Intrepid Potash, Inc · NYSE:IPI
Intrepid Potash — Investor Presentation (May 2009)
44 slides from Intrepid Potash's investor presentation, May 14, 2009
Slide 1: Investor Presentation May 2009
Investor Presentation May 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: 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, or marketed as Trio® 5 ac
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 Non-GAAP reconciliation available $36.2 $55.1 $83.7 $41.4 $43.6 Q108 Q208 Q308 Q408 Q109 Cash and Cash Equivalents $ 102 million Debt Outstanding $ - Availability under the Cred
Slide 6: Building Upon Our History of Value Creation Through Innovation
6 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 7: The Intrepid Potash Growth Story
7 36 percent increase in effective capacity The Intrepid Potash Growth Story Multiple organic growth projects in place to expand production at our existing facilities Significant strength in potash pricing environment Attractive development assets Narrowing the gap between effective and nameplate ca
Slide 8: Demand and Supply Conditions Lead to the Current Pricing Environment
9 Demand and Supply 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. Midwest (fob warehouse) $640 spot Saskatchewan (fob mine) $770 spot Brazil (cfr Brazilian port) $680 sp
Slide 9: Potash has the Best Fundamentals
11 Potash has the Best Fundamentals Source: Green Markets Notes: (1) Number of weeks declined out of the last 70 weeks, As of 5/4/2009 (2) Price for Granular MOP Midwest Since January 2008 Indexed Historical Granular MOP Midwest Prices Compared to Other Fertilizers Prices Number of Weekly Price Decl
Slide 10: Population and Meat Consumption Drive Grain Demand
12 600 800 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 a
Slide 11: In spite of financial crisis, population growth continues
13 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 respon
Slide 12: Strong Returns Continue for Corn Growers
14 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 13: Potash Consumption
15 Potash Consumption U.S Potash Apparent Consumption (‘000 Tons KCL) and Planted Corn Acres (MM) Apparent consumption is measured as: Sales – Exports + Imports Source : USGS KCL Consumption (‘000 Tons) Planted Acres of Corn (MM) Potash fertilizer consumption has remained relatively constant over th
Slide 14: Yield Response at Varying Soil Test Levels
16 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/optimum soils - No data for medium alfalfa yields. Response shown is an average of low and high yield responses. - Avg. relative yield assumes all oth
Slide 15: Long Term Supply Fundamentals Intact
17 (1) Supply curtailments include 2.7MM tons in 2008 and 6.5MM 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 16: Few Global Producers, With Strong Balance Sheets
18 Few Global Producers, With Strong Balance Sheets 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 Int
Slide 17: 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 18: 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 19: Global Production and North American Inventory Levels
21 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 20: Production Curtailed to Match Demand
22 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 Announcements Po
Slide 21: Current Market Realities and Management Actions
23 Current Market Realities Global Buyer Hesitation Persists Building Producer Inventories - Elective Production Curtailments / Mine Shutdowns Slower Sales into Agricultural & Industrial Markets Beginning to See Sell Through in Inventory Channels Intrepid Management Actions Committed to Maintaining
Slide 22: Average Potash Consumption Approximately 5x Greater than Our Production
24 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 23: Sales of Potash & Trio in the United States
25 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 24: Intrepid vs. North American Competitors
26 (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 25: Diversified Markets and Customer Base
27 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 26: HB Potash Solution Mine: Innovate and Increase Potash
