Intrepid Potash, Inc. (IPI) Q4 2011 Earnings Report, Transcript and Summary

Good morning, and welcome to the Intrepid Potash Fourth Quarter and Year End 2011 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference is being recorded today, Thursday, February 16, 2012, at 8:00 a.m. Mountain Time. It is my pleasure to turn the conference over to William Kent, Director of Investor Relations. Mr. Kent, please go ahead.

Good morning. Thank you, Joe, and thank you all for joining us today for our fourth quarter and year end 2011 earnings conference call. Participants from the company include Bob Jornayvaz, Executive Chairman of the Board; David Honeyfield, President and Chief Financial Officer; Martin Litt, Executive Vice President, General Counsel and Secretary; Kelvin Feist, Senior Vice President of Marketing and Sales; and John Mansanti, Senior Vice President of Operations. I would like to remind everyone that statements made on this call that are not historical fact or that express a belief, expectation or intention, including statements about our financial and operational outlook, are forward-looking statements within the meaning of the United States securities laws. These statements are not guarantees of future performance. A number of assumptions, which we believe are reasonable, were made in connection with the expectations reflected in such forward-looking statements. The forward-looking statements involve risks and uncertainties, which could cause actual results to differ from our expectations. For more information with respect to the risks, uncertainties and other factors which could cause our actual results to differ from our forward-looking statements, we direct you to the news release we issued last night and the risk factors and management discussion and analysis of financial conditions and results of operation in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q as filed with the SEC. All forward-looking-statements are qualified in their entirety by such factors. Our earnings news release, which is posted on our website, intrepidpotash.com, includes a reconciliation of certain non-GAAP financial measures to the most directly comparable GAAP measures, including adjusted net income and adjusted EBITDA, both of which will be used on this call. All references to tons are to short tons of 2,000 pounds. I'll now turn the call over to Bob Jornayvaz.

Thanks, Will, and thanks to those joining us today to learn more about Intrepid's achievements in our fourth quarter and year end 2011 results. Our fourth quarter performance was quite good. We earned $0.33 per diluted share or net income of $24.9 million, and our adjusted EBITDA was $49.2 million. For the full year 2011, we earned $1.45 per diluted share on 141% increase over 2010. And our adjusted EBITDA was $211.9 million, more than double our 2010 adjusted EBITDA. This financial performance is impressive, and of equal importance are the steps that we have consistently taken each quarter as part of the long-term strategy to grow our production, lower our operating costs and ultimately grow our business. Since we founded Intrepid Potash, we've made a serious commitment to reinvest in our business. We first acquired the Moab Mine over a decade ago and have consistently reinvested our cash flows. We've worked diligently since acquiring all of our assets to create a culture of innovation and operational discipline necessary to perform as a world-class potash producer. We continue to invent, innovate and commit the capital investment to modernize our previously uninvested facilities. To that end, we have invested nearly $0.5 billion in the business over the last 11 years to enhance the reliability and productivity of our operations. What is even more impressive is that even with this high level of capital reinvestment, we have a debt-free balance sheet with over $176 million of cash and investments on hand at the end of 2011 and the support of a $250 million unsecured line of credit. Our solid financial health provides us with the ability to execute on our robust capital investment strategy, as well as marketing our products with a focus on margin. In the last couple of years, we have executed on a number of transformational capital projects designed to increase our flexibility and create options to meet the needs of our diverse customer base. We've successfully completed the Moab Compaction Project, coming in under budget in late 2010, and it continues to perform very well and is delivering the benefits and marketing flexibility we expected. We then leveraged this knowledge gained from the project to bring the same level of flexibility to our Wendover operations through the installation of new compaction facility that was completed, again, under budget at the end of 2011. During 2012, we plan to expand our compaction capacities even further by beginning construction of our new North compaction facility. Once this latest project is completed, we will have the capability to compact nearly 90% of our current and anticipated potash production. In late 2011, we achieved an important milestone when we brought on line the Dense Media Separation component of our Langbeinite Recovery Improvement Project, as we referred to as LRIP. As we move through this commissioning stage for this new asset, our engineering and operations team continue to improve the process, design enhancements and take all the necessary steps to achieve and potentially exceed the improved Trio production rates expected for this project. We have also made significant progress on the granulation component of this project and anticipate having the LRIP fully operational in the first half of 2012. The ability to execute on these capital investment projects is a direct result of the focus and resources we have applied to developing an impressive internal engineering, technical and operating team. Completion of the Langbeinite Recovery Improvement Project will continue to move forward our goals of expanding production, lowering per ton cost and increasing marketing flexibility. I can't stress enough how positive the market has been for our Trio production as we continue to sell all we produce as fast as we produce it. Looking to 2012, the final permitting of the HB Solar Solution Mine appears imminent. The Bureau of Land Management and EPA review of the project is nearly complete with the publication of the notice of availability of the final EIS in the Federal Register on February 3, 2012. The schedule provided to us by the BLM shows the Record of Decision on the project in the first quarter OF 2012, just around the corner. The HB project is a game changer for Intrepid. It will increase our potash production by nearly 25%, and these new tons will be among the lowest cost tons produced in North America. I said before, 2011 was a great year for Intrepid. We deployed nearly 50% more capital than in 2010. Our production of potash grew by 86,000 tons. Our average net realized sales price for potash increased by 30%, and the cash we generated was reinvested to support our growth strategy. We enter 2012 with a tremendous sense of optimism. We have succeeded. We'll continue to succeed in making substantial investments in the business to deliver value to our stockholders. I'll now turn call over to Kelvin Feist.

