Intrepid Potash, Inc · NYSE:IPI
Intrepid Potash — Investor Presentation (October 2009)
39 slides from Intrepid Potash's investor presentation, Oct 7, 2009
Slide 1: 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 2: Strategically Located, Potash-Only Company
3 Intrepid Potash Strategically Located, Potash-Only Company Intrepid has an intense production focus: Improve reliability and efficiency Increase productivity and lower per ton cost Innovate production methods Our production focus combined with potash fundamentals delivers long-term margin opportun
Slide 3: Company Overview
4 Company Overview The largest U.S. producer of 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 active prod
Slide 4: Cash Position, Zero Debt, and Cash Flows Creates Flexibility
5 Cash Position, Zero Debt, and Cash Flows Creates Flexibility $36.2 $55.1 $83.7 $41.4 $43.6 $31.5 Q108 Q208 Q308 Q408 Q109 Q209 Pro Forma EBITDA(1) (In millions) Balance Sheet as of June 30, 2009 (1) Non-GAAP reconciliation available in the appendix to this presentation Cash and Cash Equivalents $
Slide 5: Supply and Demand Conditions Lead to the Current Pricing Environment
6 0 100 200 300 400 500 600 700 800 900 1985 1987 1989 1991 1993 1995 1997 1999 2002 2004 2006 2008 Supply and Demand Conditions Lead to the Current Pricing Environment Granular MOP Midwest Pricing Midwest Granular MOP ($/ton) Source: Green Markets, Fertecon, IPNI Example Prices ($ / ton) U.S. Midwe
Slide 6: Potash Has Performed Better Than Other Nutrients
40 60 80 100 120 140 160 180 200 220 240 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 7 Potash Has Performed Better Than Other Nutrients Source: Green Markets Notes: (1) Price for Granular MOP Midwest Since January 2008 Indexed Historical Granular MOP Midwest Prices C
Slide 7: North American Potash Consumption
- 50,000 100,000 150,000 200,000 250,000 - 2,000 4,000 6,000 8,000 10,000 12,000 Corn Acres Planted ('000) & Ending Stocks ('000 MT) KCL Tons ('000) FERTECON U.S. Potash Consumption, Corn Acres Planted and Ending Grain Stocks KCL Tons Corn Acres Ending Grain Stocks 8 North American Potash Consumptio
Slide 8: A Robust Crop = Soils Being Depleted of Nutrients
Strong Crop Yields Result in Removal of Nutrients from the Soil Potash application rates were down in 2008 and 2009 2009 has presented good growing conditions for farmers USDA estimates strong corn crop in the United States this year 9 A Robust Crop = Soils Being Depleted of Nutrients Although corn
Slide 9: Intrepid Conducted a Survey of Farmers in the United States
Intrepid Conducted a Survey of Farmers in the United States(1) Based on survey responses from farmers, usage in the 2010 fertilizer year is expected to increase over the 2009 fertilizer year Over 70% of respondents had tested their soils in the last two years Over 80% of respondents said that potass
Slide 10: Yield Response at Varying Soil Test Levels
0 20 40 60 80 100 120 140 160 180 0% 5% 10% 15% 20% 25% 30% 35% 40% Very High High Medium Very Low/Low Soil Test Level Corn/Soybeans Alfalfa Corn Yield (Bu/Acre) 11 Yield Response at Varying Soil Test Levels Average Yield Response to Potash Fertilization - No data for medium alfalfa yields . Respons
Slide 11: North American Production Curtailed to Match Demand
- 500 1,000 1,500 2,000 2,500 3,000 12 North American Production Curtailed to Match Demand 000s Tons in KCL Equivalent (1) Sales include both domes tic and export sales (2) August – September 2008 North American production negatively impacted by strike at Potash Corp. facilities Source: IPNI 2009 No
Slide 12: Potash Market Trends
