Intrepid Potash Inc. on Jan. 17 released preliminary sales and production results for the fourth quarter and full year 2011. Intrepid estimates that it produced 190,000-200,000 st and sold 175,000-185,000 st of potash during the quarter at an average net realized sales price of approximately $490-$500/st.
Intrepid noted that production results for the fourth quarter include the seasonal harvest from the Moab mine in Utah, and that potash sales during the quarter “were reflective of the decreased farmer demand for fertilizer” experienced in the latter half of the quarter.
“We believe this pause in demand was the direct result of farmers feeling a sense of economic unease over the general global market uncertainty resulting from the European debt crisis, political gridlock in Washington, and the slow pace of economic recovery,” Intrepid said. “Given this backdrop, farmers chose to focus on seed and equipment purchases and to defer purchase of their fertilizer inputs until the spring of 2012.”
For the full year ending Dec. 31, 2011, Intrepid estimates that it produced 805,000-815,000 st and sold 785,000-795,000 st of potash at an average net realized sales price of approximately $465-$475/st. Intrepid noted that it derives its average net realized sales price by subtracting freight costs from gross sales revenue, and then dividing that result by sales tons.
Intrepid’s cash cost of goods sold for potash for the full year, net of by-product credits, is estimated at $170-$180/st. The company said its higher per ton costs in the fourth quarter were largely driven by higher per ton costs from its East Mine due to maintenance and construction-related activities that impacted plant operations.
“Operating time at our East plant was reduced in part due to production disruptions associated with the construction of the Dense Media Separation (DMS) component of our Langbeinite Recovery Improvement Project (LRIP), as well as the initial commissioning of the new DMS plant and related technology,” Intrepid said. Commissioning of the DMS is expected to continue into early 2012.
Intrepid estimates that it produced approximately 30,000-35,000 st and sold roughly 25,000-30,000 st of Trio®, a product produced from langbeinite ore, during the fourth quarter, at an average net realized sales price of approximately $280-$290/st. For the full year, Trio® production was estimated at 140,000-145,000 st, with sales at 170,000-175,000 st, while the full year average net realized sales price was estimated at $230-$240/st.
Intrepid said its Trio® sales during the fourth quarter were limited by production and low inventory levels, with demand remaining strong. “We anticipate increased Trio® production once the DMS is fully commissioned,” the company said.
Intrepid also provided an update on its capital investment program. For the full year ended Dec. 31, 2011, Intrepid invested approximately $135-$140 million, which includes the DMS project and the installation and commissioning of a new compactor at its Wendover, Utah, facility. In 2012, Intrepid expects to invest approximately $225-$300 million funded from existing cash and investments and operating cash flows.
“Intrepid’s capital strategy remains focused on increasing reliability, efficiency, and productivity, all with the goal of decreasing per ton operating costs,” the company said.
Significant capital investments in 2012, beyond sustaining capital of approximately $50 million, will be focused on the construction of new compaction capacity at Intrepid’s North facility in Carlsbad, N.M.; the addition of new solution mining wells at the Moab facility; the completion of the granulation plant component of the LRIP project at the East plant in Carlsbad; and the company’s HB Solar Solution mine proj