Thank you, Bob. Favorable crop prices for corn, soybeans and other commodities continue to offer farmers an opportunity for solid profitability in 2012. Ultimately, the farmer can realize excellent returns on the crop nutrient investments this spring. Further, tight stocks-to-use ratio is translating into higher estimates for corn acreage in 2012 compared to 2011. We also expect to see an overall increase in productive land across all crops and associated competition for acreage. All of these fundamental factors should contribute to strong nutrient demand this spring. The fourth quarter was both rewarding and challenging. Our strong customer relationships helped our success despite some of the demand deferral that we saw during the latter half of the fourth quarter and into the beginning of 2012. We are starting to see signs of interest within the system as the spring season approaches. Last week, we attended the TFI conference in San Diego. The most prevalent theme was a risk-averse retailer taking a guarded stance, waiting for new farmers to show interest in crop nutrients. While this means they are risking supply chain logistics challenges, the dealer simply would rather not take a long position on product inventory. We believe that given the constructive crop economic environment and the overall fundamental is not a question of if farmers will buy, rather how much and when. Assuming current weather conditions hold, the Midwest will likely see an earlier-than-normal spring season. We also believe that the application season will get started in the next few weeks in the Southern Plains. Texas and Oklahoma should see a marked improvement due to some good rainfall in the last month that has helped to mitigate drought conditions and has improved buyer optimism. We continue to see good demand in the industrial potash markets and consistent demand in the animal feed business. The market for all grades of Trio is strong, and we expect demand strength to continue as the market is currently undersupplied. Based on this demand, we raised the posted FOB price for granular Trio to $340 per ton on January 30, 2012. With that, I will turn the call over to Dave Honeyfield to provide some final remarks.

Thanks, Kelvin. The growth path for production over the next 24 months is significant. With the completion of the commissioning for the Langbeinite Recovery Improvement Project by mid-year, we expect to see an increase in Trio production to an expected annualized productive capacity rate for this facility of 270,000 tons. Adding to this, first production from the HB Solar Solution Mine is expected approximately 8 months after we -- 18 months after we begin construction. The HB Mine will increase our potash capacity by nearly 25% and significantly reduce our overall cost profile. These projects will have the net effect of not only increasing production, but also reducing our per ton operating cost. This increases Intrepid's competitiveness in the broader North American market. If you review our fourth quarter and year end 2011 press release that we posted yesterday afternoon, you will notice that we've included the 2012 outlook that highlights where we believe certain operational metrics will be for both the first quarter and for the full year 2012. Please review this data as it should help folks in their modeling efforts. In conclusion, the fourth quarter of 2011 brought to close another successful year of growing our business and executing on our capital investment program. As Bob highlighted, our capital investments are both beneficial at an operational level and from a competitive perspective. The capital investment program is a fundamental component of Intrepid's growth strategy and is made achievable because of our strong cash flows and clean balance sheet. Through our major capital projects, we continue to move forward our goals of growing production, increasing flexibility and maximizing margin. 2012 will be a significant year for Intrepid with the completion of the Langbeinite Recovery Improvement Project, the start of construction of the North compaction facility and the anticipated permitting of the HB Solar Solution Mine. These are great times at Intrepid, and we believe we're on a clear path to growing our business and delivering value to our shareholders. We'll now open the line for any questions.

