Executive Summary / Key Takeaways

• Strategic Rejuvenation Yielding Results: Intrepid Potash has successfully revitalized its core potash and Trio assets, driving significant production increases and substantial improvements in unit economics, notably a 12% reduction in potash cost of goods sold (COGS) per ton and an 18% reduction for Trio in the first half of 2025.
• Trio as a Standout Performer: The specialty fertilizer segment, Trio, continues to be a key growth driver, achieving record sales volumes and its third-best quarterly gross margin in Q1 2025, demonstrating strong pricing power and operational efficiencies from new technologies.
• Operational Headwinds and Production Adjustments: Recent challenges, including adverse weather at the HB mine and the unexpected absence of brine in the AMAX cavern, have led to a revised 2025-2026 potash production forecast of 270,000-280,000 tons, potentially increasing unit costs in the near term.
• Robust Financial Health and Capital Allocation Focus: The company maintains a strong liquidity position with $85.0 million in cash and no outstanding debt on its $150 million credit facility, enabling disciplined capital investments focused on core assets and setting the stage for future capital return discussions.
• Unique Market Position with Growth Catalysts: As the sole U.S. potash producer, Intrepid benefits from a logistics advantage and a balanced global market, with potential long-term value from its Wendover lithium project and the strategic value of its Intrepid South oilfield assets.

A Niche Player Forging Its Path in Essential Minerals

Intrepid Potash, Inc. (NYSE:IPI), founded in 2000, has carved out a distinctive position in the agricultural and industrial minerals landscape. Operating from Denver, Colorado, the company is the sole U.S. producer of muriate of potash (potassium chloride), a critical nutrient for crop development, animal feed, and various industrial applications. Beyond potash, Intrepid offers a specialized fertilizer, Trio, which uniquely delivers potassium, magnesium, and sulfate in a single particle. Its portfolio also extends to water, salt, magnesium chloride, and brine, serving the dynamic oil and gas industry through its Intrepid South assets in New Mexico.

The company's overarching strategy centers on revitalizing its core assets to achieve predictable, resilient, and consistent performance. This involves disciplined capital spending aimed at optimizing production and cost structures, ultimately striving for sustained free cash flow generation across market cycles. This strategic focus is particularly pertinent given the broader industry trends. The global potash market is currently characterized by tight supply and strong demand, with global consumption returning to historical growth rates of 1% to 2% annually. This demand is further supported by key international contract settlements and the delayed commissioning of significant new supply sources like the Jansen project, now pushed to mid-2027, which is expected to foster a more balanced market for several years.

In the agricultural sector, a weakening U.S. dollar and recent trade deals have bolstered U.S. corn and soybean exports, with corn exports up approximately 25% year-to-date. Importantly, non-corn and non-soybean crops, which account for about 70% of global potash consumption, continue to trade at elevated levels, providing a stable demand floor. The oil and gas industry, particularly in the Permian Basin where Intrepid's Oilfield Solutions operates, shows resilient activity, though a trend towards recycled water use presents an evolving dynamic.

Intrepid's competitive positioning is unique due to its domestic potash production, affording a significant logistics advantage and historically higher netbacks compared to its peers. While larger global players like Nutrien Ltd. (NTR) and The Mosaic Company (MOS) benefit from economies of scale and broader distribution networks, Intrepid differentiates itself through specialized products like Trio and a targeted focus on industrial applications. Against competitors such as Compass Minerals International, Inc. (CMP) and ICL Group (ICL), Intrepid leverages its integrated nutrient delivery solutions and U.S.-centric operations, though its smaller scale can lead to higher operational costs and greater sensitivity to commodity price fluctuations.

A History of Adaptation and Asset Revitalization

Intrepid's journey has been marked by strategic adaptations and a persistent focus on operational excellence. Early on, the company established key production facilities, including solution mining operations for potash in New Mexico and Utah, and the conventional underground East mine for Trio production in Carlsbad, New Mexico. A significant strategic move included a Cooperative Development Agreement (CDA) with XTO Holdings, LLC, initiated in 2011, for the joint development of potassium and oil and gas resources.

