Intrepid Potash Inc (IPI) 2015 Q1 法說會逐字稿

Welcome to the Intrepid Potash Inc. first quarter 2015 earnings conference call.

(Operator Instructions)

The conference is being recorded.

(Operator Instructions)

At this time, I would like to turn the conference over to Gary Kohn, Vice President, Investor Relations. Please go ahead Mr. Kohn.

Thanks, Joe. Good morning and thank you. Hello, everyone and welcome to our call today. I'll remind everyone that parts of our discussion will include forward-looking statements as defined by the US Security laws. These statements are not guarantees of future performance and are based on a number of assumptions which we believe are reasonable. These statements are based on the information available to us today and we are not assuming any obligation to update them. You can find more information about risks and uncertainties to our future performance in our periodic reports filed with the SEC.

During today's call, we will refer to certain non-GAAP financial and operational measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in this morning's press release. Our SEC filings and press releases are available on our website at IntrepidPotash.com.

Presenting on the call today are Bob Jornayvaz, our Co-founder, Executive Chairman, President and CEO and Brian Frantz, our Interim Chief Financial Officer. Kelvin Feist, our Senior Vice President of Sales and Marketing is also available for Q&A. With that, I'll turn the call over to Bob.

Thank you, Gary, and good morning to everyone. We entered this year with our strategy and business model in good shape. We have a clear objective of increasing shareholder value by delivering long-term profitable growth and increased cash flows. Our success in building a model of sustainable, profitable growth and cash flow is predicated on three objectives to which we have remained committed. First, selling into the best opportunities where we achieve the highest net realized price, margin and cash flow possible. Second, creating even more margin and cash flow per ton by expanding our low cost solar potash production while also lowering production costs at our conventional mines. And third, growing production and sales of our highly sought after special nutrient Trio.

We have for the past decade led the North American producers in average net realized sales price per ton for potash by more than 25%. We have achieved this advantage through a sales and marketing strategy that includes a distribution infrastructure through which we better serve our customers. We have also cultivated a diverse set of markets to reduce our exposure to downturns in any single segment. In addition, we leverage our advantaged geographic footprint to compete in favorable end markets.

The second part of our strategy is to lower cash operating costs across our facilities. We will lower our costs by increasing the number of tons we produce using our solar solution mining and solar evaporation expertise and assets. Solar production is integral to Intrepid's long-term margin and cash flow profile as these tons are produced at nearly $110 per ton less than our conventional tons. At full run rates, our solar assets operate at per ton cash costs that are well-positioned on the global cost curve.

We are pleased that HB is ramping up to full production this year and that our solar assets are performing quite well. This progress is apparent in our first quarter solar production which was up more than 50% from the quarter of 2014. For all of 2015, we expect our solar production to contribute more than one-third of our total potash production, up meaningfully from 2013.

The natural long-term opportunity for Intrepid is the expansion of our solar capacity and assets. We have more underground workings and potash reserves to access, including the AMAX mine. The AMAX properly fits nicely into our Carlsbad portfolio since its location will allow it, once permitted, to utilize our exhibiting HB infrastructure. The permitting process is progressing well.

Concurrent with expansion plans for low cost solar tons is the ongoing effort to lower costs at our conventional mines. We have several process improvement initiatives underway that are part of the systemic optimization of our facilities. Having the major capital projects in the rearview mirror allows us the time and focus to pursue refinements to our process that will lead to our goal of lower production costs.

Our third priority is to grow our Trio business. Trio is a major success for us and we believe that we have the ability to produce and sell even more tons than we do today. In the quarter, Trio generated more than $150 of cash flow per ton sold making it apparent why we were so eager to produce and sell even more.

We are confident in our ability to build on the sequential Trio success we have already achieved. We are continuing to enhance our pelletization rates and have several additional upgrades that we are currently plant testing. We are also under construction and installation of several pieces of new equipment and technology that Intrepid has designed, engineered and tested over time to enhance our recovery and process results.

Finally, we are taking the steps to access our untapped high-grade langbeinite reserves which exist below the ore zones we are currently mining. Importantly, as we have strengthened our balance sheet and position ourselves to continue generating positive cash flow, our philosophy towards capital structure has not changed and shareholder value is paramount.

Our first priority is to build cash on hand to provide us with the flexibility to weather volatility in commodity prices. Our second priority is to reinvest in our growth projects, including expansion of our solar capability and increase Trio production. Our third priority is to sustain our existing assets to maximize production at the lowest cost possible. We continue to evaluate the best way and timing to return capital to shareholders in this volatile environment.

