The Mosaic Co. and CF Industries Holdings Inc. announced Oct. 28 that they have signed a definitive agreement whereby Mosaic will acquire the entire phosphate mining and production business of CF for $1.2 billion in cash plus $200 million of escrowed financial assurance earmarked for the closure and long-term care of phosphogypsum stacks under CF’s operation in Florida.
Under terms of the agreement, Mosaic would acquire the 22,000-acre South Pasture phosphate mine and beneficiation plant in Hardee County, Fla.; a phosphate manufacturing facility in Plant City, Fla.; an ammonia terminal, dock, and finished product warehouse facilities in Tampa; and the site of the former Bartow Phosphate Complex.
The CF facilities currently produce approximately 1.8 million mt of phosphate fertilizer per year, which would be additive to the annual 8.2 million mt currently produced by Mosaic. In addition, Mosaic is assuming liabilities related to the CF phosphate business, including responsibility for closure, long-term maintenance, and monitoring of the phosphogypsum stacks at the Plant City and Bartow complexes.
Mosaic and CF also signed strategic supply agreements under which CF will provide Mosaic with up to approximately 1.0 million mt per year of ammonia. Under one agreement, Mosaic will purchase 600,000-800,000 mt annually for up to 15 years from CF’s Donaldsonville, La., nitrogen complex, with pricing based on a formula tied to the prevailing price of U.S. natural gas. This agreement is expected to commence prior to January 2017. CF has a major $2.1 billion nitrogen expansion underway at Donaldsonville (GM Nov. 5, 2012, p. 1). CF says the ammonia sold at Donaldsonville to Mosaic will not come exclusively from the planned expansion. It could be sourced from other plants at the complex, or from other complexes, depending on the opportunities to maximize the overall production system. The ammonia price will be based upon the cost of natural gas delivered to the Donaldsonville facility. Natural gas supplied to Donaldsonville is generally priced based on the Henry Hub index.
Under a second agreement, Mosaic will purchase approximately 270,000 mt annually for three years from CF’s 50 percent-owned Point Lisas Nitrogen Ltd. joint venture in Trinidad at CFR Tampa market-based pricing. This agreement will commence at the close of the phosphate sale. CF noted that the Trinidad ammonia agreement is conditional on the phosphate sale transaction, but the Donaldsonville ammonia agreement is not.
CF Chairman and CEO Stephen Wilson said the transaction and supply agreements hold “significant strategic value” to both CF and Mosaic. “The sale of our phosphate operations represents good value for our shareholders, and the full set of transactions enables us to sharpen the strategic focus on our nitrogen business,” he said. “This agreement strengthens our confidence in the return we expect to generate from our Donaldsonville capacity expansion by providing a steady base demand for ammonia at a price that insulates us from movements in natural gas costs.”
In light of these supply arrangements, Mosaic announced that it will forego its proposed ammonia manufacturing plant at its Faustina, La., phosphate facility, which the company said would save approximately $1.1 billion in future capital expenditures. Mosaic’s ammonia expansion plans at Faustina, first announced in December 2012 (GM Dec. 31, 2013), would have added approximately 1 million mt of ammonia capacity, nearly tripling existing Faustina production.
“Uniting CF Industries’ phosphate operations with Mosaic’s creates an ideal combination that provides the opportunity for enhanced operating efficiencies and sustainability efforts, lower production costs, and reduced capital investment, creating value for our shareholders, customers, and employ