CRUs Breakfast Briefing

North American Nitrogen Investment

Alistair Wallace, Senior Consultant
IFA Chicago, May 2013

North American Nitrogen Investment

Why North America? How much? What does it mean for imports? Case study: Mosaic Faustina
2

What enabled the US Shale Boom?

Extensive shale plays

Regulatory incentives and mineral rights to landowners

Weak environmental legislation

Existing infrastructure and water treatment

Stable investment environment

In the US high natural gas prices resulted in a surge of domestic shale gas drilling...
9 8 7 6 5 4 3 2 1 0 7
6

2500
2000 Rig Count 1500 1000 500 0 2000 2002 2004 2006 2008 2010 2012

5
Tcf 4

3
2

1
0

9 8 7 6 5 4 3 2 1 0

US$/GJ

2002

2008

2000

2004

2006

2010

Henry Hub Gas Price Wellhead Price Shale Gas Production

2012

Rig Count

Gas Price
4

US$/GJ

...which was helped along by a highly developed conventional gas industry...

Mowry, Gammon and Baken Excello/Mulky New Albany Baxter, Mancos, Cane Creek

Marcellus

Barnett and Woodford Barnett Unconventional (red) and Conventional (blue) Natural Gas Basins

Fayetteville
5

...and by a favourable development environment

Incentives for private landowners favourable mineral ownership laws Free and responsive market access stemming from a long history of natural gas production, distribution and use

Mature and competitive service industry shale gas technology development is not at a standstill Extensive pipeline infrastructure proximal to both conventional and unconventional resources
6

The US shale gas revolution has rejuvenated US producers margins

US$/tonne 600 Henry hub price Henry hub (US$/MMBtu) 10.00 9.00 8.00

500

400

Closures and mothballing

7.00 6.00

300

Margins

5.00 4.00

200

3.00 2.00

100

Site costs
0

1.00
0.00

Jan-1995

Jan-2003

Jan-1996

Jan-1997

Jan-1998

Jan-1999

Jan-2000

Jan-2001

Jan-2002

Jan-2004

Jan-2005

Jan-2006

Jan-2007

Jan-2008

Jan-2009

Jan-2010

Jan-2011

Jan-2012

The North Americans have moved significantly down the curve since 2008
Site cash costs (US$/tonne)

500
450 400 350 300 250 200 150 100 50 0

20,000

75,000

10,000

15,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

70,000

80,000

85,000

90,000

2012 Urea Production (million tonnes)

95,000 8

5,000

WACC for DCF model

Country

WACC

China
USA Brazil Eastern Europe India Russia Qatar Egypt Nigeria

8.2%
9.1% 10.0% 11.0% 11.5% 12.3% 12.8% 13.5% 15.1%
9

Results of the DCF analysis

10

North American Nitrogen Investment

Why North America? How much? What does it mean for imports? Case study: Mosaic Faustina
11

US Nitrogen: 21st Century Gold Rush?

12

Over 5.0 million tpy of new gross ammonia capacity for $7.5 billion
Plant OCI Beaumont PCS Geismar RenTech Nitrogen Dyno, Waggaman Type Restart Restart Debottleneck Greenfield Gross ammonia 250 449 332 750 Net ammonia 250 241 225 100 Gross urea --185 -CAPEX* --0.1 0.8 Start up 2012 2013 2014 2015

Agrium Redwater
Mosaic Faustina CF Donaldsonville OCI Iowa

Debottleneck
Brownfield Brownfield Greenfield

55
720 1,090 726

-720 394 303

170
-1,200 730

0.2
0.7 2.1 1.4

2015
2016 2016 2016

Agrium Borger
CF Port Neal II Yara Belle Plaine II Totals
*US$ billions

Debottleneck
Brownfield Brownfield

490
750 750 5,218

--46 2,110

640
1,200 1,300 5,425

0.5
1.7 0.7 7.4

2016
2016 2017 --

*Note, Net ammonia has been estimated for some plants

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Over 5.0 million tpy of new gross ammonia capacity for $7.5 billion...