I want to emphasize my confidence in Intrepid's future. We have made the investments to upgrade our infrastructure and to be appropriately positioned for the long-term, we are optimizing our operations, we have solar assets running well, we have increased cash flow which has strengthened our balance sheet and we'll fund our investments to grow our solar production and Trio capabilities. Now, Brian will update you on the financial results and outlook.

Thanks, Bob and good morning, everyone. We had strong first quarter results building on the momentum of the fourth quarter. Compared to 2014's first quarter, we expanded our gross margin and generated more cash flow per ton for both potash and Trio. Our average net realized sales prices for both potash and Trio increased over the fourth quarter of 2014. We earned adjusted EBITDA of $32.5 million, adjusted net income of $6.5 million and adjusted EPS of $0.09 a share. The first quarter of 2014 resulted in adjusted EBITDA of $16.8 million and an adjusted net loss of $1 million.

We generated $136 of cash flow per ton of potash sold in the first quarter. This is a 50% increase from last year's first quarter and was the result of higher net realized sales prices of $45 a ton combined with improved cash operating costs. We sold 231,000 tons in the quarter, down slightly from last year's very strong first quarter. Our first quarter of production was 237,000 tons which compares to 220,000 a year ago.

On the Trio side, we also expanded cash flow year-over-year by 61% to $156 per ton. The strengthening in Trio pricing continued into the first quarter and our posted price increases resulted in a net average realized sales price of $367 a ton. Comparing that to 2014's first quarter, we improved our cash operating cost by $35 a ton. Positive trends and reduced losses in the conversion of standard sized Trio to premium sized Trio have reduced our production costs for Trio.

We updated our financial outlook in this morning's press release. As the spring season progresses, we expect our customers to exit the season with little to no inventory as they await summer fill programs. The cycle is not new to us and I'm confident that we have the experience and customer relationships to be successful in this challenging environment. Expected potash sales volume for the first half has been modified by about 7,500 tons to the new midpoint from the previous midpoint. Second half expectation of potash sales volumes remains unchanged.

Cash operating costs for potash are still expected to be between $195 and $210 per ton in 2015. The ranges for both the first and second half of the year remain unchanged. It's worth noting that we expect the normal seasonal pattern for solar tons as well as the annual maintenance turn around at our West facility to cause second quarter's potash cash operating costs to be the highest quarter of the year. The trend through the third and fourth quarter should be for steady improvement with the fourth quarter being the lowest quarter of the year. This pattern is driven by the timing of the harvest and subsequent sale of low-cost solar production which resumes in the third quarter.

For Trio, the ranges are essentially unchanged from previous guidance. We have tightened the bottom end of the sales range for the first quarter and full-year, and slightly modified the first [half] cash operating costs outlook. We continue to anticipate our capital investment range between $40 million and $50 million for 2015 and expect the year to be cash flow positive. We expect an effective tax rate for 2015 of around 30%. Although the effective tax rate has increased as a result of our strong first quarter, we still expect to pay very little cash taxes in 2015.

The results for the quarter show the power of our business, most notably from our solar solution mines. By selling into the best margin and realized price opportunities, together with lower cash operating costs, we deliver strong earnings and cash flow. Operator, with that, this concludes our prepared remarks and we're ready to take some questions.

Thank you. We will now begin the question-and-answer session.

(Operator Instructions)

The first question today if from Mark Connelly with CLSA. Please go ahead.

Thank you.

Bob, two things: first, can you help us understand just a little more -- you said that you don't expect a very different restock, but you did take the volumes for Q2 down. So I'm not sure I understand exactly what's going on there. Second, as I think, bigger picture, about Trio, your operating rates are picking up. You say your sales may actually match capacity. So is it time for us to start thinking about the next Trio capacity expansion yet? Or maybe you could just talk to us about the way you're thinking about capital spending overall?

Let me answer the first question. I think it's the timing of when we see the summer fill this year. The spring is actually off to a much more normal season than it feels. We started out kind of warm, then we got cold, then we got wet. And so there was -- I'm not going to say a slow start, because if you look at where we are at corn plantings, right now, we're ahead of last year but we're well below the 5-year average. I think a lot of that discussion around second quarter and what we're going to see happen in the second quarter is the timing of when we might see a summer fill program.