[Operator Instructions] The first question today is from Mark Connelly of CLSA. Kurt Schoen - Credit Agricole Securities (USA) Inc., Research Division: It's Kurt in for Mark. After lagging potash prices for years, Trio appears to be more robust than potash last year and going into Q1 as well. What is driving the relative out-performance? And do you expect Trio to start closing the gap with potash pricing at a more rapid rate going forward?

Kurt, this is Bob. When you go back many, many years, langbeinite used to actually be hot, priced a little bit higher than potash. It's a great product where people need the magnesium and the sulfur. And as we begin to see the market develop around the world and we really have focused on growing that market, customers are seeing the benefit of it. And it's reflected in the demand and in the price. So we're producing a product that the market really wants to see. At the same time, we're going to keep pace somewhat with the price of potash, however, reflecting and expecting the needs of our customers. So I think we're going to continue to just simply see robust demand. We're going to see strong and firm pricing. I don't know that it's going to exceed the price of potash as it did over a decade ago, but I do believe that the market is going to remain quite strong as we grow this market around the world and we experience kind of ever-continuing, sold-out conditions. Kurt Schoen - Credit Agricole Securities (USA) Inc., Research Division: Do you think the increased tonnage from the LRIP will disrupt the supply-demand balance at all?

No. In fact, we're going to have a hard time meeting the customer demand with the increased production. I mean, we have -- we continue to see that market grow, and we've done a great job of growing it both internationally and domestically. I just can't stress how much we're seeing that market grow. We're seeing our standard product sell as rapidly as our granular product, and we're seeing price strength in our standard significantly above what we used to. We used to have to discount our standard, and we're not having to do that anywhere near to the degree. In some cases, it's on parity. So that market continues to grow worldwide. So that's the exciting part. It's that we're out there growing a market. We're not by any stretch of the mind buying market share.

The next question is from Bill Carroll of UBS.

Assuming approval for the HB project is granted as expected, how would you assess the potential risk to completion in terms of technical issues, cost overruns and delays? At this point, is it largely a civil engineering project?

No, that's a great way to put it. This is Bob again. Let's not forget that we're going to be drilling wells to pump non-potable water into an old potash line. And so we've got a lot of history and experience drilling wells. We'll then be pumping that brine, that potash-rich brine out of that potash mine into solar evaporation ponds, which we operate at both our Moab and our Wendover facilities. So once again, we have a long track record of building and operating solar operation ponds. We'll take that crystal from that evaporation pond and run it through a flotation plant. We currently operate 3 flotation plants throughout our facilities, throughout our different locations. So we have a tremendous amount of expertise at operating flotation plants. So while there are always risks, we feel like we have the right team in place to master that and connecting all of those pieces together, obviously, pipelines. And once again, we've built pipelines. We've built pipelines under rivers. We've built pipelines across and through mountains. So we feel very technically confident on every piece of this project. Once we have permitting in place, which appears to be just around the corner, that greenlight enables us to go forward. So once again, I think your characterization of the civil engineering project is the right characterization. And we feel like we've got the right team in place to pull it off.

And if you -- it looks like Trio's cash cost of production after the first quarter at the midpoint of your forecast range are about $115 a ton. Is that a reasonable run rate beyond 2012?

