IPI recently posted its latest quarterly earnings, and the results are extremely surprising.
First, the company posted ‘losses’ of $13mm. However, their ‘losses’ are misleading, because non-cash charges account for a portion of their earnings.
Thus, when you strip away non-cash charges such as depreciation and amortization, the company generated around $7 to $10mm in profit last quarter, a $20mm swing!
Ultimately, what matters to current shareholders is our cash on cash return. Depreciation has already been paid for, and ‘paying’ depreciation now works in our favor, lowering our tax burden by artificially increasing our cost.
A second nugget was dropped by the CEO on IPI’s valuable water rights. According to the latest conference call, the company is on track to generate $10mm in cash from its water rights this year. Since most of the water infrastructure is already there, we can potentially assume that most of the cash generated from selling water is profit.
The CEO expects up to $30mm in cash per year from water rights alone.
The fact that the company is currently generating cash and can realistically earn $30mm/year in water rights are extremely positive signs for the company.
If I am right, and the water rights of the company are worth $2/share alone, then we basically own a water company called Intrepid Potash Inc. with a potash business for free, with other hidden gems such as tax assets and other mineral rights that could be monetized at any time.
Pretty funny when you think about it.