Intrepid Potash, Inc · NYSE:IPI
Intrepid Potash — Investor Presentation (March 2010)
44 slides from Intrepid Potash's investor presentation, Mar 8, 2010
Slide 1: Investor Presentation March 2010
Investor Presentation March 2010
Slide 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, as well as management’s expect
Slide 3: Intrepid Potash Strategically Located, Potash-Only Company
3 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 Our production focus combine
Slide 4: Building Upon Our History of Value Creation Through Innovation
4 Building Upon Our History of Value Creation Through Innovation February 2004: Acquired Carlsbad facilities from Mississippi Chemical April 2004: Acquired Wendover facility from Reilly Chemical February 2000: Acquired Moab facility from Potash Corp. 2000 2005 2006 2008 2007 2004 2004: Doubled Moab
Slide 5: Company Overview
5 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 ~9.4% of U.S. demand 1 of 2 global producers of sulfate of potash magnesia, marketed as Trio™ 5 active producti
Slide 6: Cash Position, Zero Debt, and Cash Flows Creates Flexibility and Stability
6 Cash Position, Zero Debt, and Cash Flows Creates Flexibility and Stability Pro Forma EBITDA(1) (In millions) Balance Sheet as of December 31, 2009 (1) Non-GAAP reconciliation available in the appendix to this presentation $36.2 $55.1 $83.7 $41.4 $43.6 $31.5 $20.8 $14.5 $0.0 $10.0 $20.0 $30.0 $40.0
Slide 7: Supply and Demand Conditions Lead to the Current Pricing Environment
7 Supply and Demand Conditions Lead to the Current Pricing Environment Granular MOP Midwest Pricing Midwest Granular MOP ($/ton) Source: Green Markets, Fertecon, International Plant Nutrition Institute (IPNI) Example Prices ($ / ton) U.S. Midwest (fob warehouse) $395 spot Saskatchewan (fob mine) $38
Slide 8: Potash Has Performed Better Than Other Nutrients
8 Potash Has Performed Better Than Other Nutrients Source: Green Markets Notes: (1) Price for Granular MOP Midwest (2) Intrepid average net realized potash price though 12/31/09 Since January 2008 Indexed Historical Granular MOP Midwest Prices Compared to Other Fertilizers Prices Urea (U.S. Gulf Pri
Slide 9: United States Potash Consumption
9 United States Potash Consumption Source : Fertecon, United States Department of Agriculture (USDA). Potash consumption is shown in fertilizer years (July – June). Potash fertilizer consumption has remained relatively constant, with an annual volatility of approximately nine percent, over the past
Slide 10: Strong Crop Yields in 2009 Result in Removal of Nutrients from the Soil
Strong Crop Yields in 2009 Result in Removal of Nutrients from the Soil Potash application rates were down in 2008 and 2009 2009 presented good growing conditions for farmers USDA estimates strong corn crop in the United States for 2009 10 A Robust Crop = Soils Being Depleted of Nutrients Corn price
Slide 11: 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 for fertilizer in 2010 is expected to increase over 2009 Over 70% of respondents had tested their soils in 2008/2009 and 2007/2008 fertilizer years Over 80% of respondents said that potassium
Slide 12: Yield Response at Varying Soil Test Levels
12 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 13: North American Production Matched to Market Demand
13 North American Production Matched to Market 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 Sales (1) Production (2) - 500 1,000 1,500 2,
Slide 14: Potash Market Trends
14 Potash Market Trends Worldwide recession Global buyer / dealer 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 ma
Slide 15: 2010 Has Started Off Strong For Intrepid
2010 Has Started Off Strong For Intrepid Aggregate sales of potash in January and February of 2010 have exceeded the total sales of 150,000 tons in 4Q09 Red Granular product inventory and production is fully committed through the end of March 2010 The Intrepid list price has moved up effective March
Slide 16: In spite of financial crisis, population growth continues
16 In spite of financial crisis, population growth continues Assuming a 1.1% growth rate in world population: Each year – 75 million more people or approximately nine more New York Cities This would require an additional 40 million acres of arable land (1.2x the farmland in Iowa)(1) A world yield in
Slide 17: Fundamentals of Increasing Population Continue to Drive Grain Demand
17 Fundamentals of Increasing Population Continue to Drive Grain Demand Over the Long-Term Note: Grains include corn, wheat, barley, oats and sorghum. Stock to use ratio is average inventory / consumption for that year; data updated monthly Source: United Nations Food and Agriculture Organization (F
Slide 18: Why Consider an Investment in Intrepid Potash
19 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 19: The Only Western World Potash Pure-Play
20 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 20: Why Potash Only?
