Intrepid Potash, Inc · NYSE:IPI
Intrepid Potash — Investor Presentation (January 2011)
52 slides from Intrepid Potash's investor presentation, Jan 25, 2011
Slide 1: Investor Presentation January 2011
Investor Presentation January 2011
Slide 2: Forward-looking statements
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, as well as management’s expect
Slide 3: Strategically Located, Potash-Only Company
Intrepid Potash Strategically Located, Potash-Only Company Intrepid has an intense margin focus: Improve reliability and efficiency Capital investment to increase recoveries and productivity which is designed to lower per ton production cost Innovate production methods Strategic marketing 3 Florida
Slide 4: Company Overview
Company Overview The largest U.S. producer of potassium fertilizer Only western world producer created and dedicated solely to potash-related products Supplies ~1.5% of global demand and ~9.4% of U.S. demand 1 of 2 global producers of sulfate of potash magnesia, marketed as Trio® 5 active production
Slide 5: Strong agricultural commodity prices support farmer economics into 2011
Strong agricultural commodity prices are very supportive of farmer economics into 2011 Tight corn and soybeans stocks are buoying crop prices and limiting downside risk Expectation of high corn yield in 2010 / 2011 crop year necessary to support current stocks level Competition for acreage a key iss
Slide 6: Fourth Quarter 2010 Preliminary Production, Sales and Net Realized Price Per Ton Data
Fourth Quarter 2010 Preliminary Production, Sales and Net Realized Price Per Ton Data 6 Unaudited Q4 2010 Preliminary Sales & Production Data (1) Production (Tons) Sales (Tons) Average Net Realized Sales Price Per Ton (2) Potash 215,000 - 225,000 210,000 - 220,000 $380 - $390 Trio® 25,000 - 35,000 2
Slide 7: Supply and Demand Dynamics Are Influencing Marketing Decisions
Supply and Demand Dynamics Are Influencing Marketing Decisions Intrepid has caught up on its backlog of rail shipments New sales orders are at current market prices According to our customers, some North American competitors are booking current sales as far forward as May, at today's pricing Intrepi
Slide 8: Potash Is Well Positioned to Gain Greater Share of Nutrient Investment
Potash Is Well Positioned to Gain Greater Share of Nutrient Investment 9 Little indication on the horizon of a major price shock from nitrogen given the relatively flat natural gas strip Nitrogen price and natural gas curve have diverged Sources: Green Markets, Bloomberg Recent Prices as of 1/21/11
Slide 9: Few Deposits, Fewer Global Producers
Few Deposits, Fewer Global Producers 10 2008, ‘09 & ‘10– MM KCL Equivalent Tons (2) (3) (2) (2,5) Sources: Public filings and select country data from Fertecon (1) Mosaic’s fiscal year ends on May 31, data has been adjusted to reflect calendar year (2) PCS has ownership stake. (3) PCS markets Intrep
Slide 10: Potash Deliveries Track Population Growth
Potash Deliveries Track Population Growth 11 In spite of slower world economy, population growth continues Utilizing the 1.1% growth rate, provided by the US Census Bureau, in world population of 6.9 billion people: Each year – 75 million more people or approximately nine more New York Cities This w
Slide 11: Increasing Population Continues to Drive Grain Demand
Fundamentals of Increasing Population Continue to Drive Grain Demand Over the Long-Term 12 Note: Grains include corn, wheat, barley, oats and sorghum. Stock to use ratio is average inventory / consumption for that year; data updated monthly. Sources: United Nations Food and Agriculture Organization
Slide 12: United States Potash Consumption
United States Potash Consumption 13 Sources : Fertecon, United States Department of Agriculture (USDA). Potash consumption is shown in fertilizer years (July – June). Grains stocks include: Barley, Corn, Oats, Sorghum, Wheat Potash fertilizer consumption has remained relatively constant, with an ann
Slide 13: Commodity Prices Have Moved Higher
Commodity Prices Have Moved Higher 14 Harvest 2011 CBOT Prices Commodity 1 Year Ago 1/21/2011 Dec. ‘11 Corn ($/bu) $4.14 $5.87 Nov. ‘11 Soybeans ($/bu) $9.50 $13.48 Dec. ‘11 Wheat ($/bu) $6.39 $8.96 Dec. ‘11 Cotton ($/lb) $0.77 $1.09 Nearby futures, data as of 1/21/11 Source: Bloomberg 60 80 100 120
Slide 14: Strong Returns for Growers
Strong Returns for Growers 15 - 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 operations, and dr
Slide 15: Farmers Understand the Agronomic Benefits of Potash
Farmers Understand the Agronomic Benefits of Potash Potash application rates were down in 2008 and 2009 A robust 2009 crop coupled with lower application rates meant that soils were being depleted of “banked” nutrients with the solid harvest in 2010 The solid 2010 crop likely resulted in a significa
Slide 16: Ethanol Has Become a Steady State Demand Driver
Ethanol Has Become a Steady State Demand Driver Ethanol demand has driven growth in corn use over the last decade Other uses have remained relatively flat Ethanol expected to grow to approximately 35% of total corn use USDA forecast assumes some ethanol imports are used to meet mandates; if mandates
Slide 17: Why consider an investment in Intrepid Potash?
