Mosaic in Face Off

Mosaic Faces Off With Environmental Groups Over Florida Mine

“What happens in this particular case may determine how much, and in what way, they continue to mine this entire area,” Huber said.

Mosaic Corp. (MOS) is facing off with environmental groups in Florida so it can maintain output of a key fertilizer component.
The fertilizer maker has secured water permits necessary to expand its mining operations in central Florida. Yet Mosaic, the world’s largest producer of phosphates, is fighting an injunction issued by a federal judge last summer after the Sierra Club and local environmental groups accused the U.S. Army Corps of Engineers, the issuer of the permits, of violating clean-water requirements.
At stake when the two sides return to court next month is about a third of Mosaic’s phosphate production. The Plymouth, Minn. company is experiencing growing demand for fertilizer made from the raw material as farmers try to keep pace with booming global food needs. Phosphate along with nitrogen and potassium, or potash, have drawn increased attention from governments and investors illustrated last year by a $38.6 billion bid byBHP Billiton (BHP) for Potash Corp. of Saskatchewan (POT), a rival of Mosaic.
Mosaic plans to expand its mine in South Fort Meade, Fla. by 11,000 acres as production from the existing acreage dwindles. Investors expect the mine to keep operating, with earnings projections by stock analysts not factoring in the costs of production losses, said Horst Hueniken, an analyst with Stifel Nicolaus in Toronto.
“The collective wisdom of investors is this place is not shutting down,” he said.
Hueniken estimated the mine’s closure could add up to $690 million in annual costs for Mosaic based on current market prices for phosphate, which the company likely would have to buy to replace the lost capacity. Phosphate currently sells for about $150 a ton.
In a recent interview, Mosaic Chief Executive Jim Prokopanko expressed confidence the company would prevail, saying the injunction has a “slim to nil” chance of being upheld on appeal. The company expects to prevail on the overall lawsuit as well.
At issue in the case is whether the Army Corps issued a permit for the mine expansion too hastily and violated the Clean Water Act. The Sierra Club and local environmental groups sued to stop the expansion, saying it could contaminate drinking-water supplies and fisheries in the U.S. Gulf of Mexico, which is connected to the site through a network of swamps and streams.
The Mosaic mine is about 80 miles southwest of Orlando nearly smack in the center of the state. Phosphate deposits have long been mined in Florida, and the state accounts for about 25% of world production.
Sierra Club attorney Eric Huber dismissed Prokopanko’s confidence on the appeal as “puffery.” On average, only 10% of trial-judge rulings are overturned in the U.S. Court of Appeals for the 11th Circuit, where Mosaic’s appeal is being heard, the Sierra Club said.
“What happens in this particular case may determine how much, and in what way, they continue to mine this entire area,” Huber said.
Prokopanko said the Army Corps spent three years examining the company’s permit request, and that work shouldn’t be stopped by a single judge who looked at the case for a couple of days.
“This country would come to a screeching, roaring halt” if such decisions were allowed to stand, he said.
The federal appeals court will hear Mosaic’s appeal of the injunction April 4. A ruling isn’t expected for at least a month and could take four to six months.
For now, Mosaic can continue a 200-acre expansion of the mine, which will be depleted in May. After that, Prokopanko said the company could mine a 1,000-acre area for about 18 months while the case is heard, if need be. Mining the area will come at a higher costs, but will avoid wetlands on which the court case focuses.
CF Industries Holdings Inc. (CF) also mines phosphate in Florida. Chief Executive Stephen Wilson in July said the case was “a troublesome situation,” but noted CF has fully permitted mines that will last through the next decade.
-By Ian Berry, Dow Jones Newswires; 312-750-4072 ;
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