Intrepid Potash, Inc · NYSE:IPI
Intrepid Potash — Investor Presentation (October 2010)
46 slides from Intrepid Potash's investor presentation, Oct 12, 2010
Slide 1: Investor Presentation October 2010
Investor Presentation October 2010
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: Intrepid Potash Strategically Located, Potash-Only Company
Intrepid Potash Strategically Located, Potash-Only Company Intrepid currently 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
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: Solid Financial Performance
5 Solid Financial Performance EBITDA(1) (In millions) Balance Sheet as of June 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 million
Slide 6: What Are We Seeing In Today's Potash Market
Potential industry consolidation has brought potash back into the spotlight BHP Billiton / Potash Corporation of Saskatchewan Inc. (“PCS” or “Potash Corp.”) Silvinit / Uralkali The timing of BHP Billiton’s offer for Potash Corp. has effectively called the bottom of the commodity market The agricultu
Slide 7: Current Inventory and Production Snapshot
Current Inventory and Production Snapshot Demand from dealers has been robust ahead of what is expected to be a strong fall application season We are fully committed on granular potash through November and are currently sold out of granular Trio™ Potassium prices are rising: Potash Granular Effectiv
Slide 8: Supply and Demand Conditions Lead to the Current Pricing Environment
Supply and Demand Conditions Lead to the Current Pricing Environment U.S. Midwest (fob warehouse) $430-440 spot Saskatchewan (fob mine) $400-405 spot E.C.L. America cfr $375-390 spot SE Asia cfr $400-405 spot W. Europe (cfr import) $399-412 spot India (cfr Indian port) (standard) $370 contract as of
Slide 9: Few Deposits, Fewer Global Producers
Few Deposits, Fewer Global Producers 9 2008 & 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 exclusively outside North America
Slide 10: Potash Deliveries Track Population Growth
Potash Deliveries Track Population Growth 10 In spite of financial crisis, 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 would
Slide 11: Fundamentals of Increasing Population Continue to Drive Grain Demand
Fundamentals of Increasing Population Continue to Drive Grain Demand Over the Long-Term 11 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 (
Slide 12: United States Potash Consumption
United States Potash Consumption 12 Source : 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 annu
Slide 13: Strong Returns for Growers
Strong Returns for Growers 13 - 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 14: Commodity Prices are Moving Up
Commodity Prices are Moving Up 14 70% 80% 90% 100% 110% 120% 130% Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Commodity Price Levels* Expressed as % of Jan. 4 2010 Prices Lean Hogs Live Cattle No. 2 Yellow Corn Soybeans Wheat No. 11 Sugar
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 An equally strong 2010 crop should result in a significant nutrient draw down 15
Slide 16: Ethanol Has Become a Steady State Demand Driver
Ethanol Has Become a Steady State Demand Driver USDA predicts corn use for ethanol to level off at around 35-40% of total use in the United States Renewable Fuels Standards effectively set a floor for ethanol production in the United States Upcoming EPA decision on E15 may potentially increase the U
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 Well-Defined, Attractive Organic Growth Opportunities that Lower Per-Ton-Costs 17 ®
Slide 18: Strategically Located Assets
Strategically Located Assets 18 Average Potash Consumption Greater than 5x 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 Kans
Slide 19: The Intrepid Potash Advantage: Strategically Located and Lower Royalties
The Intrepid Potash Advantage: Strategically Located and Lower Royalties 19 (2) Source: 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 capital
Slide 20: Diversified Markets and Customer Base
Diversified Markets and Customer Base We sell potash into three different markets: Agricultural, Industrial and Animal Feed Agricultural represents ~70% of Intrepid sales compared to an industry average of 92%(1) Agricultural primarily consumes granular potash and Trio™, while industrial and animal
Slide 21: Intrepid's Focus is to Reduce Costs and Increase Production Flexibility
Intrepid’s Focus is to Reduce Costs and Increase Production Flexibility Does operating potash assets in this way make sense for the BHP shareholder? Even if BHP does take this stance in the market, Intrepid is making operational and capital investment decisions to withstand this activity Continual e
