By: Tomas Ronolski - AllPennyStocks.com News

Tuesday, April 2, 2013

If anyone ever worries about mineral reserves of any type in the world, iodine shouldn’t cross their mind. According to the Eurasian Chemical Market, world iodine reserves are near 15 billion tonnes, enough to meet demand for hundreds of years. The vast majority of iodine production comes from only three countries in the world: Japan, the United States and Chile, with the high concentrations of iodine of the caliche in Chile largely responsible for the country producing more iodine annually than Japan and the U.S. combined. Sirocco Mining, Inc. (TSX:SIM), a Vancouver-based miner and leading iodine producer from its Aguas Blancas mine in northern Chile, added to world reserves to further solidify its leadership position. Following an extensive more than 15,000 meters of drilling completed in 2012, the company boosted the amount of iodine contained in proven and probable reserves by 57 percent to 38,412 tonnes from 24,492 tonnes in December 2011. Proven and probable reserves at the project also jumped 57 percent to 82.9 million tonnes.

The increases in resources extends the life of the mine to beyond 15 more years, as well as increases the likelihood that additional expansion is possible. Sirocco, has been producing at the project for 12 years already.

What should be particularly compelling about Sirocco to those unaware is the management team controlling the reigns. When Kinross Gold (TSX:K) bought Red Back Mining for $7.1 billion in 2010, the execs that developed Red Back into the Gahanaian gold producer, traveled to Atacama Minerals, an underperforming, Venture-listed iodine miner. No, they weren’t merely jumping from the gold ship; they had a plan. At the same time former Red Rock executives joined Atacama, Atacama bought all of Sirocco Gold, a merger that spawned Sirocco Mining as it stands today with its producing Aguas Blancas mine and the 2,500-square-kilometer Salvador Potash project in Brazil.

With the new team in place and the merger completed in late January 2012, the results for the year drastically outpaced the year earlier, according to a March 7 financial and operations report for 2012. Iodine production increased 9.1 percent to 1,224 tonnes. The company benefited from higher realized prices of $61 per kilogram, up more than 50 percent from 2011. Gross profit soared to $23.6 million, versus $7.1 million in 2011 and the company swung to a net profit of $6.7 million, or 3 cents per share, after recording a net loss of $24.3 million, or 15 cents per share, the year earlier.

Importantly, bank debt was reduced by $11.0 million, after climbing $8.9 million in 2011. Cash flow from operations vaulted to $18.6 million from $4.5 million the year prior. The company ended the year with cash on hand of $69 million and working capital of $87 million.

The new executive team appears to be running a far more efficient operation in it first year of service.

Sirocco intends to bolster operations in 2013 by expanding its mining fleet, complete feasibility studies and increasing the capacity of its chemical plant. Iodine prices are expected to remain strong throughout 2013, which could prove another valuable component of this turnaround story of the once struggling Atacama.

Will the team repeat their stunning performance with Red Back Mining? Of course, no one can answer that, but the train looks to be getting back on the tracks while the stock price has slipped from over $1.00 per share in January 2012 to current levels of 53 cents in Tuesday trading. The change in management, the dramatic increase in earnings and the dominant position in the iodine business while management delineates other paths for corporate expansion, certainly make this company look attractive at first blush and worthy of further due diligence.

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