An increase in fracking by its main US customer will mean Iofina’s (LON:IOF) iodine production this year will be significantly less than anticipated.
Iofina’s technology extracts iodine from the brine produced from oil and gas wells on US onshore fields and the fracking scheduled for the next three months is expected to reduce the brine supply to four of its plants: IO#3, IO#4, IO#5 and IO#6.
The fracking programme is also expected to continue at similar levels throughout 2014.
As a consequence, Iofina’s production for 2014 will be around 400 metric tonnes of crystallized iodine, materially below current market expectations though substantially ahead of 2013 production.
Output for the first quarter was 47 metric tonnes of crystallized iodine and was affected by the uptick in fracking and the extreme winter weather in the US.
Iofina’s first two plants, IO#1 and IO#2, remain profitable, are unaffected by fracking schedules and continue to produce iodine as planned, Iofina said.
Costs are being cut, with IO#5 mothballed until power is installed from the local grid, something that is expected in the next 90 days.
Staffing levels have been reduced while the planned deployment of mobile iodine extraction plants is being reviewed.
These measures are designed to preserve the company’s cash position of US$2.3mln at the end of March, the company said. It is also working on ways to re-route additional water from the customer.
Elsewhere, Iofina Chemical has started the year well and performed ahead of management's expectations.