13 Potash Market Trends Worldwide recession Global buyer hesitation Producer inventories building Elective production curtailments / mine shutdowns Relatively full supply chain at the dealer and retail level Dealers unwilling to take price risk Slower sales into agricultural & industrial markets Cor
Slide 13: Intrepid is Navigating the Current Market
Near Term Actions for the Long Term Plan to moderate capital investment by $15 - $20 million in 2009 to $105 - $115 million – Achieved through the slowing of certain maintenance and discretionary projects – Our deferral of projects is measured in months Maintain healthy balance sheet to be well posi
Slide 14: Potash Deliveries Track Population Growth
15 In spite of financial crisis, population growth continues Assuming a 1.17% growth rate in world population: – Each year – 80 million more people or approximately ten more New York Cities – This would require an additional 43 million acres of arable land (1.3x the farmland in Iowa)(1) – A world yi
Slide 15: Fundamentals of Increasing Population Continue to Drive Grain Demand
10% 20% 30% 40% 50% 600 800 1,000 1,200 1,400 1,600 1,800 2,000 1980 1984 1988 1992 1996 2000 2004 2008E Stocks to Use Ratio Grain Production (Millions of Tons) $0 $2 $4 $6 $8 $10 $12 1980 1986 1992 1998 2004 2010E $/bushel Wheat All Corn Soybeans 16 Fundamentals of Increasing Population Continue to
Slide 16: Why Consider an Investment in Intrepid Potash
17 Why Consider an Investment in Intrepid Potash Strong Long-Term Industry Fundamentals The Only Western World Potash Pure-Play Strategically Located Assets Diversified Markets and Customer Base Well-Defined, Attractive Organic Growth Opportunities that Lower Per-Ton-Costs
Slide 17: The Only Western World Potash Pure-Play
18 13% 2% 19% 16% 50% Potash Salt COMPO Fertiva Complementar y Business Agrium 24% 22% 54% Potash Phosphates Other 100 % The Only Western World Potash Pure-Play K+S Potash 31% 26% 43% Potash Phosphates Nitrogen Potash Corp Mosaic Uralkali 100% Potash Intrepid Comparables Revenue by Product - North A
Slide 18: Why Potash Only?
19 Why Potash Only? Market Structure for Key Fertilizer Nutrients Potash Nitrogen Phosphate (4) Producing Countries 12 ~60 ~44 Key Inputs Potash ore Natural gas Phosphate rock Sulfuric acid Ammonia % of Overall Fertilizer Market 17% 59% 24% Market Share of Top 5 Producers(1) 64% 13% Ammonia 39% Urea
Slide 19: Strategically Located Assets
20 Average Potash Consumption Approximately 5x Greater than Our Average Production in Our Markets Intrepid Mine Location Low High Source: Association of American Plant Food Control Officials (AAPFCO), TFI; Intrepid Potash New Mexico Texas Oklahoma Kansas Colorado Mississippi Arkansas Louisiana Idaho
Slide 20: Intrepid vs. North American Competitors
22 486 398 (181) (174) 0 100 200 300 400 500 600 Realized Price Adjusted COGS Intrepid N. American Competitors 88 (7) 81 -30 0 30 60 90 120 Realized Price Adjusted COGS Gross Margin Advantage (2) (2) Source: Green Markets and Fertecon Notes: (1) Based on Full Year 2008 for Intrepid Potash Inc., Pota
Slide 21: Well-Defined Attractive Growth Opportunities
24 Capital Estimates ($MM) Facility Estimated Estimate on Capital ($000s) Estimated Additional Product Tons (000s Tons) $ Capital/ Ton of Capacity ($/Ton) Estimated in service date Potash Debottlenecking and Expansion Projects at Existing Facilities Storage and Hoisting Capacity Upgrade West H2 2009
Slide 22: HB Potash Solution Mine: Incremental Low Cost Tons
25 $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 wi
Slide 23: Final Thoughts
26 Strong Long-Term Industry Fundamentals The Only Western World Potash Pure-Play Strategically Located Assets Diversified Markets and Customer Base Well-Defined, Attractive Organic Growth Opportunities Final Thoughts