Bill, this is Dave. Yes, I think what you're starting to see there is the fact that we're still in the commissioning phase for that project. But as we talked about, it's nearly a doubling of the production rate from the Trio facility, and the operating costs are substantially the same. So I think if you just run through the math, you see that those numbers end up coming in pretty close to where you are suggesting.

The next question is from Vincent Andrews of Morgan Stanley.

This is Ted Drangula sitting in for Vincent today. I guess the question on -- I guess the outlook for potash prices, whether it's in the Southwest or across the U.S., it seems like prices have been able to hold steady. Would you have -- do you have an outlook of what could affect the market or kind of a baseline view for 2012?

This is Bob again. We see firm agricultural economics. And so when we look at the variety of crops that we service throughout our entire customer base, we see very solid farmer economics. Now there's no question that we're seeing a bit of a standoff as we've seen before, where farmers are waiting to the very end to make their purchase needs, and there's no question that certain dealers, distributors could see a softening in prices and lower their prices in order to move things sooner. It's never fun when we see these standoffs. But the most important thing that we look at is what are the underlying economics underneath the entire variety of crops and the geographic diversity that we serve. And so from Intrepid standpoint, we see significant improvement due to the rainfall in our Texas and Oklahoma and Southern markets. We're seeing great economics for -- to go to work on head crops. We're seeing great economics within the corn market. So -- well, prices, due to this current standoff, if you will, could soften. We're ready for it. We've done a great job of marketing through the fourth quarter. And if we do see some softening, we don't anticipate anything significant. So I hope that answers your question.

Yes, that's helpful. I guess, as a follow-up, I mean, it seems to defy logic that you could have another sort of potash holiday that we had a few years ago. I mean, could we been missing something that soil tests are actually higher and that farmers don't need to buy this stuff? And I know you guys are inflated from some of this because of the markets you plant, but I guess this is kind of a broader question about the potash market. Is this just a matter of timing over the next number of weeks, or maybe a month or 2? Or is there something else we could be missing?

Kelvin, I'll let you.

Sure. Ted, maybe I'll just touch on the soil test. I think if you look across, it's very geographical in terms of what's out there in the soil. What we know is a lot of areas had some significant soil depletion of their K values because they grew a very big vegetative crop and in many areas, they had pretty good yields. So I think the reality is, what we see is, the farmer is looking to maximize yield. He's looking to balance his nutrition. And so he's looking at that soil test, but in many cases, he needs to apply a similar number that he did for the last year or previous years. So I guess we anticipate a very similar number to be applied. And we're getting reports back from some dealers this fall that rates are the same or above historic level. So that gives us a little bit of a comfort in what they might do this spring.

The next question is from Elaine Yip of Credit Suisse. Elaine Yip - Crédit Suisse AG, Research Division: It seems that based on your guidance, you're expecting potash in that to return close to normal levels in 1Q. And that seems to be more positive outlook than what we're hearing from some of your North American competitors. I guess, how much of your 1Q volumes have you booked already? What gives you confidence that you will kind of reach these normal run rates again?

Elaine, this is Bob again. When you talk about potash demand, what we're looking at is our natural geographic market. The market is much, much bigger than what we serve. And so due to the drought that we saw last year in Texas and Oklahoma, we've seen rains that -- we virtually had no market whatsoever in Texas and Oklahoma last year. And so due to changes in the weather, in our specific market, we're seeing improvements that lead us to believe that our market is going to be firm. So we're not necessarily speaking to the larger market, if you will. Now as we do kind of our domestic tour, we're seeing firmness across the United States. Whether or not we see as big a market or as firm a demand, I think that there's always the potential for the bigger market to see a little bit of a slide in the second quarter, but I would stress once again that in our very natural geographic market, we're seeing what appears to be the beginning of a pretty firm market. Elaine Yip - Crédit Suisse AG, Research Division: Okay. And then on your CapEx programs, if volumes or prices are weaker than you anticipate, how do you anticipate funding your capital projects? Is it simply tapping into that large amount of credit that you have? Or would you look at other ways to raise capital?