Kelvin, I don't know if you want to add a little bit of color to that? And then I'll come back to your langbeinite question.

I think that's right. Mark, what we believe is that our retailers are very focused on the spring season right now. They don't really want to talk about a summer fill. We have to let them get through their spring here and then have them consider what they're going to do here for fall. So I think we just need to be patient with that.

So in effect you're saying that even though we're not having a particularly late season, we may have sort of a late response from the retailers?

Correct. I think we have to acknowledge commodity prices. And so I think there is a much more wait-and-see attitude that we're seeing from the customer. The customer that we're seeing planting his acres is not skimping on application rates. So we're seeing strong movement when the movement is occurring to the field. It's just I think there is a perception with corn and beans priced where they are, that there's, I would just say, a more cautious attitude in the market, and so, we're trying to reflect that caution that we're feeling in our release. So that's how I would describe it.

Okay. That makes a lot of sense.

As to langbeinite, we're making a lot of process improvements as we speak. We're doing some very aggressive testing in our pelletization program that we're seeing some very good results on. We're adding several pieces of equipment that we have designed, are currently under construction to the current process stream, if you will. We're making improvements to the dryer, conveyor belts -- all things that are built into our current capital budget and capital forecast that we have given you. We think we'll make significant process improvements and help us on our langbeinite tons.

As we move forward, as we have said before, we're sitting on some of the best langbeinite ore reserves in the world that are untapped that are underneath our current fifth and seventh ore zones that we're mining. At our East mine, we're mining the tenth, fifth, and seventh, and the ore zones that exist in the third and the fourth are very significant and high-grade. We're taking the steps to access those reserves.

So, as we have tried to say, we think we have great opportunities in the langbeinite with bolt-on incremental investments that are bite-sized pieces that will substantially improve our recoveries and allow us to produce more langbeinite tons in the future. And if I didn't answer your question, I'm happy to give additional clarity. So, Mark, do you feel like I answered --

That's great. That's very helpful. Thank you and thank you, Kelvin.

You're welcome.

The next question is from Sandy Klugman with Vertical Research Partners. Please go ahead.

Yes. Thank you and good morning.

There's been a lot of concern about how competitive the domestic potash market was going to get in 2015 as last year's Rio constraints eased and additional capacity came online in Canada. Now that we're four months into the year, how would you classify the competitive landscape relative to prior years?

We saw a few more -- we saw a little bit more juggling for market share late in the year and early in the first quarter. We saw some pressure with a little bit of additional tonnage from [uric ally]. We're not seeing massive infusions. And so, this is a great market and it's a great diverse market. And I think most potash producers around the world want the United States as part of their portfolio. And so we did see additional tons come into the marketplace, but not in anywhere near as intrusive as it could have been. The market has held up pretty darn well, considering when you look at some of the other commodity markets.

So I think once again -- I don't know if I'm answering your question, Sandy. I'm happy to elaborate more.

No, that's helpful and just a follow up.

There's a perception that potash is one of the more discretionary fertilizers. But just to clarify, based on your comments, it doesn't seem that what you're seeing is the growers' response to sub-$4 harvest month futures has been a reduction in application rates. I just kind of want to clarify that.

What we see with our well-managed corporate farmers, they don't skimp any on application rates in terms of what their agronomists and their crop advisors tell them to do. So on our sophisticated farmers, which, fortunately every year we see more and more farmers that are becoming more highly sophisticated, we don't see any skimping on application rates. Now there's still a percentage of farmers out there that, I would say, look to save. Very few truly skip.

So I just think that, as farming becomes more sophisticated, and we're seeing a much higher percentage of sophisticated, highly mechanized, thoughtful farmers. Same with bankers. And if you look at land leases, most land leases have requirements for levels of fertilization. So there's a lot of things working in the favor of optimizing yields -- economics. So we see most farmers try to optimize yields once they have decided to plant an acre.

I think the bigger variable is what is the gross volume of acres that are going to be planted? And I think everyone believes that we're going to see about 88 million acres of corn, which is right down the middle of the fairway and is going to wind up with very substantial potash use this year. So once again, does that give you a little color around how we're looking at it?

That's helpful. Thank you.

The next question's from Adam Samuelson with Goldman Sachs. Please go ahead.

Yes, thanks. Good morning, everyone.