The company has also navigated significant challenges. A multi-year legal battle over Pecos River Water rights culminated in July 2025, with the New Mexico Supreme Court upholding a decision that severely limited Intrepid's water rights to 150 acre-feet per annum. This ruling necessitates future repayment for previously sold water, the form and timing of which remain uncertain. Operationally, the Trio segment faced asset impairment in 2023, prompting a strategic overhaul. In response, Intrepid implemented crucial operational improvements, including the introduction of new continuous miners and the restart of its fine langbeinite recovery system in Q1 2024. These initiatives, coupled with the commissioning of a new primary pond in Wendover in Q2 2024 and Phase 2 of the HB injection pipeline in September 2024, have been instrumental in revitalizing the company's asset base.

The positive impacts of these efforts became evident in 2024, with potash production reaching 295,000 tons, the best since 2020, and Trio achieving record sales volumes of 254,000 tons. Kevin Crutchfield's appointment as CEO in December 2024 further solidified the company's commitment to enhancing durability, consistency, and sustained free cash flow.

Recent Performance: A Story of Operational Turnaround and Emerging Headwinds

Intrepid's recent financial performance underscores the success of its asset revitalization strategy, even as new operational headwinds emerge. In the second quarter of 2025, the company reported adjusted EBITDA of $16.4 million and adjusted net income of $6.0 million, a substantial improvement from the prior year's adjusted EBITDA of $9.2 million and an adjusted net loss of approximately $40,000. This strong performance was driven by robust sales volumes and improving unit economics.

The Potash segment demonstrated significant operational leverage. For the first six months of 2025, potash production increased 8% year-over-year to 137,000 tons, contributing to a 12% improvement in cost of goods sold per ton, reaching $323 per ton. In Q2 2025 alone, potash sales rose to $33.99 million from $30.03 million in Q2 2024, and gross margin increased 46.7% to $4.86 million, marking its best quarterly figure in over a year. This was achieved despite a decrease in average net realized sales price per ton to $361 from $405 in the prior year, offset by a 25.5% increase in sales volumes to 69,000 tons.

The Trio segment continued its impressive trajectory, standing out as a clear success story. Year-to-date Q2 2025 production increased 8% to 132,000 tons, with cost of goods sold per ton improving by 18% to $234 per ton. Q2 2025 sales surged 25.2% to $33.21 million, and gross margin soared 270.6% to $8.09 million compared to Q2 2024. This was fueled by an 11.1% increase in sales volumes to 70,000 tons and a 17.2% increase in average net realized sales price per ton to $368. The Q1 2025 gross margin of $10.4 million was the third best in Intrepid's history, reflecting strong market tailwinds and operational efficiencies.

The Oilfield Solutions segment contributed $4.32 million in sales and $1.34 million in gross margin in Q2 2025, maintaining a gross margin of approximately 30% of revenue, consistent with historical averages. However, sales decreased by 21.9% year-over-year due to reduced oilfield activity around Intrepid South and a market shift towards recycled water.

From a liquidity perspective, Intrepid's financial health is robust. Cash and cash equivalents grew to $85.0 million by June 30, 2025, from $41.3 million at the end of 2024, primarily driven by strong potash and Trio sales. The company operates with no outstanding borrowings on its $150 million revolving credit facility and is in compliance with all covenants, providing ample financial flexibility.

Operational Details and Technological Edge

Intrepid's operational improvements and technological differentiators are central to its investment thesis. The Trio specialty fertilizer is a prime example of its product innovation. By delivering potassium, magnesium, and sulfate in a single particle, Trio offers enhanced nutrient efficiency for customers, providing more targeted solutions and superior performance in various agricultural and industrial applications. This integrated delivery mechanism translates into stronger customer loyalty and pricing power, contributing to more robust growth and margins for the segment. The operational efficiencies achieved through new continuous miners and the restart of the fine langbeinite recovery system have been instrumental in driving Trio's COGS per ton down by approximately $10 million to $12 million in annualized production costs, showcasing the tangible benefits of these technological and process improvements.

