First Tidal Acquisition Corp T.AAA

RE:IPI and K+S under pressure today due to downgrades

[oceaneleven]

Agrimoney.com - https://www.agrimoney.com/news/news.php?id=6113

Potash price dip to force industry cuts - Intrepid
By Agrimoney.com - Published 01/08/2013

Intrepid Potash flagged the likelihood of potash industry project cancellations stemming from the break-up of one of the two marketing cartels even as it supported the economics of its own investment project.
The biggest miner of US potash said that the "extraordinary events of the last few days" - after Uralkali's break-up of the Belarusian Potash Company marketing consortium sparked expectations of a collapse in potash prices – represented a major setback to rivals' plans to raise production
Uralkali also forecast potash prices falling below \$300 a tonne, from current levels of about \$400 a tonne.
"We see the recent news about potash pricing as a further catalyst to cause additional delays or cancellations of other companies' expansion projects," Bob Jornayvaz, the group's chairman, said.
Many analysts are already betting on Germany's K+S and Anglo-Australia mining giant BHP Billiton cancelling their greenfield potash developments in Canada, although neither company has confirmed such speculation.
'Too early to speculate'
Indeed, a BHP source told Agrimoney.com that it was "far too early" to speculate on the future of group's Jansen project in Canada, which is down to produce 8m tonnes of potash a year – equivalent to more than 10% of current world capacity.
BHP, which is still exploring the costs and details of the project, is due this financial year, which ends in June, to decide on whether to press the button with Jansen completion.
"It is not at all clear yet exactly how the potash price will react to what has happened [as BPC]," the source said.
"You also have to remember that any decision on Jansen will be based on long-term events."
BHP has long said it would not, as a potash group, sell through the North American Canpotex cartel. Canpotex and BPC between them controlled some 70% of world volumes.
Lower production costs
However, Intrepid Potash said that the likely fall in potash prices ahead  -with the "near-term outlook for prices to soften" thanks to the "speculation" on values prompted by Uralkali's move - underlined the importance of its own capital projects, which it has said will cut the cost of production.
Mr Jornayvaz said: "We are poised to deliver lower cost production" as projects come onstream including a mine in New Mexico which will rely on sunshine to evaporate water from potash solution derived from pumping brine through an abandoned potash seam.
"The extraordinary events of the last few days in the potash market only confirm that we have taken the right steps to run and manage our business," he said, terming "imperative" the need to lower production costs in an "uncertain price environment".
"We will see our capital investment programme step down significantly into next year," he added.
'Reduced application rates'
Intrepid said that its costs of production for the April-to-June quarter was \$186 per short ton (\$205 per tonne) on a cash basis, up from \$167 per short ton a year before.
Potash sales by volume were, at 184,000 tonnes, in line with those a year before, although the average price realised fell by 13.6% to \$402 per short ton (\$443 per tonne).
The market came under pressure from "reduced application rates this spring due to persistent cool and wet weather across much of the US", Mr Jornayvaz said.
"The unfavourable weather this past spring compressed the planting season and impacted second quarter sales volume, which was below dealer and retailer expectations.
"Because of the compressed window for farmers to work in their fields, many reduced their spring application of potash in hopes that potassium reserves in the soil would be adequate for the current growing season. "
The group cut by 8%, to 180,000-200,000 short tons, its forecast for full year potash sales, reflecting the difficult spring.
Earnings fall
Group revenues for the latest quarter fell 6.2% to \$92.7m, with earnings tumbling 40% to \$11.3m.
Stripping out one-off factors, earnings fell to \$0.17 per share, below Wall Street expectations of a \$0.20-a-share result.