The Mosaic Company: A guide and comprehensive analysis (Part 6 of 9)
Mineral properties and rights
As a distinctive asset in the fertilizer industry, rights and properties to mine are as important as a company’s mining equipment. Similar to the oil business, these companies bid the right to explore the mines. These contracts expire between 2023 and 2142. This fact, along with heavy capital requirements, creates high barriers to entry, benefiting companies already in the industry—like Mosaic.
Property, plant, and equipment
Even though Mosaic has a substantial amount of cash and large inventories (like any other company in the industry), property, plant, and equipment (or PPE) represent almost half of the company’s total assets and 75% of its long-term assets. Examples of PPE include buildings, machinery, and land.
Machinery and equipment
The largest component of Mosaic’s assets is its machinery and equipment. These represent almost half of Mosaic’s gross PPE. Machinery and equipment include all the heavy gear Mosaic needs in order to mine and process its products. These assets are located inside mines, warehouses, and blending facilities. For the year ending fiscal 2013 (May 31), the value of machinery and equipment on Mosaic’s books rose 18.9%, reflecting the company’s investment in new mines and plants.
Mosaic’s potash production facilities are located in Saskatchewan, Canada, while its phosphate production facilities are located around Florida. The company also has multiple distribution facilities and joint ventures in multiple continents that allow Mosaic to better commercialize its products. As we can see from the map above, many distribution facilities are concentrated in the U.S. and South America.
Investments and expansions
Over the past year, Mosaic has been aggressively expanding geographically. In fiscal 2013, there was an increase of 35% in its locations. Starting in 2013, Mosaic invested in another joint venture with Saudi Arabian Mining Company (Ma’aden) and Saudi Basic Industries Corporation (SABIC) to further its phosphates production facilities in the Kingdom of Saudi Arabia. The total investment will consist of around $7 billion, and productions are expected to start in 2016. During the next six months, Mosaic will complete the acquisition of a competitor’s potash facilities in Florida. Looking more into the future, there’s still space for the company to expand to Europe, Africa, and most of Asia.
Browse this series on Market Realist:
- Part 1 - The Mosaic Company: An investor’s guide to MOS’s business
- Part 2 - An investor’s guide to Mosaic’s revenue generation process
- Part 3 - Why lower sales have led to Mosaic’s shares falling 20.8%
- Investment & Company Information
- Mosaic Company