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8-K - 8-K - SCOTIABANK FERTILIZER AND CHEMICALS CONFERENCE (SEPTEMBER 2016) - MOSAIC CO | a8-kscotiabankfertilizeran.htm |
Scotiabank Fertilizer &
Chemicals Conference
Rich Mack, Executive Vice President and Chief Financial Officer
September 20, 2016
This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements include, but are not limited to, statements about the Wa’ad Al Shamal Phosphate Company (also known as MWSPC) and other
proposed or pending future transactions or strategic plans and other statements about future financial and operating results. Such statements
are based upon the current beliefs and expectations of The Mosaic Company’s management and are subject to significant risks and
uncertainties. These risks and uncertainties include but are not limited to risks and uncertainties arising from the ability of MWSPC to obtain
additional planned funding in acceptable amounts and upon acceptable terms, the timely development and commencement of operations of
production facilities in the Kingdom of Saudi Arabia, the future success of current plans for MWSPC and any future changes in those plans;
difficulties with realization of the benefits of our long term natural gas based pricing ammonia supply agreement with CF Industries, Inc.,
including the risk that the cost savings initially anticipated from the agreement may not be fully realized over its term or that the price of natural
gas or ammonia during the term are at levels at which the pricing is disadvantageous to Mosaic; customer defaults; the effects of Mosaic’s
decisions to exit business operations or locations; the predictability and volatility of, and customer expectations about, agriculture, fertilizer,
raw material, energy and transportation markets that are subject to competitive and other pressures and economic and credit market
conditions; the level of inventories in the distribution channels for crop nutrients; the effect of future product innovations or development of new
technologies on demand for our products; changes in foreign currency and exchange rates; international trade risks and other risks associated
with Mosaic’s international operations and those of joint ventures in which Mosaic participates, including the risk that protests against natural
resource companies in Peru extend to or impact the Miski Mayo mine; changes in government policy; changes in environmental and other
governmental regulation, including expansion of the types and extent of water resources regulated under federal law, greenhouse gas
regulation, implementation of numeric water quality standards for the discharge of nutrients into Florida waterways or efforts to reduce the flow
of excess nutrients into the Mississippi River basin, the Gulf of Mexico or elsewhere; further developments in judicial or administrative
proceedings, or complaints that Mosaic’s operations are adversely impacting nearby farms, business operations or properties; difficulties or
delays in receiving, increased costs of or challenges to necessary governmental permits or approvals or increased financial assurance
requirements; resolution of global tax audit activity; the effectiveness of Mosaic’s processes for managing its strategic priorities; adverse
weather conditions affecting operations in Central Florida, the Mississippi River basin, the Gulf Coast of the United States or Canada, and
including potential hurricanes, excess heat, cold, snow, rainfall or drought; actual costs of various items differing from management’s current
estimates, including, among others, asset retirement, environmental remediation, reclamation or other environmental regulation, Canadian
resources taxes and royalties, or the costs of the MWSPC, its existing or future funding and Mosaic’s commitments in support of such funding;
reduction of Mosaic’s available cash and liquidity, and increased leverage, due to its use of cash and/or available debt capacity to fund
financial assurance requirements and strategic investments; brine inflows at Mosaic’s Esterhazy, Saskatchewan, potash mine or other potash
shaft mines; other accidents and disruptions involving Mosaic’s operations, including potential mine fires, floods, explosions, seismic events,
sinkholes or releases of hazardous or volatile chemicals; and risks associated with cyber security, including reputational loss, as well as other
risks and uncertainties reported from time to time in The Mosaic Company’s reports filed with the Securities and Exchange Commission.
Actual results may differ from those set forth in the forward-looking statements.
2
Safe Harbor Statement
Background on New Wales Incident
3
Background:
• In August, Mosaic experienced a process water loss in its New Wales
phosphogypsum stack, caused by a sinkhole
• Incident was reported to federal, state and local officials immediately
• Little to no impact to production at New Wales
Next Steps:
• Pump out process water and continue monitoring water quality
• Advance investigation of sinkhole and develop repair estimates:
preliminary range $20-50M
• Continue to coordinate with government officials
• Local community outreach
Increase competitiveness
Mosaic’s Competitive Positioning
4
Potash: Long Life, Low Cost Assets
5
46%
54%
Potash Sales
2012-15
North
America Offshore
Corporate Headquarters
Business Unit Office
Deep Shaft Mine
Solution Mine
Export Terminal and Shipping
Potash Shipments
2012 - 2015
4
Potash: Long Life, Low Cost Assets
6
*Production costs are reflective of actual costs, excluding realized mark‐to‐market gains and
losses. These costs are captured in inventory and are not necessarily reflective of costs
included in costs of goods sold for the period.
*Assumes 1.30: 1 CAD to USD.
$53
$71 $66
$26
$18
$‐
$10
$20
$30
$40
$50
$60
$70
$80
$90
Esterhazy Belle Plaine Enterprise
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Cash Costs by Mine (95% Operating Rate)
Brine Cash costs including royalties, excluding resource taxes, brine and realized derivative gains/(losses)
average
Phosphate: Vertically Integrated, Low Cost
7
U.S. Phosphate Operations
53%47%
Phosphate Sales
2012-15
North
America Offshore
Phosphate Shipments
2012 - 2015
6
Effective Capital Management
8
* 2013 through 2015
18%
13%
29%
40%
Capital Allocation: Three Year Summary*
Maintenance
Organic Growth
Investment Commitments
Return to Shareholders
(dividends & repurchases)
($ in billions)
Total:
$11.5 Billion
A Balanced Approach to Capital Allocation
Increase competitiveness
Opportunities We See
9
Managing Costs and Capital
10
• $500 million Expense Reduction
• +$75 million from Support Functions
• Asset Optimization
• Lower Capital Spending
Esterhazy K3: Transformational Impact
11
0
25
50
75
100
125
150
175
200
225
250
275
300
325
0 10 20 30 40 50 60 70
US$/Tonne
Million Tonnes
Future State: MOP Cost Curve fob Port (K3 Scenario)
Source: CRU and Mosaic Demand: ~70mmt
Notes:
‐ fob Port for exporting producers, fob Mine for
those serving a domestic market
‐ K3 Scenario: Full Esterhazy ore output from K3
Mosaic
Continue to Assess Trade-Offs:
Dividend, CAPEX, OPEX and Credit Rating
12
($ per share)
$1.10
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
2011 2012 2013 2014 2015
Dividend per Share
Absolute Dividend Payout: Less than $400M
Cautiously Optimistic
13
Market
Environment
Mosaic’s
Actions
Capital
Stewardship
Mosaic is Well Positioned to Weather the Cycle