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Mosaic to Temporarily Curtail Production at Esterhazy Mine

Zacks Equity Research

The Mosaic Company MOS recently announced that it will temporarily curb production at its Esterhazy potash mine. Previously, the company had stated that it will reduce production of potash, which along with the latest move, brings total curtailments to up to 600,000 tons.

Mosaic does not expect the curtailment to affect the pace of development at the Esterhazy mine K3 project. Growing inventories caused by temporary slowdown in global potash markets and higher risks of a delay in Chinese contract settlement was instrumental in the company’s decision to increase the curtailment.

Notably, the company’s performance may be impacted by nearly $150 million in adjusted EBITDA, in case the full amount of the curtailment is realized in lower fourth-quarter 2019 sales.  

However, Mosaic continues to expect a strong application season in North America and Brazil along with better demand-supply balance in 2020. The company however noted that challenges in fertilizer markets will persist in the near term. It intends to provide an updated market view during third-quarter 2019 earnings results, which is slated to release on Nov 4, 2019.  

Shares of Mosaic have lost 37.1% in the past year compared with the industry’s 13.1% decline.

For third-quarter 2019, Mosaic expects phosphates sales volumes in the band of 2.2-2.4 million tons. The segment’s adjusted gross margin is projected in the band of $5-$15 per ton.

Potash sales volumes have been forecast in the range of 2.2-2.4 million tons for the third quarter and adjusted gross margin is projected in the band of $60-$70 per ton.

The company also expects sales volumes in the Mosaic Fertilizantes segment in the band of 3.6-3.8 million tons for the third quarter. It projects gross margin for the segment in the range of $30-$40 per ton.

Zacks Rank & Key Picks

Mosaic currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are The Scotts Miracle-Gro Company SMG, Royal Gold, Inc RGLD and Agnico Eagle Mines Limited AEM, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Scotts Miracle-Gro has an expected earnings growth rate of 21.3% for fiscal 2019. The company’s shares have surged 41.2% in the past year.

Royal Gold has a projected earnings growth rate of 82.1% for fiscal 2020. The company’s shares have rallied 57% in a year’s time.

Agnico Eagle has an estimated earnings growth rate of 158.6% for the current year. Its shares have moved up 37.5% in the past year.

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