I wanted to touch, go a little bit deeper on the pricing comment that you made earlier about just acknowledging more competitive markets as you go through the balance of the year. You look at the Midwest pricing. It's down about $20 from the start of the year. You look at the NOLA barge rate; it's down even more. Can we contemplate decline to that magnitude in your second quarter? Or were you able to presell tons at the higher winter fill level? Help us think about how you're contemplating pricing trajectory through the rest of the spring.

I think the best way, Adam -- it's a great question and we're very much taking a wait-and-see approach. You know, we have recently read the same press releases that you have read from the Russians and the Belarusians in terms of decreased volumes that they're going to export. I think as May plays out, and we see the corn crop get planted and the bean crop get planted, people will start to look and talk about and we'll see the degree to which we see tons imported in the United States, which would have the impact on pricing.

So we're taking a very much a wait-and-see approach. I don't think that lower prices are necessarily going to stimulate additional demand for a pretty stable US market in terms of tonnage used. We're just taking a wait-and-see attitude as to what additional tons are going to come into the market, if any, and what impact they're going to have.

So I understand that if we do see a summer fill program, that generally equates to a reduction in price. We're not hearing anyone talk about a summer fill program yet. And so, we're on the sidelines watching and waiting and just really ready to execute our marketing strategy.

Okay. And maybe along similar lines.

Can you talk about how your oil and gas business did in the quarter? The rig count is down by nearly half or more than half from the peak last fall. And obviously that's a meaningful market for you guys. How has the oil and gas business performed, and how has that impacted your mix in aggregate price realizations in the quarter?

We saw a reduction in volume but not necessarily price. Pricing for our industrial tons into the oil and gas market were really stable -- surprisingly stable. And so, once again, if we were to lower price for oil and gas products, we're not going to change the rig count. So, the rig count is going to be whatever the rig count is going to be, and Intrepid will react accordingly to whatever drilling activity occurs in various parts of our geographic region.

But the price of potash doesn't direct whether or not someone's going to stand a rig up. We don't have any direct impact on what's going to happen to rigs getting -- to whether or not someone stands up a rig. And so we're going to try to maintain as much pricing stability as we can. We definitely saw some drawdown on the volume. And we'll compact that and sell it into the ag market or some of our other industrial markets and continue to search out the best netbacks that we can possibly achieve.

Okay. And then just a quick last one for me.

SG&A guidance for the year ticked up. Why is SG&A going to be up about 10% this year?

Well, the first, which is a smaller amount of cash, revolves around some legal and professional fees around one -- I'm not going to say it's an ongoing issue -- but it's one issue that we took on this year that's a trade issue. So we wanted to reflect that. The other is some performance grants that I was granted that are all risk-based around the price of our stock if we achieve certain goals with price appreciation. So that's non-cash. That's how we account for it.

Brian, if you want to give any additional --

The only thing I would add to that, Adam, is the accounting recognition for that happens over the term of the grant regardless as to where the stock price goes. So you get that non-cash charge coming through, and that was the big driver for the increase in SG&A.

And it's a non-cash charge regardless of whether or not the stock is earned.

Okay. That's very helpful. Thank you.

Next question's from Don Carson with Susquehanna Financial. Please go ahead.

Just a follow up on pricing: so, basically, last year was an anomaly. We had a $30 price increase during summer fill, which I can't remember the last time that happened. Typically we have a $30 decline. Is it your feeling that, that's what dealers are anticipating, would be a summer fill discount as they're really waiting to see the details of that announcement? And then secondly, what impact are you seeing in terms of Agrium getting ready to place additional Vanscoy tons through their retail system either on the overall market? Or specifically, what impact might that have on Intrepid sales?

Yes, let's go back and clarify. You're right -- the price did go up last summer, and then the price has come back down. And so that's why, I don't know that we need an additional price decrease in the summer to potentially stimulate demand. I think demand is going to be what it's going to be, based on what acres are planted and where we wind up with the spring. So I think we have seen from a pricing standpoint, it's our belief that we have seen a lot occur over the last nine months. And I don't think additional price decreases will necessarily stimulate demand.

What was the second part of your question, Don? I apologize.

The impact of --

We have been hearing this question for a year now. We're just not seeing major impacts in our geographic markets from what Agrium is doing. Kelvin, if you want to add some color to that?

Don, let me add a little bit.

I guess the first thing is our distribution capability. And we have done a great job over the last few years of really managing that part of our business and making sure that we maintain our volumes with specific customers. So we're pretty comfortable with the strategy that we have put in place and expect to maintain our volumes with them. I think it's really more about being partners with the customer and we feel like we have some pretty strong relationships to rely on there.