Elaine, this is Dave. What I'd ask you to look at is -- let's just start with the cash that's on the balance sheet that we have at the end of the year. What do we have? $176 million. And then look at the cash flow generation that we're seeing each quarter. If you look -- I mean, that's a pretty significant amount of cash flow. Our capital forecast for this year is somewhere in that $225 million to $300 million range. Clearly, there's always going to be the timing around permitting and such that may have an influence on that. That's why we've got the wide range. But the big projects are -- wrapping up the langbeinite project, starting the North compaction project, starting the HB project. We're doing some drilling in Moab. And we feel like that we'll fund each one of those out of cash and cash flow. So you should expect to see cash, the cash balance come down through the year. But know that that's what it's being used for, for the CapEx projects.

The next question is from Ben Isaacson of Scotiabank.

This is Shawn, stepping in for Ben. A quick question for you on your potash prices. Your competitors realized an average of a $20 sequential decline in their average North American realized potash price. And I'm just trying to understand if the $8 increase for you was due to a shift in regional sales to higher net back markets? I was wondering if you could provide some color on that and whether it's consistent in this quarter to date.

Well, let me give you a little bit of color and then I'll let Dave and Kelvin address some of the specifics. One of the things that Intrepid has always been able to focus on, because of our location of our facilities, is being a little more nimble in the marketplace and trying to meet specific niche pieces of the market, as well as moving a substantial baseload as well. So I would just reiterate that we have a more localized market because of where we are in our ability to service that diverse part of the market. It has served us well and is reflective in our net realized pricing. As to any differences, I'll let Dave address that real quick and how we see it.

Shawn, I'll just remind you that if you look at how we compare to other North American producers, our average net realized sales price in the fourth quarter was $97 higher than where they were, which I think really reinforces Bob's point as to, really, the geographic advantage we have. Like we've touched on, I wouldn't be surprised that some of the competitive market forces out there might cause pricing to come down a little bit here in the first quarter relative to the fourth quarter, but the point is it's pretty firm. And that geographic diversity that we have and we serve different crops in different regions in the United States really plays in well to our strength.

And let me go back and just reemphasize because it's very important to understand the importance of the compaction projects that we took on. Our ability to go back and forth between a compacted product to serve the agricultural markets and a standard product to serve the industrial markets and rightsize our product stream for each of those markets at any given point in time has served us very well. And we would ask you to continue to watch that difference in the realized price because that's what investing in product flexibility and optionality does for us here at Intrepid. As we continue to create these great products, like Trio, as we continue to invest in compaction capacity, it gives us market flexibility, which allows us to focus on margin.

The next question is from Lindsay Drucker Mann of Goldman Sachs.

I was hoping you gave the price list for Trio, I think, as of January. Can you tell us what the latest price list was for potash? I guess that will be called that. And also, when do you intend to release your next price list?

Lindsay, this is Dave. The -- just to reiterate, the FOB price for Trio is at $3.40 now. And that was really driven off of the demand strength that we continue to see in the market. Our posted price for potash, we haven't changed. So that continues to be at $5.60, FOB Carlsbad. Clearly, you can -- you guys can take a look at Green Markets and see what's happening in the Midwest. And we will participate in the market in certain places. But the -- I think the points around where our markets are and the strength of some of those local markets is really the one that I would try to take home here.

So based on your historic relationship between your pricing and what you see kind of in Midwest spot areas, exist at the spot market, how would you think about kind of the short-term negative impact on prices you might see in the first quarter?

I think if you go through our previous filings, we've said that our net realized price has always been in that kind of 85% to 90% of the posted price and we'll probably be towards the lower end of that. But I certainly feel like that's still a range that holds true for us given the diverse markets that we take care of.

Yes, and Lindsay, I don't want you to hear that we're in denial that there's a bit of softness in some of the markets. But that's how we see it, as a bit of softness in some of the markets, not necessarily all the markets.

Then can you just remind us, if you get approval as expected this quarter, what's the timeline to -- not the CapEx spending but more importantly just achieving your production targets, when should we start seeing fully loaded capabilities start to flow through?