Why consider an investment in Intrepid Potash ? Strong Long-Term Industry Fundamentals The Only Western World Potash Pure-Play Strategically Located Assets Diversified Markets and Customer Base with Enhanced Product Flexibility Well-Defined, Attractive Organic Growth Opportunities that Lower Per-Ton
Slide 18: Strategically Located Assets
Strategically Located Assets 19 Average Potash Consumption in Intrepid’s Markets is Greater than 5x of Intrepid’s Average Production Low High Sources: Association of American Plant Food Control Officials (AAPFCO), The Fertilizer Institute (TFI), Intrepid Potash. (1) AAPFCO, Fertecon, USDA. New Mexic
Slide 19: Potash Price Advantage: Strategically Located and Lower Royalties
Intrepid’s Potash Price Advantage: Strategically Located and Lower Royalties 20 (2) Sources: Green Markets and Fertecon Notes: (1) Based on Full Year 2009 for Intrepid Potash Inc., Potash Corp., Mosaic Co., Agrium Inc. (2) Total COGS include: Cash operating costs including all royalty, profit and ca
Slide 20: Diversified Markets and Customer Base with Increased Flexibility in Product Mix
Diversified Markets and Customer Base with Increased Flexibility in Product Mix Intrepid sells potash into three different markets: Agricultural, Industrial and Animal Feed Agricultural represents ~80% of Intrepid sales compared to an industry average of 92%(1) Agricultural primarily consumes granul
Slide 21: Focus is to Reduce Costs and Increase Production Flexibility
Intrepid’s Focus is to Reduce Costs and Increase Production Flexibility Continual effort towards increasing production rates from existing assets Increased mining and hoisting capacity at Intrepid’s West Mine Additional mine panels developed in 2010 Underground stacker reclaim Coarse tails recovery
Slide 22: Continuous Improvement and Development of Assets
Continuous Improvement and Development of Assets is Key to Intrepid’s Competitiveness and Strategy 23 Productivity enhancement at the West Mine is notable Tons hoisted from 2004 – 2009 have averaged 2.4 million tons per year since Intrepid purchased the assets Through successful execution of capital
Slide 23: Well-Defined Growth Opportunities to Increase Production and Lower Per Ton Costs
Well-Defined Attractive Growth Opportunities to Increase Production and Lower Per Ton Costs 24 Major Capital Projects Facility Key Expected Benefits Estimated Capex Range for Future Projects (1) Estimated in service date Potash Debottlenecking and Expansion Projects at Existing Facilities Wendover C
Slide 24: Moab Compaction Project
Compactor unit installed and in service at end of 2010 Total capital investment of $11 - $12 million Ability to granulate greater than 100 percent of annual production from Moab facility, an increase from the current 40 percent capacity Project allows flexibility in production between granular and s
Slide 25: Growing the Langbeinite Business Presents a Key Opportunity
Intrepid believes the market recognizes the combined value of the nutrients in Trio®, potassium, magnesium and sulfur, and, as a result, Intrepid expects the pricing opportunity in the premium market to strengthen Growing the Langbeinite Business Presents a Key Opportunity for Intrepid Intrepid made
Slide 26: Langbeinite Recovery Improvement Project
Langbeinite Recovery Improvement Project Expected to increase Trio® recoveries from 30-35 percent to approximately 50 percent, thereby reducing cash costs per ton Expected to reduce process water consumption Allows for production flexibility through the ability to granulate 100 percent of standard T
Slide 27: HB Solar Solution Mine
$120 - $130 mm total estimated capital investment results in $700 per ton capex to reopen an existing mine compared to an estimated average cost of $1,400 per ton for greenfield projects HB Solar Solution Mine expected to be among the lower-cost potash mines in North America Same proven solar evapor