And then just as a follow up -- Bob, you talked about making an evaluation of returning capital to shareholders. Obviously CapEx is coming down dramatically. You have got an underlevered balance sheet. What was the timing of when you're going to make this decision on returning capital to shareholders?

Well, we talk about it quite a bit. I mean, we watch the environment around us. We listen and evaluate very clearly the volatility in other commodity markets. And so, inherent in that decision is the discussion that you started with concern about price. We have to be very realistic that the Don Carsons of the world bring up price first. So we're always trying to balance what is the best way and timing to return capital to shareholders and still evaluate potential price risk and continued volatility. So we look at that, and as we do reduce, are looking at it very closely. And I really don't have anything to add to that, other than as the largest shareholder, we're aligned and I would love to see us start returning capital to shareholders.

Thank you.

The next question is from Christopher Parkinson with Credit Suisse. Please go ahead.

Thank you. You mentioned in your prepared remarks that your solar assets are operating currently at about $110 less than your conventional assets. Can you comment on the potential range of the level, given a different season than normal? So if you're above expectations or you're slightly below expectations?

Chris, this is Brian.

As we ramp up those solar assets, they continue -- I mean, HB continues to perform very well. And as you know, all of our solar assets contribute to low-cost production tons. And so as more of those come online, the better off we are. Those tons are coming in, as we said, at a $100, $110 less than the conventional ones. We expect that to continue going into the future. You are going to see a little bit of an uptick in our cash cogs as we said, during the second quarter here, as the Moab site and the HB site are in their normal summer shutdown during the evaporation season. When they ramp back up in the third and fourth quarter, again, you will see those cash costs begin to come down with that fourth quarter being the lowest quarter of the year.

Perfect. And just a quick follow up.

You mentioned you expect the Trio pricing remains stable from Q1 levels, but you did include a comment for at least the potential for further pressure in MLP markets. Is that solely due to just relative product demand dynamics? Or is there actually a geographic component in there as well?

Well, first and foremost, the Trio market is a growing market. The great part of the Trio market is that demand is outpacing supply pretty significantly. Whenever you're in a growing market and have a product where the need for it is growing, pricing stability and the price increase has been possible.

First, it's understanding that you're in a market that we're seeing greater geographic demand than we had ever anticipated and good solid demand for the product. So that's, first and foremost, is the difference. And given that there's only one langbeinite deposit in the world and it's in southeast New Mexico, we have seen people try to substitute and there aren't any substitutes for it. And you've seen the strength in the SOP market, which is an entirely different product and then it doesn't have the magnesium. But it doesn't have any chlorides. So, this is just a part of the market that is expanding and as farmers become more educated and they see the need for the magnesium and the sulfur, that's why we have the pricing power for the product.

Kelvin, you want to add any color to that?

Yes, maybe I'll just add a little bit.

I guess I really see the Trio market detached from the MOP market. That's an important consideration that you need to think about. We've gone through a very tight supply of our Trio products here this year again. So that's bolstering some of that side of the business. But I think there's a lot of acres that are looking for a low-chloride product. There's some significant deficiency of magnesium, certainly, on the east side and if you go through Nebraska, there's some of that. And then, there's stronger demand for sulfate. All that plays very well into the Trio business. I think finally, we've expanded our geography with that product. We're just covering more ground and able to supply some of that demand out there in various geographies.

Perfect. Thank you very much.

The next question's from Vincent Andrews with Morgan Stanley. Please go ahead.

Thanks, good morning everyone.

Could you just talk a little bit about -- I know you said that you're not expecting the dealers to finish with empty bins. Could you compare and contrast this year versus last year in terms of where we were when we came into the season with inventory? And I know last year there seemed to be a lot that was sitting there on consignment; it got drawn down and then there were logistical challenges refilling it. How do you think that all shakes out year over year?

Well, I think we wind up with a situation that was very similar to last year in terms of, at the end of the season, everyone was empty. And we then saw a price increase to restock. Now, I'm not suggesting that we're going to see the same thing that we saw last year, but we're going to be in a very similar situation in terms of the inventory that's out there. And so I think people are waiting to see how big the acreage is that actually gets planted and what the farmer economics look like. And I think that's what's going to drive potash pricing, is overall economics and perceived acres that might be planted on a going-forward basis.