Greenfield

Brownfield

Debottlenecking/Restart

Current

Total N Demand

'000 N tonnes
19,000 17,000 15,000

13,000
11,000 9,000 7,000 5,000 2012 2013 2014 2015 2016 2017 2018 2019 2020 14

...and if everything being planned gets built,

Greenfield

Brownfield

Debottlenecking/Restart

Current Capacity

Total N Demand

'000 N tonnes
19,000 17,000 15,000

13,000
11,000 9,000 7,000 5,000

2016

2012

2013

2014

2015

2017

2018

2019

2020

15

North American Nitrogen Investment

Why North America? How much? What does it mean for imports? Case study: Mosaic Faustina
16

In our base-case scenario we expect over 3.0 million tpy of new solid urea

Expected Capacity '000 tonnes 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2007

Urea Imports

2012 Import level

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017 17

Some Canadian and Arabian Gulf exporters likely to continue imports

18

Expansions from CF and OCI will move the US close to self sufficiency...

Expected capacity '000 tonnes 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2007

UAN Imports

2012 Import Level

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017 19

...likely pushing out European, FSU and even Trinidadian imports.

20

Mosaic, Dyno, CF and OCI look likely to add over 2 million tpy of merchant NH3
Expected Capacity '000 tonnes 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Ammonia Imports 2012 Import Level

21

New ammonia capacity in Lousiana looks likely to squeeze out FSU imports

22

North American Nitrogen Investment

Why North America? How much? What does it mean for imports? Case study: Mosaic Faustina
23

24

US DAP site cash costs: 2012

US$/tonne 600

Other US

Mosaic

Tampa FOB

500
PCS

CF Industries

MissPhos

400 Faustina 300 Riverview 200 New Wales PCS Bartow CF Industries

100

4200

7800

1200

1500

1800

2100

2400

2700

3000

3300

3600

3900

4500

4800

5100

5400

5700

6000

6300

6600

6900

7200

7500

8100

8400

8700

9000

300

600

900

25

Mosaic Faustina: Ammonia cash costs

Year Gas price to plant Gas conversion efficiency Train capacity

US$/GJ GJ/tonne tpd

2012 3.02 31.75 3000

2017 5.46 31.75 3000

US operational days
Train operating rate Ex-works Cash Cost Feedstock cost Labour Electricity Consumables Working capital Maintenance & Sust Capital Total site cost

days
%

345
90%

345
90%

US$/tonne US$/tonne US$/tonne US$/tonne US$/tonne US$/tonne US$/tonne

95.9 4.3 1.7 3.4 2.9 13.8 122.0

173.4 4.8 1.8 3.8 3.3 16.8 203.8

26

US DAP cash costs: 2017 (leveraging expanded ammonia cap. at Faustina

US$/tonne 600

Other US

Mosaic

Tampa FOB

500

MissPhos

400

Faustina CF Industries

300 Bartow 200 Riverview New Wales

PCS

100

3000

8400

1200

1500

1800

2100

2400

2700

3300

3600

3900

4200

4500

4800

5100

5400

5700

6000

6300

6600

6900

7200

7500

7800

8100

8700

9000 27

300

600

900

This is the global curve in 2017 with Mosaic purchasing merchant NH3
Site cost (US$/tonne) 700 Global site costs (non-Mosaic) 600 500 400 300 200 100 0 0 10 20 DAP Capacity (million tonnes) 30 40 28 Mosaic (weighted avg.) Tampa FOB

...and with Mosaic leveraging NH3 production at Faustina?

DAP site Cost (US$/tonne) 700 Global site costs (non-Mosaic) 600 500 400 300 200 100 0 0 10 20 30 40 29 DAP Capacity (million tonnes) Mosaic (weighted avg.) Tampa FOB

Thank you for your attention

Questions?
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