Slide 28: HB Solar Solution Mine: Project Timeline & EIS Process
HB Solar Solution Mine: Project Timeline & EIS Process 29 We are 25 months into the EIS process with the BLM Anticipate completing EIS review process in 1Q 2012, reflecting updated timeline from BLM BLM is completing preparation of the draft EIS Received ground water discharge permit for the mine fr
Slide 29: Final Thoughts
30 Final Thoughts Strong Long-Term Industry Fundamentals The Only Western World Potash Pure-Play Strategically Located Assets Diversified Markets and Customer Base with Enhanced Product Flexibility Well-Defined, Attractive Organic Growth Opportunities that Lower Per-Ton Costs
Slide 30: Potash Appendix
POTASH Appendix
Slide 31: Conversion Rates
32 Conversion Rates 1 metric tonne = 1.102 short tons 1 product ton of potash (KCL or KCL Equivalent) = 61% K20 1 product ton of langbeinite = 22% K20 1 product ton of SOP = 50% K20
Slide 32: Solid Financial Performance
33 Solid Financial Performance EBITDA(1) (In millions) Balance Sheet as of September 30, 2010 (1) This is a financial measurement not calculated based on U.S. Generally Accepted Accounting Principles (Non GAAP). Non-GAAP reconciliation available in the appendix to this presentation. Net Income (In m
Slide 33: Calculation of EBITDA Non-GAAP Reconciliation
Calculation of EBITDA 34 Non-GAAP Reconciliation Earnings before income taxes, interest, depreciation and amortization (“EBITDA”) is computed as net income adjusted for the add back of income tax expense, interest expense including derivatives, depreciation, depletion, amortization, asset retirement
Slide 34: Calculation of Adjusted Net Income Non-GAAP Reconciliation
Calculation of Adjusted Net Income 35 Non-GAAP Reconciliation Adjusted net income is calculated as net income adjusted for significant non-cash and unusual items. Examples of non-cash and unusual charges include insurance settlements in excess of property losses, non-cash gains or losses associated
Slide 35: Selected Financial Data
36 Selected Financial Data Adjusted Net Income (1) (In millions) EBITDA (1) (In millions, except gross margin percentage) Net Sales (In millions) Earnings Per Share (Diluted) This is a financial measurement not calculated based on U.S. Generally Accepted Accounting Principles (Non GAAP). Non-GAAP re
Slide 36: Historical Quarterly Production and Sales Summary
37 Historical Quarterly Production and Sales Summary September 30, December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, Potash 200 201 137 131 112 124 172 165 166 215-225 Langbeinite 50 34 42 45 60 45 57 39 32 25-35 Potash 204 94 99 80 111 150 243
Slide 37: Estimated Long-Life Reserves
38 Estimated Long-Life Reserves (1) Product / Operations Date Mine Opened Current Extraction Method Minimum Remaining Life (years) Muriate of Potash Solar Moab 1965 Solution 126 Wendover 1932 Shallow Brine 30 HB Solar Solution Mine(2) N/A Solution 28 Conventional Carlsbad West 1931 Underground 130 C
Slide 38: Intrepid Production Volume History & Outlook
39 Intrepid Production Volume History & Outlook Tons (000’s) Intrepid’s Potassium Production Volume Growth Estimated Productive Capacity at Full Operating Rates Historical 0 200 400 600 800 1,000 1,200 1,400 1,600 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Potash Prod
Slide 39: Intrepid Average Net Realized Sales Price Advantage
Intrepid Average Net Realized Sales Price Advantage 40 *Represents Intrepid 2010 Estimate, Mosaic CY2010, Agrium and Potash Corp have not reported Q4 yet, data is Q1-Q3 2010 Net Realized Sales Prices Q1 Q2 Q3 Q4* Intrepid $354 $376 $343 $380-390 Mosaic $323 $305 $300 $300 Agrium $307 $322 $297 * Pot
Slide 40: The Only Western World Potash Pure-Play
41 Potash Salt Nitrogen 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 ICL Po
Slide 41: Why Potash Only?
