couple of questions that were kind of in the finance arena.

54:33 And the first one, a couple of people asked when will debt be completely eliminated? Well, I think you've already probably got from some of the things Tom said that that's not quite how we're how we're looking at debt at the moment. I think it's worth just quickly revisiting what's happened to debt in the last few years. So beginning of two thousand and nineteen, we had $25,600,000 of debt. Cash balances were 4,500,000. Net debt was 21,100,000. And then three years later, end of last year, debt's down to 8,200,000. Cash balances are up to 5.2, and our net debt's 3,000,000. So we reduced net debt by 18,000,000 from the beginning of two thousand nineteen to the end of last year. And the interest payable that was 1,600,000 in '19 is down to 400,000 for last year also, which is a really important factor in terms of our corporate costs.

55:34 And when we did the the refinancing, I I would say a key part of our debt turnaround was getting a new banking partner who has already provided finance that suits our needs and, really importantly, is supportive of our growth intentions. So we don't see debt now as an overhanging issue, but rather than as a well, I'm calling it a component of the growth toolbox to be used to help us to grow faster than we otherwise might, in particular, by funding capital projects. But the increase in debt would be within the confines of banking covenants that, into earlier, tied debt to EBIT to earnings to EBIT to earnings and therefore put a cap on borrowings. So the short answer to the question is we don't plan to eliminate debt as we see a modest level of debt as advantageous.

56:22 That should be noted that all our borrowings are structured so they can be paid off at any point without penalty subject to unwinding interest rate hedges should we choose to do so. And I think that's probably not where we are on debt. The there was another question asking about the provision of further analysis in our financials so as to give more visibility to the chemicals operation as well as the iodine production activities. And, again, Tom's made some comments about that as he's gone through his presentation. And the answer is that, yeah, we are we are aware that we haven't moved on very much in in terms of the some of the, how can I put it, operational analysis that we provide in our half year and full year reports, and we are gonna work on that and and and bring out more? But I can't at this point say exactly what it'll be. It does present a few challenges because the chemical business and the iodine production business are very closely entwined, but but something will be forthcoming.

57:28 Okay. Thanks, Malcolm. And I know we're running a little a bit short on time. I'll I'll I'll attempt to get through all the presubmitted questions here, and it looks like we'll probably, any any of the questions that were submitted during the presentation, will probably be answered on the on the, IMC website. So there are a number of questions submitted related to our item production review of IO nine and its timeline as well as IO ten and, additional item production questions related to the ability or need to move poor producing item plants and the useful life of plants. So, as I mentioned before, our our timing for I o nine has not been ideal. Location choices, COVID resurgent at the end of last year, personnel changes at our new partner and dealing with a new partner are all reasons why we've not yet, hit the finish line for with IO nine.

58:25 It is a disappointment for us, frankly. We are working hard to get to that finish line. We believe we have a good location, a good partner, and in an area of growth, but we frankly have not crossed that finish line. But all current signs indicate we are close to complete. But I I I will say that until it's finished, it's not complete. So we are working hard to do that. We have preordered many key components so we can execute the construction as soon as possible. And we are also concurrently negotiated for possible I O 10 sites, mostly with new partners, but also with a current partner as well. We are, assessing the best timing for I O 10. And, you know, once we get I O nine, completed or not completed, the contract completed for I o nine and under construction, we'll be, focusing a lot more on I o ten, getting sites signed up, and and, evaluating when the proper timeline is to build an I o ten.

59:24 We've learned, lessons from past management decisions on plant locations, and we perform our best due diligence efforts for these new sites. That said, every business has risks, and this is, and these sites are risks for IOFINA. And and when we get to moving old plants, you know, old production, old poor choices in plant sites, have resulted in IOFINA moving plants. We've moved I 03 to I 07. We're using some components from I 05 in our new I 09, facility. So, currently, there's no plans to move any any other producing plants. They are all strong producing plants that are profitable, iodine producers. And as far as the lifetime of plants, we've run I o two over nine years.

