Intrepid Potash Inc. reported a seven-fold increase in pro forma earnings for the second quarter ending June 30, 2008. Net earnings were $32.4 million ($.43 per diluted share) on sales of $105.2 million, compared to the year-ago $4 million ($.05 per share) and $56.1 million.
Six-month pro forma net earnings were $51.7 million ($.69 per share) on sales of $189.5 million, versus the year-ago $7.6 million ($.10 per share) and $104.3 million, respectively.
“We are facing the first demand-driven agriculture market in modern times,” said Bob Jornayvaz, Intrepid CEO. “The most recent USDA report indicates that yields will come in better than initially expected, yet still leave us with low levels of stocks. The increase in crop yield demonstrates the positive returns on the fertilizer investments made by the farming community and that fertilizers are doing their jobs. It is widely believed that a tight global food supply is a long-term situation and the demand for potash will continue to increase. Intrepid is focused on the long-term by appropriately and aggressively investing capital in new capacity and efficiency projects to bring on additional lower cost tons to satisfy the needs of our customers.”
Second-quarter potash sales were 213,000 st, down from the year-ago 245,000 st, though production was 210,000 st for the current and year-ago quarters. Second-quarter average potash prices were $425/st versus the year-ago $182/st. Sales volumes for langbeinite were 47,000 st, down from the year-ago 52,000 st. Average prices were up at $188/st from $109/st.
Six-month potash sales volumes were 426,000 st, down from the year-ago 454,000 st. Average prices rose to $360/st from $182/st. Langbeinite sales volumes were 141,000 st, up from 100,000 st. Prices were $145/st versus the year-ago $109/st.
Intrepid expects to produce 870-890,000 st of potash in 2008, with production costs of $140-$150/st. It expects to produce 210-230,000 st of langbeinite, with production costs of $75-$85/st. Intrepid posted potash and langbeinite prices as of Aug. 1 were $782/st and $356/st, respectively.
Intrepid said it spent $24 million in the first half on its capital program. This includes an upgrade of the mining fleet with the addition of three new underground miners, two replacement miners at the West Mine, and one miner to create an additional operating panel at the East Mine to allow it to increase ore throughput. The storage and hoisting upgrade at the West Mine has moved forward with the installation of the new cable and the upgrade of the skips. The next phase will be the construction of the underground storage system, which is expected to be complete in 2009. Intrepid said this should increase productive capacity without any additional fixed costs.
Intrepid said it is moving forward with the permitting process for the HB Mine, which is a solar evaporation solution mining project in Carlsbad.
Intrepid expects total capital expenditures to be $80-$95 million in 2008, and said that it is ahead of schedule in its core sustainability and debottlenecking plans.
Intrepid said the production costs increased to $142/st for the second quarter, up from the year-ago $120/st.
The company said it is focused on growing production volumes, with an eye toward the future. As a result, it has added a trainee program at its mining operations, added another operating panel in the East Mine, increased contract maintenance labor, and added personnel to increase its maintenance staff. It said this increase in personnel and higher natural gas prices have put upward pressure on production costs. However, the expanded workforce is designed to minimize the impact of any turnover and increase the reliability and throughput of the mines. Intrepid said it is adding full-time employees to its maintenance and mining support roles throughout the remainder of the year, which will be partially offset by a decrease in contract maintenance expense.