There is a wait-and-see attitude. And we're just not seeing any pressure on the markets to try to push summer fill right now. From a producer's standpoint, we're happy to see that. We're on the sidelines servicing our customers' needs here. The good news is that we're going to see most of the United States, other than California, with great moisture levels. I think we're going to see demand for lots of different crops throughout the United States.

The only area that's really in severe drought continues to be California, and the customers that we're servicing in California, despite growing difficulties or differences, we're still seeing almond farmers with access to water. So that's really the only area.

Kelvin, do you want to add anything?

Yes, Vincent, the first thing is, retailers never want to carry any amount of inventory after a spring season. I think that's normal from last year to this year. I think the one difference that I would say is that logistics really drove a lot of their decision-making last year. If you remember, they never did really catch up. So I would say retail took a position earlier because of those tight supplies through the winter last year.

There's no sense of urgency. We haven't even finished our spring season here. So we don't really know the mindset of the retailer and the farmer until they get the seed in the ground and start thinking about fall. So we're just being very patient with that and I think that's the right thing to do right now.

And as a quick follow up -- Mosaic shut down its MOP at Carlsbad. Presumably that's a favorable dynamic for you. But maybe you could compare and contrast that with the pressure coming in from the Gulf with the imports?

Well, it's had a lot of benefits. It's had benefits from a power standpoint, usage on the highway standpoint, labor, dealings with regulatory authorities. We have seen a great access to the truck market that they used to service. Those customers are now coming over to us.

They did hold up -- they did produce enough inventory to be able to -- I think they actually shut down -- we're not sure of the exact timing. You would have to ask them. But it appears to us they shut down sometime in January or February. But produced enough, or some inventory, to try to take them through this month. So they have been in the market, but at a substantially reduced rate. We're looking forward to picking up that MOP market -- truck market -- as they finally exit stage left.

Okay. Thanks very much. Appreciate it.

The next question's from Joel Jackson with BMO Capital Markets. Please go ahead.

Good morning. Most of my questions have been answered but I had a couple.

There's been some chatter in some of the local media in New Mexico about water usage by some of your mines. And I think your prospective mine, AMAX. Can you give a little color on that, please?

Yes, it turns out that, that was -- we actually appeared in front of the Lee County Council just last Thursday, and there was another newspaper article correcting the first newspaper article. Unfortunately, with newspaper corrections, they don't quite get the same circulation as the first piece.

What they did not realize was that 89% of the water that was being used is non-potable water. And so there was an article suggesting that we were using 100% potable water. I think that issue has been very clearly put to bed. We spent last week down in New Mexico with various officials, news agencies, correcting the misconception. I think that's in the rearview mirror.

Okay. And finally, you seem to be talking about expecting Trio price stability, and of course a little bit of maybe potash price pressure. If I take those comments -- and we know that Trio, the Trio premium over potash has been eroding a little bit over the last few quarters -- does that mean you expect the Trio premium to expand in the next few quarters over potash?

Kelvin, why don't you answer that first.

But the one part that I just have to drive home is that Trio is a growing market. And so we see more demand all the way from the Pacific Northwest, going into the Midwest, all the way over to Florida. So it's a national market that has developed. The strength that we're seeing is because that product is more desired throughout the entire United States as we've gotten out and educated farmers and talked to retailers about the benefits of the product. The first part is to really understand is that, that is a growing market.

And so Kelvin, if you want to add some --?

Yes, I guess I don't think of it as eroding Trio price side of things. It's really about the mix of the products we're selling there, and we feel like it's very strong. And you're seeing pretty flat pricing on the Trio side -- flat to up. On the potash price side, we've already talked about that extensively, but really we think that it's more measured against the commodity pricing and a number of other things that are happening in the current market. But if you look globally, there's actually some strength, or some -- I would call it strength, actually -- in the international S&D balance for potash. To assume that North America is in a very different spot than that, I don't know if that's the right way to think about it.

My question was that the Trio price premium had been eroding a little bit in the previous quarters. But based on your commentary, would you expect the premium to rise over the next few quarters?

Are you talking about just the pure delta between --?

Yes, of your realized price of Trio over potash, yes.

Well, if Trio goes up and potash goes down, then, yes, that premium is going to expand. We don't see any reason for Trio prices to go down based on demand. And we've tried to give a pretty clear articulation as to some of the potential risks in the potash market that everyone's identified in their questions.

