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Big Deal Over Fertilizers

Phosphates: Mosaic expects to reap benefits by acquiring CF’s operations in a deal worth more than $1 billion

by Alexander H. Tullo
November 1, 2013 | A version of this story appeared in Volume 91, Issue 44

Credit: Mosaic
Mosaic’s deal with CF will augment its existing Florida phosphate operations.
This is a photo of a Mosaic phosphate mining operation in Florida.
Credit: Mosaic
Mosaic’s deal with CF will augment its existing Florida phosphate operations.

Mosaic has agreed to buy CF Industries’ phosphate mining operations in Florida for $1.4 billion. Mosaic says the transaction will expand its leading phosphate fertilizer enterprise while allowing it to avoid another $1.4 billion in planned capital expenditures.

With the transaction, Mosaic will get CF’s 22,000-acre South Pasture phosphate mine in Har­dee County, Fla. The site is in the middle of one of the world’s largest phosphate rock deposits and contiguous with Mosaic’s massive operations in the area. Mosaic is also acquiring a CF beneficiation plant, which separates phosphorus from other minerals; a phosphate fertilizer facility in Plant City, Fla.; and an ammonia terminal in nearby Tampa.

CF’s annual production capacity of 1.8 million metric tons of phosphate fertilizer will bring Mosaic’s capacity to 10 million metric tons. With the CF beneficiation plant, Mosaic will no longer have to build a new plant of its own, saving it $1 billion. Instead, it will spend $500 million to improve existing mines and develop reserves.

“The proximity of the CF assets gives us a unique advantage in maximizing the value of these assets,” says Lawrence W. Stranghoener, a Mosaic executive.

With the acquisition, Mosaic is also getting contracts to buy ammonia at prices tied to low U.S. natural gas costs. The company will buy 270,000 metric tons of ammonia annually from a CF affiliate in Trinidad for three years plus up to 725,000 metric tons from CF’s Donaldsonville, La., ammonia plant for 15 years. Ammonia reacts with phosphoric acid to make diammonium phosphate, the main phosphate fertilizer.

In light of the ammonia contracts, Mosaic will cancel plans for a $1.1 billion ammonia plant it was going to build in Faustina, La. Instead, the firm will spend $200 million on marine equipment to transport ammonia from Louisiana to Florida.

CF, for its part, will focus on nitrogen fertilizers; it is, CF claims, the world’s second-largest producer.

P. J. Juvekar, a stock analyst with Citi Research, calls the deal a “win-win” for the companies. Mosaic will clearly benefit from the proximity of CF’s operations to its own. And the sale allows CF to sell its phosphate business, he says, for a “reasonable valuation.”



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