Lindsay, it's about an 18-month construction cycle. So right out of the gate, we start with the drilling program, getting the pipeline done, construction of the ponds and then the mill into '13. We start to see the benefit of first production in the last half of 2013, and that will probably be about 1/4 of what the expected capacity is. 2014 will have the benefit of another year's injection, another year's of operation. We should see production somewhere in that 150,000 to 200,000 ton range during 2014. And then by 2015, it's really when you see us at where we believe those maximum rates will be, which are in excess of 30,000 [ph] tons a year.

The next question is from Joel Jackson of BMO Capital Markets.

I wanted to go back to Trio. I wanted to know if in the quarter you had a bit of a mix shifted towards international sales of Trio just on pricing and freight cost. And maybe you could talk about with the added supply you're going to have with Trio starting this year, where do you expect to place those tons incrementally, domestic versus offshore sales?

Joel, let me start with kind of the mix of where it's going to go. The great thing is -- and I don't want to sound too Pollyannaish, but we are really seeing the opportunity to put those tons pretty much anywhere we want to with some of the customers and the relationships that we've created. We've got some very strong customer relationships that we're going to service. It's almost as though we're on an allocation, if you will. So as we continue to grow our international markets, we need to service those and service -- our domestic customers as well. So I just can't reiterate how strong we're seeing that market around the world, as well as in our backyard. And with that, I'll let Kelvin address a little more specificity.

Sure. Joel, I guess what we're seeing going forward is a very similar numbers in terms of the split between domestic and international sales. It really comes down to an allocation and trying to manage customer expectations the best we can. So very similar to what we've reported, it may trend a little bit towards domestic here, maybe a 60-40 split of the volumes. But traditionally, we're slightly less than that, but that's sort of our plan and the expectation going forward.

Okay. And can you also explain -- there is a bit of kick-up in the by-product credits in the quarter versus what you've done in the last 1.5 years. Maybe a little bit of color on that?

Yes. Joel, this is Dave. I'd kind of ask you to look at that on an average basis. Most of the by-product credit for us tends to come through in the form of magnesium chloride. So you can link that somewhat to the winter. But if you average that out over the course of the year, I think we tend to see kind of in that $6 to $8 per ton by-product credit. Naturally, it's probably the right way to look at it.

And what do you think is the floor? You mentioned that you could see some retailers and distributors possibly offer a bit of more softer prices to try to finally get -- some of the farmers have a little more urgency and pick up some of their shipments for the spring. What would you think is sort of the floor to that softness over the next little while? I know it's a very leading question, but I can try.

There's a part of me that would love to say $1 or $2. But once again, I don't want to be Pollyannaish. I think it's very realistic that we can see $10, $15, if not as much as $20 in softness. But I think that those are going to be in localized markets. We're seeing firmness in a lot of our markets. And so -- but the good news is we are seeing, the phone is ringing. We're seeing people that want to buy potash. We see this market as being firm in our regions and in our natural market. So I wouldn't be surprised to see a little softness. But once again, I take people kind of on a world tour of the various products that potash is servicing, from sugar to cotton. We've seen a bit of a falloff in coffee, but we look at corn, soybeans, wheat economics. And I continue to ask people to really focus around the world when you look at palm oil economics. Agricultural economics, right now, are very firm. And so while we may see a very short-term, moderate, small, very small dip in the price, we're seeing good underlying demand worldwide.

Can I follow up to that and maybe ask you to maybe rank the markets that you serve and in terms of where you see the terms of, I guess, potential price strength down to price softness?

Joel, once again, I'm not going to really rank them, but I'll just kind of take you on a tour. When you look at the Pacific Northwest, it's a great, strong market right now. The California market is a very strong market. We're seeing our Texas and Oklahoma markets come back with the rain that they've had. I don't think by any stretch the drought has broken, but we're seeing good, solid firmness in those markets, our oil and gas industrial market with the price of oil picking up and the amount of shale plays that are going on. We're seeing our industrial markets pick up. We're seeing strength and solidity in our feed market. And as I've mentioned earlier, the compaction allows us to rightsize our products for each of those markets. And some of those markets change on a quarterly basis. So that flexibility and optionality had served us quite well. And as I've stressed over and over, it's reflected in our net realized pricing. So it's not a matter of ranking those markets, but it's the opportunity to have access to all of those markets and have access to them on an iterative, dynamic, real-time basis so that we can supply our customers on an as-needed basis.