If you're talking about just the math equation of if Trio prices remain stable or firm or actually go up and potash prices go down a tick, then, yes, that premium will expand.

Okay. Thank you.

The next question's from Christopher Perrella with Bloomberg. Please go ahead.

Good morning. Thank you for taking my call.

Maybe I missed this earlier -- how much product have you forward sold into the second quarter at this point?

Kelvin?

Yes, Christopher, we tend not to sell a whole bunch right now. We have positioned a lot of product in for the demand for spring. But I would say that the industry tends not to sell a whole bunch forward here. And some of that is because we don't lead price. I guess we're in a position here where we'll -- everybody will be doing a fill at some point for fall. And I would say most retailers are in a position where they really want to be empty. It doesn't make sense for us to really drive to positioning tons right now.

Yes, there's an opportunity in between, that as farmers actually go out into the fields and put their crops in as they're doing right now, there are geographic areas that will run low or run out of potash and need an immediate restocking. And so, given our geographic locations, we have that opportunity in between, given our size and flexibility. So that is a better opportunity for us financially than to really trying to focus on summer pricing. I don't know if that makes sense or not, but.

Okay. No, so it's more of the second quarter is more about the taking -- opportunistically taking -- advantage of tons in the local market?

Exactly. As farmers are planting aggressively, there's certain geographic areas where they potentially run out. If you look at our Texas market; if you look at the markets slightly east, Texas has clearly broken its drought. But what's happening in Texas is they have had quite a bit of rain. So the Texas market will kick in and it's very much a truck market.

The same thing with western Oklahoma, southeastern parts of Kansas -- southwestern parts of Kansas. So those truck markets, you just have great opportunities into; and those are where you want to be patient and nimble and ready to go. So those are markets that are next in the phase.

All right. And shifting to the balance sheet quickly. Is there a cash level that you want to maintain at all costs with the volatility in the market? Is there a goal that you want to keep cash balances above X at this point of the market?

It's a good question. Those are the type of things that we continue to really evaluate.

Also evaluate the slight capital costs of bringing on significantly more langbeinite production than I talked about earlier in the prepared remarks; the bolt on projects at HB. As we navigate these kind of volatile waters, we're trying to establish what are those right cash numbers to keep on hand. And as we've said all along, as we continue to ramp up our solar production, which is substantially lower cost, you have a different ability to mitigate your risk by the cost structure of your production.

The good news is that we're getting closer and closer to that nexus which allows us to give more clarity around cash in the bank and timing of return to shareholders. Everything's going as planned, if that makes sense.

Okay. That's it for me. Thank you.

The last question today comes from Andrew Wong with RBC Capital Markets. Please go ahead.

Hey guys, so I just want to ask actually about Belarusian product coming into the US. We have seen members of the US Senate and the House raising some concerns recently. Do you guys expect any resolution from the government anytime soon? And have you seen any reluctance from dealers to take on some of those products?

Well, I guess what I can comment in terms of what we know is that the Treasury Department and the State Department are both investigating the importation of Belarusian tons. And those things don't happen overnight. So having learned more about sanction rules than I ever thought I would, the reality is that the State Department and the Treasury Department are investigating them. How they articulate their conclusions is unknown to us. I would imagine it's kind of like the IRS -- once they decide to conduct an audit, you don't know when or when that outcome may occur. We do know that there are numerous members of the House and the Senate that were surprised by the importation of Belarusian potash given the existing sanctions.

That's as much as we know and so, we're now following it, as is the rest of the fertilizer industry.

And on the second part of the question: reluctance, any reluctance by dealers?

I think -- we have heard both comments. We have heard both sides of that. We have had several comments that they're just going to stay away from it. And then we've heard of situations where people have purchased it. So I think there's a little bit of both. Because it is a very gray area.

Okay. That's fair.

And then just quickly on the AMAX approvals -- could you just provide some more details on the government or committee approvals and the timing around those?

Well, we've gone through BLM public scoping. We have gone through NMED scoping and one round of public comment. We have come through without any comments other than comments of support. We are now in the -- well, the BLM has certain different sets of phases within the EA, and it's working its way through the system. Our expectation is somewhere towards the end of the summer, early into the fall that those permits should be approved. So we're not seeing anything getting in the way of that. They're just progressing well and have their own life.

All right. Thank you.

I want to thank everybody for taking the time to dial in and we really appreciate your interest in Intrepid. We look forward to speaking with everybody in the near future and thank you again for your interest.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.