29 $600 per ton Capex to reopen an existing mine compared to an estimated cost of ~$1,200 per ton for greenfield projects HB expected to be among the lower-cost potash mines in North America Same proven solar evaporation and solution mining technology as used in Moab Will share infrastructure with e
Slide 27: Well-Defined Attractive Growth Opportunities to Increase Production
30 Capital Estimates ($MM) Facility Estimated Estimate on Capital ($000s) Theoretical Additional Product Tons (000s Tons) $ Capital/ Ton of Capacity ($/Ton) Estimated in service date Potash Debottlenecking and Expansion Projects at Existing Facilities Storage and Hoisting Capacity Upgrade West H2 20
Slide 28: Opportunity at the North Mine
31 Opportunity at the North Mine Current infrastructure allows North Mine to reopen at a capital cost much less than a greenfield project Full conventional underground mine and process facility, idled in early 1980’s Two concrete lined shafts, utilities, brine disposal, tailings disposal and other i
Slide 29: Low-Cost, Low-Sovereign Risk Expansions
32 19,033 Low-Cost, Low-Sovereign Risk Expansions Capital Cost Curve for Announced Potash Expansion Projects Capital Costs ($) / ton (1) Incremental Annual Production Capacity (2) MOS / PCS / Intrepid PCS CVRD (Argentina) MagMinerals (Congo) Greenfield Project Intrepid Greenfield (HB) Brownfield Pro
Slide 30: Why Consider an Investment in Intrepid Potash
33 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 Long-Life Reserves Experienced Management Team with Significant Eq
Slide 31: Appendix
POTASH Appendix
Slide 32: Innovate and Increase Production
35 Innovate and Increase Production Unique and Innovative Growth Projects Completed Since 2002 Facility Completed Capital ($000’s) Additional Product Tons (000’s Tons) $ Capital/ Ton of Capacity ($/Ton) 1st Horizontal Potash Cavern Moab Q4 2004 5,000 40 125 2nd Horizontal Potash Cavern Moab Q4 2005
Slide 33: Improvements: Reliability and Efficiency
36 Improvements: Reliability and Efficiency Location Project Description Moab, UT Drilled and completed first potash horizontal solution mining caverns Refurbish warehouses Upgraded electrical system Optimized potash and tails leaching Wendover, UT Drilled and completed two corrosion-resistant deep-
Slide 34: Long-Life Reserves
37 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 35: Global Industry Susceptible to Production Interruptions & Supply Shocks
38 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 36: Demand Growth from BRICs Reaching Recommended Application Levels
39 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 37: Solar Evaporation and Solution Mining Technology
41 Solar Evaporation and Solution Mining Technology Existing Solar Evaporation Facility Year Opened Dead Sea Works (ICL) 1970 Arab Potash Company 1973 SQM Solar 1996 Intrepid Moab 1970 Intrepid Wendover 1932 Qinghai Salt Lake Potash Corp - Compass Minerals - Rincon Solar - Existing Solution Mining F
Slide 38: Carlsbad Potash Area
42 Carlsbad Potash Area
Slide 39: HB – Phase I Potash Mine Flood Area
43 HB – Phase I Potash Mine Flood Area
Slide 40: Conversion Rates
44 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 41: Select Pro Forma Data
45 Select Pro Forma Data Adjusted Pro Forma Net Income (In millions) Pro Forma EBITDA (In millions, except gross margin percentage) Net Sales (In millions) Pro Forma Earnings Per Share (Diluted) $36.2 $55.1 $83.7 $41.4 $43.6 40% 57% 62% 60% 49% Q108 Q208 Q308 Q408 Q109 $15.9 $31.6 $49.8 $24.3 $25.2
Slide 42: Select Operating Data
46 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 43: Historical Quarterly Production and Sales Summary
48 Historical Quarterly Production and Sales Summary 2009 March 31, December 31, September 30, June 30, March 31, Production volume (in '000 per short tons) Potash 137 201 200 210 224 Langbeinite 42 34 50 58 56 Sales volume (in '000 per short tons) Potash 99 94 204 213 213 Trio® 38 17 50 47 93 INTRE
Slide 44: Return on Potash Investment for Corn & Soybeans
Return on Potash Investment for Corn & Soybeans 49 Assumes 170 bu/acre, $3.80/bu corn price, $650/ton KCL Input Costs for Corn ($/bu) Input Costs for Corn ($/acre) Return on Potash Investment Source: IPNI & Intrepid Potash Corn Soybeans 2009 Revenue 618.21 $ Gross Margin 130.92 $ Input Costs Potash