Slide 24: Appendix
POTASH Appendix
Slide 25: Conversion Rates
28 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 26: Long-Life Reserves
29 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 27: Select Pro Forma Data
30 $36.2 $55.1 $83.7 $41.4 $43.6 $31.5 40% 57% 62% 60% 49% 43% Q108 Q208 Q308 Q408 Q109 Q209 Select Pro Forma Data $15.9 $31.6 $49.8 $24.3 $25.2 $17.4 Q108 Q208 Q308 Q408 Q109 Q209 Adjusted Pro Forma Net Income (In millions) Pro Forma EBITDA (In millions, except gross margin percentage) $74.2 $99.5
Slide 28: Select Operating Data
31 Select Operating Data $295 $425 $623 $762 $727 $674 Q108 Q208 Q308 Q408 Q109 Q209 $123 $188 $283 $323 $330 $338 Q108 Q208 Q308 Q408 Q109 Q209 Potash Net Sales Price (Per short ton) Langbeinite Net Sales Price (Per short ton)
Slide 29: Non-GAAP Reconciliation
Q1 Q2 Q3 Q4 Q1 Q2 Pro Forma Net Income $19,284 $32,446 $49,719 $22,690 $24,681 $14,436 Add: Income tax expense 12,657 20,580 29,474 13,927 15,196 13,023 Add: Interest expense, including derivatives 1,433 (1,201) 643 2,703 203 (251) Add: Depreciation, depletion, amortization and accretion 2,790 2,782
Slide 30: Historical Quarterly Production and Sales Summary
33 Historical Quarterly Production and Sales Summary March 31, June 30, September 30, December 31, March 31, June 30, Production volume (in 000 short tons) Potash 224 210 200 201 137 131 Langbeinite 56 58 50 34 42 45 Sales volume (in 000 short tons) Potash 213 213 204 94 99 80 Trio™ 93 47 50 17 38 4
Slide 31: Carlsbad Potash Area
34 Carlsbad Potash Area
Slide 32: HB – Potash Mine Flood Area
35 HB – Potash Mine Flood Area
Slide 33: Low-Cost, Low-Sovereign Risk Expansions
36 0 200 400 600 800 1,000 1,200 19,033 Low-Cost, Low-Sovereign Risk Expansions Capital Cost Curve for Announced Potash Expansion Projects Capital Costs ($) / ton (1) Incremental Annual Production Capacity (2) MOS / PCS / Intrepid PCS CVRD (Argentina) MagMinerals (Congo) Greenfield Project Greenfiel
Slide 34: Global Industry Susceptible to Production Interruptions & Supply Shocks
37 Historical Depleted 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 Several
Slide 35: Few Deposits, Fewer Global Producers
38 Few Deposits, Fewer Global Producers 2008– MM KCL Equivalent Tons 0 1 2 3 4 5 6 7 8 9 10 11 PCS Mosaic Agrium Belaruskali Uralk ali K&S Silvinit ICL China APC Intrepid SQM Vale Compas s (2) (3) (2) (2) Source: Public filings and select country data from IFA (1) Mosaic’s fiscal year ends on May 31
Slide 36: Potash Production and North American Inventory Levels
39 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Potash Production and North American Inventory Levels N. American Inventory (000s Tons KCL Equivalent) Sourc
Slide 37: Fertilizer Use Far Below Recommended Rates
40 Fertilizer Use Far Below Recommended Rates 60 112 24 59 17 66 0 20 40 60 80 100 120 Nitrogen Phosphate Potash Current Application Rate Scientifically Recommended Rate Sourc e: Morgan Stanley, Agricultural Products R esearch, September 4, 2008 146% Shortfall 86% Shortfall 288% Shortfall Global App
Slide 38: Returns for Corn Growers
41 Returns 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 operations, and dryin
Slide 39: Return on Potash Investment for Corn & Soybeans
Return on Potash Investment for Corn & Soybeans 42 ROI ass umes 161.9 bu/acre and $3.28/bu for corn, 45 bu/acre yiel d and $8.82 for soybeans , $525/ton KCL Input Costs for Corn ($/bu) Input Costs for Corn ($/acre) Return on Potash Investment Source: USDA, IPNI, & Intrepi d Potash Corn Soybeans Inpu
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