IPI - Intrepid Potash, Inc - Credit Suisse 26th Annual Chemical and Agricultural Science Conference Transcript

    Company Name:Intrepid Potash, Inc
    Event Title:Credit Suisse 26th Annual Chemical and Agricultural Science Conference Transcript
    Event Date:17-Sep-2013
    Event Time:04:00 PM ET


    Christopher Parkinson

    Analyst, Credit Suisse
    Good afternoon for the last meeting. I am very pleased to have David Honeyfield, President and Chief Financial Officer of Intrepid Potash. For those of you don't know the company Intrepid potash has assets in both and New Mexico and supplies over just 9% of U.S. demand annually and with significant growth initiatives coming into over the next several months I'm sure you all could hear from them today and with that David floor is yours.

    David W. Honeyfield

    President and Chief Financial Officer
    Well, thank you for joining us today, appreciate the introduction Chris. With me today is Gary Kohn, who is our Vice President of Investor Relations.

    I want to just take a brief movement to remind everybody that we -- that the presentation contain some forward-looking information. I urge everyone to read our cautionary statement regarding the forward-looking information that's contain in this presentation. We also include some non-GAAP measures in our website and in the presentation that we may refer to. So please make sure to take a look at those reconciliations.

    Interpid is the largest producer of potash in the United States. We supply approximately 9% of the U.S. market. We're also one of two global producers of Langbeinite.

    Langbeinite is the unique high value mineral that contains, potassium, magnesium and sulfate and virtually no chlorides. We currently have five active productions facilities and we are near in completion and construction of our sixth facility the HP Solar Solution mine. That mine is expected to increase our overall Potash production by nearly 25%. The incremental HP production is expected to have a cash cost per tonne less than half of our current rate moving us further to left on the cost curve.

    Intrepid stands out in the Potash industry for several reasons. We compete almost exclusively in the United States which is the large sophisticated and predictable market. Over time we've earned the highest average net realized sales price per ton and the highest average per ton cash margin compared to the average of our North American competitors.

    We accomplish this through our geographic advantage and our well developed marketing strategy of serving our diverse customer base in our end markets. We are increasing our margin advantage opportunity as we begin to lower our cash cost per tonne as production ramps us that our hp Solar Solution mine that will occur over the next several years we benefit from the strong capital structure that provide us flexibility and we have cash on hand to complete our current capital projects.

    We have been transforming Intrepid with a capital investment program that's design to drive growth of lower cash cost tonnes to increase flexibility and create margin and cash flow opportunities. We're just a couple of quarters away from completing this transformation and on concluding the construction on our major capital projects. As we enter 2014 we are poised to begin realizing the benefits of having come through this transformation.

    Most notably we expect to generate free cash flow in 2014 as our capital investment level will decrease significantly. And as we drive cash flow by lowering our cash cost to produce potash tonnes.

    Turning to the current potash market for a moment. The domestic agricultural market fundamentals remain solid albeit unpredictable from a timing perspective. We expect that farmers may delay potash purchases, while they wait to see where prices might settle. Yet farmer economics continued to be supportive of a positive demand environment as farmers look to maximize yields. Balance fertilization application remains a cornerstone to achieving the yields that farmers want.

    The piece we can never lose sight of is that farmers farm. Ultimately the fall season in the United States should be decent as many other farmers look to replenish the nutrients that were drawn down during this year's growing season particularly following the weather driven diminish spring fertilizer application season and the anticipated strong yield from this year's crops. Over the past several decades despite fluctuations in acres of corn planted, floods, drought years, changes in stocks to use ratios, annual consumption of potash in the U.S. has remained fairly steady at approximately 9.5 million tonnes per year.

    We've been fulfilling approximately 9% of this demand annually and we have the unique advantage of being able to run our facilities at full rates in doing so.

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