Intrepid Potash, Inc. (IPI) stock intrinsic value fair value estimate & owner earnings analysis

WHAT THE BUSINESS IS Intrepid Potash is the only U.S. producer of muriate of potash, a basic crop nutrient. It also makes Trio, a specialty fertilizer that supplies potassium, magnesium and sulfur. Potash comes from three solution and brine mines: HB near Carlsbad, New Mexico, and Moab and Wendover in Utah. Trio comes from the underground East mine at Carlsbad. In 2025 sales were $298 million: 48% Trio, 39% potash, and the rest salt, magnesium chloride, brines and water. About 93% of sales were in the United States. Intrepid is a small producer that follows prices set by much larger global competitors. Its advantage is location. Being close to U.S. farm markets saves freight, and U.S. production and royalty taxes are lower than its Canadian rivals pay. Its earnings rise and fall with fertilizer prices. In 2025 potash averaged $353 a ton and Trio $367 a ton. HOW WE MEASURED EARNING POWER We start from cash generated by operations. We take out swings in working capital and the cost of stock pay, and we subtract the capital spending needed to keep the mines running. Several one-time items were handled as follows: - The large 2024 net loss of $213 million came mostly from a $194 million non-cash write-down of tax assets. It is not a cash cost and is ignored. - A customer prepayment built up through 2021 and was used up in 2022. We treated it as timing, not earnings. - The 2019 purchase of the Intrepid South land and water assets was an acquisition, not upkeep spending, so we left it out of capital spending. - In 2023-2024 XTO paid $50 million up front under a cooperation agreement covering oil and gas drilling in the potash area. Intrepid books about $4.5 million a year of income from it. We removed both the payment and that booked income from yearly earnings and valued the agreement on its own. On this basis, earnings per share over 2017-2025 ranged from a loss of $1.33 in 2023 to $5.85 in the 2022 price spike. The 2025 figure was $2.50. This period covers a full cycle: the 2017-2020 lows, the 2021-2022 boom and the 2023-2024 bust. We use the median, $2.06 a share, rather than any single year. In the first half of 2026 Intrepid sold its oilfield water and services business, which it now reports as discontinued, and received about $60 million. We cut the starting level by about $0.45 a share for the earnings that business contributed and credit the $4.54 a share of sale proceeds separately. That leaves a starting level of $1.60 a share. It is well below 2025's $2.50, and we assume no growth from it. First-half 2026 operating cash flow from the continuing business was higher than a year earlier, so there is no sign the starting level is too high. HOW LONG IT LASTS The independent reserve estimate puts potash reserve life at 25 years at all three potash mines, with resources lasting 33 to more than 100 years. At the end of 2025, langbeinite reserves for Trio were reported for the first time since 2022: 7.2 million product tons, roughly 26 years at 2025 production of 273,000 tons. That estimate assumes a price of $435 a ton, and no Trio reserves were reported at the end of 2023 or 2024, when prices were low. This is the main fragility in the case. THE CASES (6% discount rate) All three cases include the same three one-off items: - the $4.54 a share of oilfield sale proceeds; - the contracted $50 million Access Fee XTO owes when the first new drilling island is approved, or at the latest about seven years after the agreement. Discounted, it is worth about $2.75 a share; - a deduction of about $3.00 a share for mine closure and reclamation obligations, carried at $39.9 million. None of the cases include the Access Realization Fee (up to $100 million, owed only if XTO drills more), the Wendover lithium project (still before a final investment decision), the deferred AMAX cavern at HB, or any further price gains. None of these is secured yet. Bear, about $12 a share: Trio loses its economic reserves again as it did in 2023-2024, and potash prices stay near trough levels. Earning power averages $0.60 a share for the 25-year reserve life and then stops. Base, about $26 a share: $1.60 a share, flat, for the 25-year reserve life, then fading to zero by year 33 as operations move from proven reserves into resources. Bull, about $35 a share: the 2025 level of about $2.05 a share, excluding the sold business, holds. The mines' long resource life keeps them running for about 40 years. The Wendover pond completed in June 2024 and continued Trio pricing strength support this level. MARGIN-OF-SAFETY PRICE This is a cyclical, price-taking commodity producer, and its Trio reserves have recently disappeared in a downturn. That calls for a wide margin of safety. The margin-of-safety price is $15, about 42% below the base value and a little above the bear value. WHAT WOULD MAKE THIS WRONG The estimate would be too high if another multi-year price trough makes Trio uneconomic again, or if keeping brine supply at HB and Wendover needs much more capital than in recent years. It would be too low if prices stay closer to the 2021-2022 levels. Neither is assumed. One gap: the text of the latest quarterly report was not available. The details of the 2026 sale come from its reported figures, and the acquirer and terms could not be confirmed.