Slide 22: Moab Compaction Project
$15.5 million capital investment approved in early 2010 Ability to granulate 100 percent of annual production from Moab facility Project allows flexibility in production mixes to meet market demand Current compaction capacity at Moab is approximately 40 percent of annual production capacity All long
Slide 23: Growing 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 Langbeinite Business Presents a Key Opportunity for Intrepid Intrepid made the
Slide 24: 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 p
Slide 25: HB Solution Mine
$120 - $130 mm total estimated capital investment, results in, $700 per ton capex to reopen an existing mine compared to an estimated cost of ~$1,400 per ton for greenfield projects HB solution mine expected to be among the lower-cost potash mines in North America Same proven solar evaporation and s
Slide 26: HB Solution Mine: Project Timeline & EIS Process
HB Solution Mine: Project Timeline & EIS Process 27 Twenty months into the EIS process with the BLM Anticipate completing EIS review process in Q4 2011 BLM has issued its scoping summary report for the EIS and is moving forward on preparation of the draft EIS Received ground water discharge permit f
Slide 27: Appendix
POTASH Appendix
Slide 28: Conversion Rates
30 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 29: Calculation of EBITDA
Calculation of EBITDA 31 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 30: Calculation of Adjusted Net Income
Calculation of Adjusted Net Income 32 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 31: Selected Financial Data
33 Selected Financial Data Adjusted Net Income (1,2) (In millions) EBITDA (1,2) (In millions, except gross margin percentage) Net Sales(2) (In millions) Earnings Per Share (2) (Diluted) This is a financial measurement not calculated based on U.S. Generally Accepted Accounting Principles (Non GAAP).
Slide 32: Historical Quarterly Production and Sales Summary
34 Historical Quarterly Production and Sales Summary 2008 2009 2010 June 30, September 30, December 31, March 31, June 30, September 30, December 31, March 31, June 30, Production Volume (in thousands of short tons) Potash 210 200 201 137 131 112 124 172 165 Langbeinite 56 50 34 42 45 60 45 57 39 Sa
Slide 33: Estimated Long-Life Reserves
35 Estimated Long-Life Reserves (1) Product / Operations Date Mine Opened Current Extraction Method Minimum Remaining Life (years) Current Annual Estimated Productive Capacity in Potash Product Tons Muriate of Potash Solar Moab 1965 Solution 126 130 Wendover 1932 Shallow Brine 30 100 HB Solution Min
Slide 34: Intrepid Production Volume History & Outlook
36 Intrepid Production Volume History & Outlook Tons (000’s) Intrepid’s Potash 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 Potash Pr
Slide 35: Sales of Potash & Trio in the United States
Sales of Potash & Trio™ in the United States 37 Intrepid Sells Potash & Trio™ into Multiple Markets & Multiple End Users
Slide 36: Intrepid Average Net Realized Sales Price Advantage
Intrepid Average Net Realized Sales Price Advantage 38
Slide 37: The Only Western World Potash Pure-Play
39 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 38: Why Potash Only?
40 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 39: Global Industry Susceptible to Production Interruptions & Supply Shocks
41 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 40: Carlsbad Potash Area
42 Carlsbad Potash Area
Slide 41: 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) Global Production North American Production 5,000 15,000 25,000 35,000 45,000 55,000 65,000 75,000 500 1,00
Slide 42: Demand Growth from Brazil, India & China
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 43: Fertilizer Use Below Recommended Rates
45 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 Application Rate Scientifical
Slide 44: Yield Response at Varying Soil Test Levels
46 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 45: Return on Potash Investment for Corn & Soybeans
Return on Potash Investment for Corn & Soybeans 47 ROI assumes 165.0 bu/acre and $4.40/bu for corn, 44.0 bu/acre yield and $10.15 for soybeans, $376/ton KCL Input Costs for Corn ($/bu) Input Costs for Corn ($/acre) Return on Potash Investment Source: USDA, IPNI, & Intrepid Potash®. Corn Soybeans Inp
Slide 46: Intrepid Potash Management Structure
Intrepid Potash Management Structure 48
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