42 Why Potash Only? (1) Potash Corp. (2) Potash percentage represents 2007, nitrogen and phosphate percentages represent 2005 figures from Integer Research Ltd. (3) Estimated by Intrepid Potash based on publicly available historic production data. Operating capacity rates for nitrogen and phosphate
Slide 42: Global Industry Susceptible to Production Interruptions & Supply Shocks
43 Depleted Conventional Mines Mines Currently With Less than 15 Years Reserve Life Theodore, Amelie, Marie Louis mines in France Pasquasi and San Cataldo mines in Italy Salzdetfurth, Friedrichshall, Bergmannssegen-Hugo, Siegfried-Giesen, and Niedersachen-Riedel German mines Trona, California Severa
Slide 43: Carlsbad Potash Area
44 Carlsbad Potash Area
Slide 44: Potash Production and North American Inventory Levels
45 Potash Production and North American Inventory Levels N. American Inventory (000s Tons KCL Equivalent) Sources: IPNI, Fertecon, Intrepid Potash®. Potash Production (000s Tons KCL Equivalent) (1) Global Production North American Production 5,000 15,000 25,000 35,000 45,000 55,000 65,000 75,000 500
Slide 45: Nutrient Removal of Various Crops
Nutrient removal of various crops 46 N P2O5 KCl Eq. *Based on 2009 world yield for Oil Palm and 2009 US Yields for all others Sources: UN Food and Agriculture Organization (FAO), International Plant Nutrition Institute, International Potash Institute, USDA lb/acre* Corn (grain) Cotton (lint) Rice So
Slide 46: Removal of KCl by Selected Crops
Removal of KCl by Selected Crops: Steady in the United States - Growing Significantly Worldwide 47 Sources: International Plant Nutrition Institute, UN Food and Agriculture Organization, USDA USA Removal of KCl Equivalent by Various Crops ROW Removal of KCl Equivalent by Various Crops 7,261 8,466 -
Slide 47: United States Harvested Crop Acreage
United States Harvested Crop Acreage 48 Sources: UN Food and Agriculture Organization, USDA 72.4 68.8 69.3 70.9 73.6 75.1 70.6 86.5 78.6 79.6 81.3 72.4 73.0 72.5 72.5 74.0 71.3 74.6 64.1 74.7 76.4 76.8 53.1 48.5 45.8 53.1 50.0 50.1 46.8 51.0 55.7 49.9 53.6 23.1 23.8 23.1 23.6 21.7 22.4 21.4 21.7 21.
Slide 48: World Arable Land Decreasing
World Arable Land Decreasing 49 Source: UN Food and Agriculture Organization USA Total Area Harvested ROW Total Area Harvested - 100 200 300 400 500 600 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Million Acres Unharvested Arable Land Legumes, Roots, Tubers & Tree Nuts Fruits and Vegetables Fi
Slide 49: Brazil, India and China Must Increase Demand to Reach Recommended Application Levels
50 To Reach Recommended Application Levels, Brazil, India and China Must Increase Demand China Brazil India sources: 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 pur
Slide 50: Fertilizer Use Below Recommended Rates
51 Fertilizer Use 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 Average Application Rate Scie
Slide 51: Yield Response at Varying Soil Test Levels
52 Yield Response at Varying Soil Test Levels Average Yield Response to Potash Fertilization - No data for medium alfalfa yields. Response shown is an average of low and high yield responses. - Avg. relative yield assumes all other factors are non-limiting, yields approach 100% after fertilization,
Slide 52: Return on Potash Investment for Corn & Soybeans
Return on Potash Investment for Corn & Soybeans 53 ROI assumes 152.8 bu/acre and $6.27/bu for corn, 43.5 bu/acre yield and $13.82 for soybeans, $376/ton KCL Input Costs for Corn ($/bu) Input Costs for Corn ($/acre) Return on Potash Investment Sources: USDA, IPNI, & Intrepid Potash®. Corn Soybeans In
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