21 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 21: Average Potash Consumption Approximately 5x Greater than Our Average Production in Our Markets
22 Average Potash Consumption Approximately 5x Greater than Our Average Production in Our Markets Low High Source: Association of American Plant Food Control Officials (AAPFCO), The Fertilizer Institute (TFI), Intrepid Potash (1) AAPFCO, Fertecon, USDA New Mexico Texas Oklahoma Kansas Colorado Missi
Slide 22: Sales of Potash & Trio in the United States
23 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 23: Intrepid vs. North American Competitors
24 (2) Source: Green Markets and Fertecon Notes: (1) Based on Full Year 2009 for Intrepid Potash Inc., Potash Corp., Mosaic Co., Agrium Inc.; Intrepid Q1, Q2 ,Q3 and Q4 2009 represent a gross margin advantage of $204, $122, $99 and $27 per ton over our North American competitors . Results exclude th
Slide 24: Low-Cost, Solar Evaporation Assets
Low-Cost, Solar Evaporation Assets 25
Slide 25: Diversified Markets and Customer Base
26 We sell potash into three different markets: Agricultural, Industrial and Feed Agricultural represents ~70% of Intrepid sales compared to an industry average of 92%(1) Agricultural primarily consumes granular potash and Trio™, industrial primarily consumes standard potash Standard potash costs le
Slide 26: Debottlenecking and Expansion Projects at Existing Facilities
27 Facility Estimated Key Benefits Estimated in service date Potash Debottlenecking and Expansion Projects at Existing Facilities Langbeinite Recovery Project East 2011 Step change in langbeinite recoveries Reduced water consumption Lower East mine cost structure 2011 Storage and Hoisting Capacity U
Slide 27: HB Potash Solution Mine: Incremental Low Cost Tons
28 $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 28: Final Thoughts
29 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 29: Appendix
POTASH Appendix
Slide 30: Conversion Rates
31 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 31: Long-Life Reserves
32 Long-Life Reserves (1) Product / Operations Date Mine Opened Current Extraction Method Minimum Remaining Life (years) Current Annual Productive Capacity in Potash Product Tons Muriate of Potash Solar Moab 1965 Solution 126 130 Wendover 1932 Shallow Brine 30 100 HB Solution Mine(2) N/A Solution 28
Slide 32: Calculation of Pro Forma EBITDA
Calculation of Pro Forma EBITDA 35 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
Slide 33: Calculation of Pro Forma Adjusted Net Income
Calculation of Pro Forma Adjusted Net Income 36 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 a
Slide 34: Historical Quarterly Production and Sales Summary
37 Historical Quarterly Production and Sales Summary (1) Q409 Data represents the range disclosed as part of our Current Report on Form 8-K filed with the SEC on 1/21/10 March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, Production volume (in thousands of sho
Slide 35: Carlsbad Potash Area
38 Carlsbad Potash Area
Slide 36: HB — Potash Mine Flood Area
HB — Potash Mine Flood Area tea
Slide 37: Low-Cost, Low-Sovereign Risk Expansions
40 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 38: Global Industry Susceptible to Production Interruptions & Supply Shocks
41 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 39: Few Deposits, Fewer Global Producers
42 Few Deposits, Fewer Global Producers 2009– MM KCL Equivalent Tons (2) (3) (2) (2,5) Source: Public filings and select country data from Fertecon (1) Mosaic’s fiscal year ends on May 31. (2) PCS has ownership stake. (3) PCS markets Intrepid Potash’s products outside North America. (4) Compass Mine
Slide 40: Potash Production and North American Inventory Levels
43 Potash Production and North American Inventory Levels N. American Inventory (000s Tons KCL Equivalent) Source: 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 1,
Slide 41: Demand Growth from Brazil, India & China Reaching Recommended Application Levels
44 Demand Growth from Brazil, India & China 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 ~
Slide 42: Fertilizer Use Far Below Recommended Rates
45 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 43: Returns for Corn Growers
46 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 44: Return on Potash Investment for Corn & Soybeans
Return on Potash Investment for Corn & Soybeans 47 ROI assumes 165.2 bu/acre and $3.78/bu for corn, 44.0 bu/acre yield and $8.93 for soybeans, $500/ton KCL Input Costs for Corn ($/bu) Input Costs for Corn ($/acre) Return on Potash Investment Source: USDA, IPNI, & Intrepid Potash Corn Soybeans Input