Intrepid Potash, Inc · NYSE:IPI
Intrepid Potash — Shareholder Meeting (May 2009)
35 slides from Intrepid Potash's shareholder meeting presentation, May 28, 2009
Slide 1: Annual Stockholders Meeting May 28, 2009
Annual Stockholders Meeting May 28, 2009
Slide 2: Forward-Looking Information
2 Forward-Looking Information Certain statements in this presentation, and other written or oral statements made by or on behalf of us, are “forward-looking statements” within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance,
Slide 3: Intrepid Potash: Strategically Located, Potash-Only Company
3 Intrepid Potash Strategically Located, Potash-Only Company Intrepid has an intense production focus: Improve reliability and efficiency Increase production of incrementally lower-cost volumes Innovate production methods Our production focus combined with earnings leverage to potash price delivers
Slide 4: Company Overview
4 Company Overview The largest U.S. producer of potash or potassium fertilizer Only Western world producer created and dedicated solely to potash-related products Supplies ~1.6% of Global demand and ~9.2% of U.S. demand 1 of 2 global producers of sulfate of potash magnesia, marketed as Trio® 5 activ
Slide 5: A Strong Cash Position, Zero Debt, and Cash Flows
5 A Strong Cash Position, Zero Debt, and Cash Flows Pro Forma EBITDA(1) (In millions) Balance Sheet as of March 31, 2009 (1) Cash and Cash Equivalents $102 million Debt Outstanding $ - Availability under the Credit Line $125 million Non-GAAP reconciliation available $36.2 $55.1 $83.7 $41.4 $43.6 Q10
Slide 6: Why Consider an Investment in Intrepid Potash
6 Why Consider an Investment in Intrepid Potash Strong Long-Term Industry Fundamentals The Only Western World Potash Pure-Play Significant Margin Opportunity Strategically Located Assets Diversified Markets and Customer Base Well-Defined, Attractive Organic Growth Opportunities
Slide 7: In spite of financial crisis, population growth continues
7 In spite of financial crisis, population growth continues Assuming a 1.17% growth rate in world population: Each year – 80 million more people Approximately 10 more New York Cities This would require an additional 43 million acres of arable land (1.3x the farmland in Iowa)(1) A world yield respons
Slide 8: Population and Meat Consumption Continue to Drive Grain Demand
8 600 800 1,000 1,200 1,400 1,600 1,800 2,000 1980 1984 1988 1992 1996 2000 2004 2008 Grain Production (Millions of Tons) 10% 20% 30% 40% 50% Stock to Use Ratio Fundamentals of Increasing Population and Meat Consumption Continue to Drive Grain Demand Note: Grains include corn, wheat, barley, oats an
Slide 9: North American Potash Consumption
9 North American Potash Consumption Source : USGS- Apparent consumption is measured as: Sales – Exports + Imports Potash fertilizer consumption has remained relatively constant over the past 29 years, with an annual volatility of approximately eight percent Corn acres planted in the U.S. have been o
Slide 10: Yield Response at Varying Soil Test Levels
10 Yield Response at Varying Soil Test Levels Average Yield Response to Potash Fertilization (1) ROI for corn and soybeans on very low/low and medium soils - No data for medium alfalfa yields. Response shown is an average of low and high yield responses. - Avg. relative yield assumes all other facto
Slide 11: Strong Returns Continue for Corn Growers
11 Strong Returns Continue for Corn Growers - Non-land fixed costs include: labor, opportunity cost of unpaid labor, taxes, insurance, general overhead, and machine and equipment expenses - Other variable costs include: seed, chemicals, fuel, lube, electricity, repairs, water, interest, custom opera
Slide 12: Long Term Supply Fundamentals Intact
12 (1) Supply curtailments include 2.7MM tons in 2008 and 6.9MM tons in 2009 based on Fertecon estimates and company announcements Source: Fertecon, Intrepid Potash, and public filings Long Term Supply Fundamentals Intact World Potash Production vs. Consumption Growth Assumes 92% Industry Operating
Slide 13: Why Potash Only? Market Structure for Key Fertilizer Nutrients
13 Why Potash Only? Market Structure for Key Fertilizer Nutrients Potash Nitrogen Phosphate (4) Producing Countries 12 ~60 ~44 Key Inputs Potash ore Natural gas Phosphate rock Sulfuric acid Ammonia % of Overall Fertilizer Market 17% 59% 24% Market Share of Top 5 Producers(1) 64% 13% Ammonia 39% Urea
Slide 14: The Only Western World Potash Pure-Play
14 Potash Salt COMPO Fertiva Complementary Business Agrium Potash Phosphates Other The Only Western World Potash Pure-Play K+S Potash Potash Phosphates Nitrogen Potash Corp Mosaic Uralkali Potash Intrepid Comparables Revenue by Product - North America Comparables Revenue by Product - International I
Slide 15: Few Deposits, Fewer Global Producers
15 Few Deposits, Fewer Global Producers 2007– MM KCL Equivalent Tons (2) (3) (2) (2) Source: Public filings and select country data from IFA (1) 2007 figures are for December 2006 through November 2007. Mosaic’s fiscal year ends on May 31. (2) PCS has ownership stake. (3) PCS markets Intrepid Potash
Slide 16: Global Production and North American Inventory Levels
16 Global Production and North American Inventory Levels N. American Inventory (000s Tons KCL Equivalent) Source: IPNI, Fertecon, Intrepid Potash Global Production (000s Tons KCL Equivalent) Global Production Potash Inventory Trendline Risks to Production Supply Shocks Delays in Projects Labor Short
