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The Mosaic Company Message Board

  • germantrader71 germantrader71 Feb 22, 2012 8:22 AM Flag

    Positive comment from Barclays

    positive comment from Barclays.... and they are Equal Weight (right now):

    Mosaic: South Fort Meade Settlement is Positive on Many Fronts

    Yesterday, after market close MOS announced that it had reached a settlement with plaintiffs (the Sierra Club, Manasota-88 and People for Protecting the Peace River) resolving legal issues it was facing in connection with its South Fort Meade (SFM) phosphate rock mine in Florida. Specifically, legal issues at SFM included a temporary injunction from mining (injunction was under appeal) and a pending trial challenging the validity of the federal wetlands permit issued by the Army Corps of Engineers for the Hardee County extension of the SFM mine.

    Based on our initial understanding of the settlement, which is subject to approval by the courts, MOS will be able to re-start mining at SFM in trade for the following commitments:

    - Preservation of approximately 130 acres of land otherwise eligible to be mined by Mosaic

    - Donation of the Peaceful Horse Ranch in DeSoto County to the State of Florida, or alternatively, a non-profit organization for permanent conservation (MOS purchased the ranch at auction for approximately $10 million in December 2011)

    - Certain mitigation, monitoring and site enhancements

    - Additional efforts to obtain permanent conservation easements along the Peace River

    The company estimates that of the original 10,856 acres set out in the SFM Hardee County extension, it will have access to more than 7,000 acres after the settlement commitments are accounted for, allowing the company to mine the site for approximately an additional 10 years.

    Settlement is Positive for a Number of Reasons:

    In our opinion, the announced settlement represents a significant positive for MOS on many fronts. From a stock overhang perspective, it not only resolves the short-term issue of the temporary injunction of mining both the up and low lands (we viewed a potential positive outcome to the appeal as an 18-24 month solution at best) but more importantly removes the longer-term concern of an extended mine shutdown or the requirement for MOS to conduct an area wide Environmental Impact Study (which could have taken a number of years to complete) in relation to the challenge of the wetlands permits. As a result, we see the settlement as resolving concerns over the long-term availability of phosphate rock from SFM.

    In the short term, the settlement resolves margin issues related to the purchase of third-party rock in MOS' phosphate business. For FY2012, we were modeling third-party phosphate rock purchases of ~ 2.0 mln tonnes versus normal annual third party rock purchases of ~1.0 mln tonnes. While we anticipate we will receive more details about the settlement and the impact on third-party rock purchases at today's analyst day, we highlight that the re-starting of the SFM mine should have a positive impact on MOS' FY2012 EPS via lower phosphate rock costs and therefore higher phosphate margins.

    With the SFM issue now materially resolved and the disposition of the first tranche of MOS shares held by Cargill previously completed, we believe the investment case for MOS becomes much more clear. We believe that MOS stock will now be able to participate more fully in strong agricultural fundamentals and hampered less by company specific issues.

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