In its potash operations, Intrepid employs solution mining and solar evaporation, methods that are inherently sensitive to weather conditions. The company's ongoing capital investments, such as the new primary pond in Wendover and the HB injection pipeline, are designed to optimize these processes and enhance production reliability. A key long-term initiative is the development of the AMAX cavern at its HB mine. Despite a recent setback where a sample well drilled in July 2025 did not find the anticipated brine pool, management views AMAX as a critical component for Carlsbad's long-term production. The company is actively evaluating options for an injection well and pipeline, akin to how other HB mines were developed by injecting brine to fill cavities. This strategic approach aims to leverage existing infrastructure for future brine extraction.

Beyond its core fertilizer products, Intrepid is exploring new technological frontiers. Discussions are progressing for a lithium project at Wendover, a longer-term initiative with a multi-year timeline for commissioning once a partner is selected. This diversification into critical minerals represents a potential future growth avenue, leveraging the company's existing resource base and operational expertise.

Outlook and Strategic Imperatives

Intrepid's outlook reflects a blend of continued operational strength and strategic adaptation to new challenges. For potash production, the company has revised its guidance to between 270,000 and 280,000 tons for both the 2025 and 2026 calendar years. This adjustment incorporates a 20,000-ton reduction in H1 2026 due to above-average rainfall at the HB mine in Q2 2025, and an additional 25,000-ton decrease in 2026 due to the AMAX cavern setback. A planned HB mill shutdown in September 2025 will also shift 15,000 tons of 2025 production into spring 2026 to maximize late-season evaporation. Despite these near-term production impacts, management anticipates that improving potash market fundamentals and better-than-expected pricing will help mitigate the financial effects.

For Trio production, the full-year 2025 estimate is 235,000 to 245,000 tons, approximately 5% lower than prior year figures. While the Q1 2025 COGS per ton of $235 fully reflects recent improvements, a slight uptick of 5% to 10% in unit costs is expected in the second half of 2025 due to general cost increases and slightly lower production.

Third-quarter 2025 sales guidance projects potash volumes between 55,000 to 65,000 tons at an average net realized sales price of $375 to $385 per ton. Trio sales volumes are expected to be between 27,000 to 37,000 tons at an average net realized sales price of $383 to $393 per ton, with Q3 historically being the slowest period for Trio sales. Capital expenditure guidance for 2025 has been reduced to $32 million to $37 million, reflecting the deferral of spending on the AMAX extraction well and pipeline as options are re-evaluated.

Management remains committed to its core strategy of making operations more durable and consistent, prioritizing investments that support higher production and lower costs over the long term. This disciplined approach to capital allocation is paramount before committing to any capital return program for shareholders. However, the potential to receive the second guaranteed $50 million payment from XTO, possibly ahead of its seven-year deadline, is acknowledged as a significant catalyst for future capital return discussions with the Board. The recognized value of the Intrepid South Ranch, with "extraordinary amount of interest" in the Delaware Basin, also presents a strategic asset that could unlock further value.

Conclusion

Intrepid Potash stands at a pivotal juncture, having successfully executed a strategic revitalization of its core assets while confronting new operational realities. The company's unique position as the sole U.S. potash producer, coupled with its differentiated Trio specialty fertilizer, provides a robust foundation in a balanced global market. Recent financial performance, particularly the strong gross margins and improved unit economics in both potash and Trio segments, underscores the efficacy of its operational focus and technological enhancements.

While near-term potash production forecasts have been adjusted due to weather and the AMAX cavern setback, Intrepid's strong liquidity, debt-free balance sheet, and disciplined capital allocation strategy position it well to navigate these headwinds. The ongoing evaluation of the AMAX cavern and the long-term potential of the Wendover lithium project highlight a forward-looking approach to resource development and diversification. For discerning investors, Intrepid Potash represents a compelling story of resilience, strategic execution, and a commitment to sustained value creation, driven by its core assets and specialty product innovation, with potential catalysts for shareholder returns on the horizon.