Intrepid Potash, Inc · NYSE:IPI
Intrepid Potash — Investor Presentation (February 2010)
42 slides from Intrepid Potash's investor presentation, Feb 9, 2010
Slide 1: Investor Presentation February 2010
Investor Presentation February 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 productivity and lower per ton production cost Innovate production methods Our production focus combined with potash fundamentals deliv
Slide 4: 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 ~9.4% of U.S. demand 1 of 2 global producers of sulfate of potash magnesia, marketed as Trio™ 5 active producti
Slide 5: Cash Position, Zero Debt, and Cash Flows Creates Flexibility and Stability
5 Cash Position, Zero Debt, and Cash Flows Creates Flexibility and Stability Pro Forma EBITDA(1) (In millions) Balance Sheet as of September 30, 2009 (1) Non-GAAP reconciliation available in the appendix to this presentation Cash and Investments $ 95 million Debt Outstanding $ - Availability under t
Slide 6: Supply and Demand Conditions Lead to the Current Pricing Environment
6 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) $35
Slide 7: North American Potash Consumption
8 North American 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 8: 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 9 A Robust Crop = Soils Being Depleted of Nutrients Although co
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 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 10: Yield Response at Varying Soil Test Levels
11 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 11: North American Production Curtailed to Match Demand
12 North American 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 A
Slide 12: Potash Market Trends
13 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 13: 2009 Actions Taken for the Long Term
2009 Actions Taken for the Long Term Capital investment was moderated by $20 - $25 million in 2009 to $100 - $110 million Achieved through the slowing of certain projects Deferral of projects was measured in months Maintained healthy balance sheet to be well positioned for the next up cycle Moved pr
Slide 14: Fourth Quarter 2009 Preliminary Production, Sales and Net Realized Price Per Ton Data
Fourth Quarter 2009 Preliminary Production, Sales and Net Realized Price Per Ton Data 15 Unaudited 4Q 2009 Estimated Sales & Production Data (1) Production (Tons) Sales (Tons) Average Net Realized Sales Price Per Ton Potash 120,000 - 130,000 145,000 - 155,000 $400 - $420 Trio™ 40,000 - 50,000 20,000
Slide 15: Potash Deliveries Track Population Growth
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 16: 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 17: 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 18: 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 19: 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 20: Intrepid Sells Potash & Trio into Multiple Markets & Multiple End Users
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 21: Intrepid vs. North American Competitors
24 (2) Source: Green Markets and Fertecon Notes: (1) Based on Full Year 2008 for Intrepid Potash Inc., Potash Corp., Mosaic Co., Agrium Inc.; Intrepid Q1, Q2 and Q3 2009 represent a gross margin advantage of $203, $122 and $99 per ton over our North American competitors (2) Total COGS include: Cash
Slide 22: Diversified Markets and Customer Base
25 We sell potash into three different markets: Agricultural, Industrial and Feed Agricultural represents ~60% of Intrepid sales compared to an industry average of 92%(1) Agricultural primarily consumes granular potash and Trio™, industrial primarily consumes standard potash Standard potash costs le
Slide 23: Well-Defined Attractive Growth Opportunities to Increase Production and Lower Per Ton Costs
26 Capital Estimates ($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 24: HB Potash Solution Mine: Incremental Low Cost Tons
27 $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 25: Final Thoughts
28 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 26: Appendix
POTASH Appendix
Slide 27: 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 28: Long-Life Reserves
31 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 29: Select Pro Forma Data
32 Select Pro Forma Data Adjusted Pro Forma Net Income (1) (In millions) Pro Forma EBITDA (1) (In millions, except gross margin percentage) Pro Forma Net Sales (In millions) Pro Forma Earnings Per Share (Diluted) (1) Non-GAAP reconciliation available in this appendix $36.2 $55.1 $83.7 $41.4 $43.6 $3
Slide 30: Select Operating Data
33 Select Operating Data Potash Average Net Realized Sales Price (Per short ton) Trio™ Average Net Realized Sales Price (Per short ton) (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 (1) (1) $295 $425 $623 $762 $727 $674 $458 $400
Slide 31: Calculation of Pro Forma Adjusted Net Income
Calculation of Pro Forma Adjusted Net Income 35 Non-GAAP Reconciliation Adjusted net income is calculated as net income adjusted for significant non-cash and unusual items. Examples of non-cash and unusual charges include insurance settlements in excess of property losses, non-cash gains or losses a
Slide 32: Historical Quarterly Production and Sales Summary
36 Historical Quarterly Production and Sales Summary (1) Q409 Data represents the range disclosed as part of our Current Report on Form 8-K filed with the SEC on 1/21/10 March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, (1) Production volume (in thousands of
Slide 33: Carlsbad Potash Area
37 Carlsbad Potash Area
Slide 34: HB – Potash Mine Flood Area
38 HB – Potash Mine Flood Area
Slide 35: Low-Cost, Low-Sovereign Risk Expansions
39 19,033 Low-Cost, Low-Sovereign Risk Expansions Capital Cost Curve for Announced Potash Expansion Projects Capital Costs ($) / ton (1) Incremental Annual Production Capacity (2) MOS / PCS / Intrepid PCS CVRD (Argentina) MagMinerals (Congo) Greenfield Project Intrepid Greenfield (HB) Brownfield Pro
Slide 36: Global Industry Susceptible to Production Interruptions & Supply Shocks
40 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 37: Few Deposits, Fewer Global Producers
41 Few Deposits, Fewer Global Producers 2008– MM KCL Equivalent Tons (2) (3) (2) (2) Source: Public filings and select country data from IFA (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 Minerals pr
Slide 38: Potash Production and North American Inventory Levels
42 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 1,000
Slide 39: Demand Growth from Brazil, India & China Reaching Recommended Application Levels
43 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 40: Fertilizer Use Far Below Recommended Rates
44 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 41: Returns for Corn Growers
45 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 42: Return on Potash Investment for Corn & Soybeans
Return on Potash Investment for Corn & Soybeans 46 ROI assumes 165.2 bu/acre and $3.61/bu for corn, 44.0 bu/acre yield and $8.85 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
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