Materials IPO: Intrepid Potash Competes with Mosaic

Intrepid Potash (IPI) is the largest US-based producer of potash – potassium chloride.

All quotations are from the company’s most recent S-1 filing with links provided.

Business Overview (from prospectus)

We are the largest producer of muriate of potash (MOP, or potassium chloride) in the U.S. and are dedicated to the production and marketing of potash and langbeinite (sulfate of potash magnesia), another mineral containing potassium. Potassium is one of the three primary nutrients essential to plant formation and growth. Since 2004, we have supplied, on average, 1.5% of world potash consumption and 8.5% of U.S. consumption annually, and we have supplied a considerably higher proportion of the potash consumed in the southwestern and western U.S., our core markets. We are one of two exporting producers in the world of langbeinite, a low-chloride fertilizer that is better suited than MOP for chloride-sensitive crops. We also produce salt, magnesium chloride and metal recovery salts from our potash mining processes. We own five active potash production facilities—three in New Mexico and two in Utah—and we have the nameplate capacity to produce 1,200,000 tons of potash and 250,000 tons of langbeinite annually. In 2007, we sold approximately 893,000 tons of potash and approximately 158,300 tons of langbeinite, an increase of 22% and 66%, respectively, over 2006. Our preliminary estimate of production for the first quarter of 2008 is 224,000 tons of potash and 56,000 tons of langbeinite as compared to 218,000 tons and 45,000 tons, respectively, in the first quarter of 2007.

Offering: 24 million shares at $24 - $26 per share. Net proceeds of approx. $559.8 million to be used for payment to Intrepid Mines in exchanges for assets, repayment of debt, production expansion, and general corporate purposes.


IPO Underwriters: Goldman Sachs, Merrill Lynch, Morgan Stanley

Financial Highlights:

Intrepid Potash was formed as a Delaware corporation on November 19, 2007 and, in connection with the completion of this offering, will receive a transfer of all of the nonmonetary assets of Intrepid Mining and will assume all amounts in excess of $18.9 million of Intrepid Mining’s existing liability under its existing senior credit facility and all other liabilities and obligations of Intrepid Mining, as described in the exchange agreement discussed under “The Formation Transactions”. Intrepid Mining will repay the $18.9 million that is not assumed by Intrepid Potash from the cash proceeds received from Intrepid Potash pursuant to the terms of the exchange agreement.

Top Competitors:

The supply of potash fertilizers is influenced by a broad range of factors including available capacity and achievable operating rates; mining, production and freight costs; government policies and global trade. Barriers to adding new potash production are significant because economically recoverable potash deposits with the appropriate geologic conditions occur rarely. Virtually all of the world’s potash is currently extracted from twenty commercial deposits located in twelve countries.

According to the IFA, in 2007, six of these countries (Canada, Russia, Belarus, Germany, Israel and Jordan) accounted for approximately 87% of the world’s aggregate potash production. Canada alone contains approximately one-half of the world’s known reserves as of 2007, according to the USGS, the vast majority of which are located in the province of Saskatchewan. This scarcity has resulted in a high degree of concentration among the leading producers. As depicted in the table on the following page, the top seven potash producers controlled approximately 83% of world potash production in 2007.

Five of the top ten producers are further concentrated into two marketing groups: Canpotex, which represents the three Canadian producers (PCS (POT), Mosaic (MOS) and Agrium (AGU)), and BPC, which represents a Belarusian producer (Belaruskali) and a Russian producer (Uralkali). Together, Canpotex and BPC producers controlled approximately 57% of global potash production in 2007. Additionally, PCS markets Intrepid Potash’s product outside North America and has equity ownership positions in a number of the leading independent potash companies: Arab Potash Company (Jordan) (26%), Sociedad Quimica y Minera de Chile (32%), Sinofert Holdings Limited (China) (19%) and Israel Chemicals Ltd. (10%).

In the U.S., three producers account for 100% of potash production. Intrepid Potash is the largest producer, with Mosaic (MOS) representing most of the remainder of domestic production. U.S. potash reserves are concentrated in the southwestern U.S. and account for approximately 4% of world production, according to Fertecon.

Intrepid Potash has estimated annual nameplate capacity of 787,000 K2O tons and estimated annual effective capacity of 635,000 K2O tons of potash and langbeinite. As reported by Fertecon, Mosaic’s U.S. production has estimated annual nameplate capacity of 625,000 K2O tons. Intrepid Potash estimates that Mosaic’s U.S. production has annual effective capacity of 553,000 K2O tons of potash and langbeinite.

Additional Resources:


Company website
Online roadshow
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