Slide 17: North American Production Curtailed to Match Demand
17 North American Production Curtailed to Match Demand 000s Tons in KCL Equivalent (1) Sales include both domestic and export sales (2) August – September 2008 North American production negatively impacted by strike at Potash Corp. facilities Source: IPNI 2009 North American Production Curtailment A
Slide 18: Current Potash Market Realities
18 Current Potash Market Realities Global Buyer Hesitation Persists Building Producer Inventories / Elective Production Curtailments / Mine Shutdowns Slower Sales into Agricultural & Industrial Markets US Dealer Inventories Continue to De-Stock Intrepid Management Actions Committed to Maintaining St
Slide 19: Potash Consumption Greater than Our Production in Our Markets
19 Average Potash Consumption Approximately 5x Greater than Our Average Production in Our Markets Low High Source: Association of American Plant Food Control Officials (AAPFCO), TFI; Intrepid Potash New Mexico Texas Oklahoma Kansas Colorado Mississippi Arkansas Louisiana Idaho Washington Oregon Nebr
Slide 20: Sales of Potash & Trio in the United States
20 Sales of Potash & Trio® in the United States Potash & Trio® Potash Trio® (Represents sales of at least 500 short tons in 2008) Intrepid Sells Potash & Trio® into Multiple Markets & Multiple End Users Intrepid Mine Location
Slide 21: Intrepid vs. North American Competitors
21 (2) (2) Source: Green Markets and Fertecon Notes: (1) Based on FY 2008 for Intrepid Potash Inc., Potash Corp., Mosaic Co., Agrium Inc. (2) Adjusted COGS include: Cash operating costs, including all royalty, profit and capital taxes; Royalties of $16 per ton for Intrepid; Royalty, profit and capit
Slide 22: Diversified Markets and Customer Base
22 We sell Potash into 3 different markets: Agricultural, Industrial and Feed Agricultural represents ~60% of Intrepid sales compared to an industry average of 92%(1) Agricultural primarily consumes granular potash, industrial primarily consumes standard potash Standard potash costs less to produce
Slide 23: HB Potash Solution Mine: Incremental Low Cost Tons
23 $600 per ton Capex to reopen an existing mine compared to an estimated cost of ~$1,200 per ton for greenfield projects HB expected to be among the lower-cost potash mines in North America Same proven solar evaporation and solution mining technology as used in Moab Will share infrastructure with e
Slide 24: Low-Cost, Low-Sovereign Risk Expansions
24 19,033 Low-Cost, Low-Sovereign Risk Expansions Capital Cost Curve for Announced Potash Expansion Projects Capital Costs ($) / ton (1) Incremental Annual Production Capacity (2) MOS / PCS / Intrepid PCS CVRD (Argentina) MagMinerals (Congo) Greenfield Project Intrepid Greenfield (HB) Brownfield Pro
Slide 25: Final Thoughts
25 Strong Long-Term Industry Fundamentals Strategically Located Assets Significant Margin Opportunity Diversified Markets and Customer Base Well-Defined, Attractive Organic Growth Opportunities Final Thoughts
Slide 26: Appendix
POTASH Appendix
Slide 27: Long-Life Reserves
27 Long-Life Reserves (1) Product / Operations Date Mine Opened Current Extraction Method Minimum Remaining Life (years) Current Annual Nameplate Capacity in Potash Product Tons Current Annual Effective Capacity in Potash Product Tons Muriate of Potash Solar Moab 1965 Solution 124 180 93 Wendover 19
Slide 28: Select Operating Data
29 Select Operating Data Potash Net Sales Price (Per short ton) Langbeinite Net Sales Price (Per short ton) $295 $425 $623 $762 $727 Q108 Q208 Q308 Q408 Q109 $123 $188 $283 $323 $330 Q108 Q208 Q308 Q408 Q109
Slide 29: Calculation of Pro Forma EBITDA
30 Calculation of Pro Forma EBITDA Non-GAAP Reconciliation We define EBITDA as income from continuing operations before interest, income taxes, depreciation, depletion, amortization and accretion. EBITDA is used as a supplemental financial measure by our management and by external users of our finan
Slide 30: Historical Quarterly Production and Sales Summary
31 Historical Quarterly Production and Sales Summary INTREPID POTASH, INC. SELECTED OPERATIONS DATA (UNAUDITED) (Data in short tons) 2009 March 31, June 30, September 30, December 31, March 31, Production volume (in ‘000 per short tons) Potash 224 210 200 201 137 Langbeinite 56 58 50 34 42 Sales vol
Slide 31: Carlsbad Potash Area
32 Carlsbad Potash Area
Slide 32: HB – Phase I Potash Mine Flood Area
33 HB – Phase I Potash Mine Flood Area
Slide 33: Demand Growth from BRICs Reaching Recommended Application Levels
34 Demand Growth from BRICs Reaching Recommended Application Levels China Brazil India Source: IPNI, Potash Corp (MM Tons KCL) Goal to attain self-sufficiency of food supply History of under application of potash Need to increase yields Increasing land use for agricultural purposes ~15MM ~7MM ~5MM 0
Slide 34: Fertilizer Use Far Below Recommended Rates
35 Fertilizer Use Far Below Recommended Rates Source: Morgan Stanley, Agricultural Products Research, September 4, 2008 146% Shortfall 86% Shortfall 288% Shortfall Global Application Rates (lb/acre) 60 112 24 59 17 66 0 20 40 60 80 100 120 Nitrogen Phosphate Potash Current Application Rate Scientifi
Slide 35: Return on Potash Investment for Corn & Soybeans
36 Return on Potash Investment for Corn & Soybeans ROI assumes 170 bu/acre and $4.20/bu for corn, 45 bu/acre yield and $11.50 for soybeans, $650/ton KCL Input Costs for Corn ($/bu) Input Costs for Corn ($/acre) Return on Potash Investment Source: USDA, IPNI, & Intrepid Potash Corn Soybeans Input cos