1:00:14 We believe, our our plants have a useful life of up to twenty years or more. We've seen positive progress in reinvestment in our partners in their oil and gas fields, and we believe the COVID blip, which saw oil go to zero and caused investments to decrease by oil and gas operations, is more of an anomaly than a prediction of the future. So I think that answers most of those questions. There's also, some questions about ongoing corporate strategy, which I'll finish up on. And, essentially, with a sound balance sheet and financial footing, how do we view organic growth, and and what's our vision over the next couple of years? And and also comment on, you know, other business opportunities, including, further monetizing the brand we use.

1:01:01 We've worked we've worked very hard over the last number of years to establish IOFINA as a profitable low cost company geared for growth. It's it's been mentioned a number of times in this, seminar. The debt restructuring was a major win for IOFINA, and now we have a low debt to EBITDA ratio. With these wins and positive momentum now and anticipated markets growth that we serve, we will invest back in the company for growth. We will continue to learn from lessons in the past and prudently make decisions when it comes to evaluating growth opportunities. But we will likely look to grow at a faster pace now with our improved positioning. IO nine and IO 10 are ways we expect to grow soon organically. We're making substantial investments at IOFINA Chemical to increase capacities and and to invest in new products and r and d opportunities.

1:01:48 We intend over the next few years to be the largest, North American iron producer. That said, we intend to use physical responsibility when making these decisions and to do and do the right due diligence and risk assessments when determining where and when to invest. Growth of the company outside of organic growth within IOFINA Chemical and IOFINA Resources, I believe now is a is a possibility. We'd be looking for, add ons to the specialty chemical business, whether it be full businesses or product lines, other JVs that make sense to us that would add value to the organization. But these possibilities, there's nothing absolutely imminent. We are looking around, and we would not execute execute on this without doing the that full due diligence and making sure that the deal is right within our core competencies and right with respect to cost to do the deal.

1:02:42 Monetizing brine streams for other components such as lithium, bromine, manganese, magnesium are all things that we are considering and looking at. We, we use brine streams, a waste stream to extract iodine. All brine streams are different. So certain brine streams have certain components. Other brine streams have other components, but our geological team is looking for other opportunities outside of iodine. We will continue to really focus on our iodine production and but also look for value of other minerals, whether it's through directly through IOFINA or through partnerships with other technology based companies to provide comprehensive solutions to the partners that we that we use for to obtain our brand streams.

1:03:32 I think I'll just end here as we we've gone a bit over time is that we believe the company's in the best position ever with a positive momentum, that we've carried, and we're committed to, reinvest in the company, in our core areas to spur additional growth throughout our traditional methods while evaluating nontraditional methods for growth in the future. We're excited for the next few years. We think we're in a market which is growing, and we think we have, good management team, good employees, and, good technology to, be successful here, moving forward. And, I think I'll throw it back. I think that's where I'll end the q and a session. Tom, that's great. Malcolm as well, thank you for addressing all those questions that you can, from investors this afternoon. Of course, ladies and gentlemen, as Tom kindly did mention, the company will review all of the questions submitted today, and we'll publish those responses on the investment company platform where it's appropriate to do so, and you'll be notified by email when these are ready for your review. Tom, perhaps for redirecting the attendees on the call to provide you their feedback, which I know is particularly important to yourself and the company. If I could just ask for a few closing comments to wrap up with, that'd be great. Yeah. That'd be great. Yeah. Again, thanks for everybody for attending today. Hopefully, it was, informative not only of our current operations, but our, our commitment to reinvest in the company.

1:04:54 We are excited about the iodine market. We're excited about the specialty chemical market. We've learned lessons from the past of what to do and what not to do. There's always risks with respect to the organization. We will evaluate those risks as we continue to reinvest in the, organization, and we look to really grow this organization here over the next couple years and provide shareholder values as much as we possibly can. So I hope, our investors and our potential investors enjoyed the presentation today, and we hope to be able to do these types of presentations here moving forward. That's great. Tom, Malcolm, thank you very much indeed for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations?

1:05:43 This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of IOFINA PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.