Intrepid Potash Idles West Facility

- May 10th, 2016

The decision comes amidst continued weakness in the potash market. Shares of Intrepid dropped on Monday’s news, but were back up 18 percent on Tuesday.

Concurrent with the release of its first quarter results on Monday, Intrepid Potash (NYSE:IPI) announced that it would idle its West facility and transition its operations to care and maintenance mode.
Located in New Mexico, the West Facility generated 42 percent of Intrepid’s potash production in 2015. “The facility’s operations have become increasingly less profitable in recent months as oversupply and foreign competition in the U.S. potash market has pressured prices,” the company said in Monday’s statement.
The West facility is a conventional mining facility, an operation that garners a higher cost of production than Intrepid’s solar solution mines. That’s a key consideration with potash prices falling as much as they have as of late—Intrepid reported a net realized sales price of $216 per tonne of potash for Q1, a 40 percent decrease year-on-year.
Roughly four years ago, potash prices were sitting as high as $470 a tonne.

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“This move, in combination with the transition of the East facility to Trio®-only production, removes our two most expensive potash facilities from production during this period of low potash prices,” said Intrepid president and CEO Bob Jornayvaz in Monday’s release. “We believe our remaining potash production facilities, which consist of our three low-cost solar solution mines, will improve our position on the world cost curve and provide the right model for our portfolio in this challenging environment.”
Earlier this year, auditors raised concerns that Intrepid was in danger of breaching its loan covenants due to increasing pressure on the potash market. The company reported a net loss of $20.1 million for Q4 2015.
However, Intrepid announced in its first quarter results that it had reached an agreement with its lenders to extend its credit facility until July 31 2016. It’s adjusted net losses for the quarter came in at $17.4 million.
Intrepid Potash isn’t the only potash producer under strain this year. Potash Corporation of Saskatchewan (TSX:POT), the world’s largest potash supplier, shuttered its operations in Picadilly, New Brunswick in January, after fast-tracking the closure of its Penobsquis potash mine in late 2015.
The market appears to have taken well to Intrepid’s moves to cut costs. Shares of the company dropped on May 9, but were up 18.22 percent on Tuesday to $1.11 per share. Roughly 2.08 million shares of Intrepid traded hands, compared to a daily average trading volume of 1.39 million.
However, shares of Intrepid Potash have lost 62 percent so far in 2016 and 91 percent over the past year.
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Securities Disclosure: I, Teresa Matich, hold no investment interest in any of the securities mentioned in this article.

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