[Operator Instructions] The next question is from Farooq Hamed of Barclays Capital.

My question really is just around development of the HB Mine. So after you get your permitting, you're going to start construction. I'm just wondering, do you have all the equipment in place and ready to go to start the construction process? Or are there any long lead time items that you're still waiting for?

Farooq, this is Dave. We're certainly doing everything we can to make sure we're prepared for that. Clearly, we're outreaching, making agreements and talking to vendors about availability. We're trying to get contracts less at this point. So we've got drilling contractors lined up. We've got pipe manufacturers and labor lined up. In terms of having contracts in place around the liner and construction, all those things are in the queue and in progress right now. So our sense is we're going to get started straight away as soon as we get the -- what we hope to be a favorable Record of Decision. I mean, at the end of the day, it's going to depend on what the Record of Decision says, but we're optimistic about that and planning accordingly.

Farooq, this is Bob. I can't stress how ready we are to start on that project.

Okay, that's good to hear. I mean, that's kind of -- the biggest, I think, concern is that, would there be anything that would delay you that you are in control of, if you get that Record of Decision on time. The next question is on the CapEx estimate...

Let me just answer that empathically, no.

Okay, that's good. In terms of your CapEx estimate for construction. when do you think -- or what's the timeline for revisiting and readdressing CapEx estimates?

Farooq, we'll do that throughout the year. I think you've seen us keep that number as current as we can in our historical practices. So really, probably the most realistic update will be at the end of the second quarter and we'll have -- we'll know on HB and we'll know -- we should know on North at that point in time. So those are probably the 2 biggest unknowns in terms of exact timing.

Okay, great. And maybe if I can just switch gears a little bit and just talk about langbeinite for a minute. So I guess, a little bit surprising commentary this quarter around the strength and demand for the standard product -- I think that's a little bit different from what we've heard in past quarters. That is really the strength and demand has been for the granular product and not so much for the standard product. I'm just wondering 2 things: One, do you see the strength in demand for the standard langbeinite product being sustainable? And two, how does that impact your thoughts on an increase in granulation capacity for your langbeinite product?

Farooq, that's a great question, but here's the really, really cool part. It's that our pelletizer will allow us to -- we produce a natural granular. And what we don't produce as a natural granular product, our pelletizer will allow us to compact 100% of the product. So once again, Intrepid will be able to use its newly built plants and design in a way to create maximum marketing flexibility so that we can rightsize the product for the market. Now I will say that the strength and the growth in the standard areas of the market have been a function of us going out and growing the market and showing the benefit of the product. So a lot of that product is going to people that are just seeing the benefits of it. They're liking the product and they're wanting the product. So the way the plant is designed is we would be able to produce the right amount of standard for the demand. So we're not going to have that disparity. We shouldn't see any kind of a significant delta in pricing because we can rightsize our product for the market.

The next question is a follow-up from Ben Isaacson of Scotiabank.

It's Shawn again. Regarding your Moab drilling, I was just wondering if you can give an update on the timing of when the drilling is expected to start. I think we're originally looking at late 2011. And if you could give us some color on when we can expect the project benefits to be realized. Is that still something we can expect to see in 2012?

Shawn, this is Dave. We just spud the first well here right at the beginning of the year, and it will take us the better part of the year to get that program drilling done. So I really wouldn't look for too much coming in, in 2012. We've incorporated, really, as a company, as you can see from our outlook numbers, what our expectations are around production. So hopefully, that gives you a good sense for it. But again, it's not as if you're going to see this 20% jump coming out of Moab straight away here. It's going to take us some time. And then there's always the -- you have to consider the overall mix for the company as well.

There are no more questions at this time. I'll turn the conference back over to Mr. David Honeyfield.

Thanks, Joe. We appreciate all the questions and the interest. And at this time, we just like to thank everyone for joining today's call and for making the effort and taking the time to learn more about Intrepid. Have a great day. Thanks.