Mosaic Co., Tampa, recently outlined for analysts its optimization of operating assets, with President and CEO Joc O’Rourke saying, “the North American business is delivering production and cost improvements that were almost unthinkable a decade ago.
“Two significant highlights are the new integrated operations center in phosphates, which is efficiently and safely running our Four Corners field operations today, and our continued accelerated progress at Esterhazy as we near completion,” he continued. Esterhazy 3 is expected to be fully operational by mid-2022, with O’Rourke saying it would represent the delivery of this project over two years earlier than originally planned while remaining on budget.
When K3 ramps up, O’Rourke said the cash cost will be $50-$55/mt, almost $30-$40/mt less than when the company decided to proceed with the project. It will also add about 900,000 mt/y in tonnage and eliminate some $200 million in brine inflow costs.
O’Rourke said Mosaic is not expected to build a new phosphate mine in Florida anytime soon, citing plentiful reserves and next-generation technology. “One of the big things there is these guys when you talk about innovation, they are now pumping almost 20 miles from the drag lines to the plants,” he said. “That was unheard of a decade ago.
“So bottom line, we are continuously pushing out the need for new mines,” he said, adding that some of the investments the company had been talking about five or ten years ago have been pushed off decades.
Mosaic said the highwater mark for capital expenditure should come in this year at $1.1 billion, declining to $800 million in 2025. The company expects consolidated adjusted EBITDA to grow from 2020’s $318 million to $700 million in 2023.
O’Rourke mentioned two things that could change the capex scenario – M&A and the need to grow the premium product category, with MicroEssentials production capacity becoming a possible limiting factor. The company said it had record-setting growth in specialty products in 2020 to 4 million mt, and it expects 30 percent growth with a 2023 target of 5.2 million mt.
“Our collaboration with companies like Anuvia Plant Nutrients, Bio-Consortia, and Sound Agriculture, while still very early in the process, shows our commitment to expanding our specialty product portfolio over time to meet grower needs while also promoting solid health and sustainability,” he added.
O’Rourke noted that Mosaic Fertilizantes had record-setting financial results in 2020, delivering the best annual earnings and adjusted EBITDA since the acquisition from Vale despite year-over-year declines in average MAP selling prices. “We expect continued growth on many fronts as we look to the future with the combination of stronger grower economics, efficient assets, and our well-positioned distribution business, as well as the benefit of solid execution,” he said.
O’Rourke added that there is a great opportunity to expand the company’s distribution into northwest Brazil. “That’s where agriculture is growing, and it is growing quite rapidly there.” O’Rourke also noted the government of Brazil’s desire to have more domestic fertilizer production, and suggested that the government may do something about interstate taxes that have been restrictive. He added that there is a big advantage to having in-country production, which Mosaic already has, and he said he believes there are opportunities there.
Even though Tampa ammonia prices have been going up, O’Rourke said that right now the “CF contract is in the money.” As a result, he said that under its contract, it expects to push to take more under its 600,000-800,000 mt/y supply contract from CF, meaning the company will pick up more tons at a price below the market.
When prices were lower, he said the contract tons were under water. He said the ratios will change, but that overall the company would maintain its plans to buy about one-third of its ammonia from CF under a formula-based contract, one-third from its own Louisiana production, and one-third from the open market.