Compass Minerals Intl Inc

Please stand by. We're about to begin. Good morning, ladies and gentlemen. Welcome to the Compass Minerals Fiscal Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded. After the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Now, at this time, I would like to turn the call over to Mr. Brent Collins, Vice President, Investor Relations. Please go ahead, Mr. Collins. Thank you, operator. Good morning, and welcome to the Compass Minerals Fiscal 2023 Second Quarter Earnings Conference Call. Today, we will discuss our recent results and update our outlook for the remainder of 2023. We will begin with prepared remarks from our President and CEO, Kevin Crutchfield, and our CFO, Lauren Crenshaw, joining in for the question and answer portion of the call. will be George Shuler, our Chief Operations Officer, Jamie Standen, our Chief Commercial Officer, and Chris Yandel, our Head of Lithium. Before we get started, I will remind everyone that the remarks we make today reflect financial and operational outlooks as of today's date, May 10, 2023. These outlooks entail assumptions and expectations that involve risks and uncertainties that could cause the company's actual results to differ materially. The discussion of these risks can be found in our SEC filings located online at investors.compassminerals.com. Our remarks today also include certain non-GAAP financial measures. You can find reconciliations of these items in our earnings release or in our presentation, both of which are also available online. The results in our earnings release issued last night and presented during this call reflect only continuing operations of the business other than amounts pertaining to the condensed consolidated statements of cash flows, or unless noted otherwise. I'll now turn the call over to Kevin.

Thanks, Brent. Good morning, everyone, and thank you for joining us on our call today. Before beginning the call, I wanted to welcome Jill Gardner to our board of directors. Jill joined the board last week and brings a wealth of financial and extractive industry experience to our board. We're looking forward to her contributions and insights. Now, halfway through our fiscal year, we continue to push forward in our pursuit to create value for you, our shareholders, seizing opportunities and mitigating challenges when either arise. To guide us in this pursuit, we focus our efforts around six strategic objectives that we set for the organization in fiscal 23. You've heard me outline these objectives on past calls, And I'll take a few minutes to provide an update on each of those areas. I'll then comment briefly on the quarter before turning the call over to Lauren to discuss our financial performance in more detail. Safety and specifically our drive towards zero harm will always be a key area of focus for our company. We owe it to our employees and their families to foster an environment where employees know they will go home to their families at the end of the shift in the same condition as when they left. Safety performance is also often a leading indicator of operational performance. The safest minds in the world are also the most productive. We make safety a priority because it's the right thing to do for our people and it's the right thing to do for our business. Last year was an outstanding year for safety performance, and I'm proud to say that year to date we're performing even better with our track safety metrics than we did in fiscal 2022. Achieving zero harm is a high bar, particularly in the complex operating environment that we operate in. However, several of our sites have proven it's possible and will continue to pursue that goal each and every day. With respect to our salt business, our objective for 2023 was to improve the profitability of that segment to levels that we've historically delivered, specifically we've talked about restoring profitability to around $20 of EBITDA per ton for the segment for fiscal 23. As I've outlined previously, we approached the 23 bidding season with a disciplined pricing strategy and focused on securing sales commitments in markets that are geographically advantageous and relatively efficient to serve. For the second quarter, we saw the average gross sales price for the SALS segment increase 12% to approximately $82 per ton, driven by improved pricing in highway deicing salt from the comparable period last year. Favorable pricing dynamics combined with essentially flat distribution and cash operating costs resulted in EBITDA per ton increasing 64% to just over $20 per ton, up nearly $8 from roughly $12 per ton last year. Although the year's not over, I'm pleased with the progress the team has made to restore profitability following the extremely challenging inflationary environment we experienced in 2022. Charting a path to improve the reliability and sustainability of our SOP production was another strategic objective for this year. Though we continue to face significant headwinds on this front, one thing I do want to make clear is the reduced sales volumes year over year that we've experienced during our second quarter are not a function of production issues. Operationally, we've been ready to service customer demand. However, ongoing precipitation challenges in our key California market have continued to delay the application season for growers. Again, when those challenges abate for our customers, we stand ready to respond. From a longer-term perspective, however, our focus with respect to this part of our business remains optimizing sustainable production levels of our Ogden Pond Complex across a variety of weather scenarios. Progress continues to be made in that regard and we'll provide a more detailed update on this initiative when appropriate. The next objective I want to touch upon involves the advancement of our battery grade lithium development at Ogden. As indicated in our release yesterday, we were engaged in what turned out to be a particularly busy legislative session in Utah this past quarter for those of us who share in the overall goal of maintaining a healthy Great Salt Lake while at the same time balancing the needs of its many diverse stakeholders, including the mineral extraction industry. Specifically, legislation promulgated as a part of this recent Utah state legislative session introduced new regulatory and cost elements into the framework that will govern the development of lithium on the Great Salt Lake And certain of these provisions relating to severance taxes, royalty agreements, leasing rights, and burn management have created some near-term uncertainty until regulatory rulemaking can be completed in the coming months. Our operations at Ogden were founded over 50 years ago with the original intent to extract lithium. Unfortunately, at that time, a commercially viable technology wasn't available. Today, with our technology provider, energy source minerals. We have a commercially viable technology that allows us to extract a fourth mineral from our existing operating stream and recycle the brine back into our pond system. Lithium development is new for the state, and we fully appreciate its desire to receive fair value from the development of that resource. However, we'll continue to pursue this opportunity only if two critical criteria are met. Number one, that it makes economic sense for our shareholders from a risk adjusted financial return perspective. And two, predictability of the regulatory regime in Utah. These criteria are true in any mining jurisdiction or project, and Utah can be no exception. Historically, Utah has long been considered an attractive operating environment due to their historic understanding of the economic and social value our industry creates. And based on preliminary discussion, we expect this mindset to continue. As we've previously announced, the full development of phases one and two of our lithium project would represent an approximate $1 billion investment on the Great Salt Lake. Clearly, to justify that investment, we must have clarity and certainty on the evolving regulatory framework we will be working under to assess the potential impacts on our project. Therefore, as we continue advancing the demonstration unit presently under construction and proceeding with developing an FEL2 engineering estimate with all deliberate speed and an abundance of caution, we'll defer publicly sharing the updated disclosure of any project-related economic and engineering estimates until we have such clarity. Again, we've been a responsible and productive operator on the Great Salt Lake for over 50 years. We've been an important contributor to the Utah economy for decades, and this project has the potential to bring Utah to the forefront as part of the domestic supply chain for critical minerals. I'm cautiously optimistic that as we've done time and again with regard to our other mineral resources on the Great Salt Lake, we will reach a favorable accord with the state of Utah on a path forward for our planned lithium development that serves the best interests of all stakeholders. Moving on to our other commercial growth pillar, yesterday we announced that we had acquired the outstanding 55% interest in Fortress North America, bringing our ownership stake to 100% for upfront consideration of approximately $26 million in cash, contingent milestone consideration in cash or stock valued at approximately 28 million, and an earn out of 30 cents per gallon of product sold over the next decade. For those of you who are not familiar with Fortress, it's a next gen fire retardant company that utilizes our magnesium chloride and other salt production as the key ingredients in its formulations of aerial and ground fire retardants. The aerial fire retardant industry has essentially been a monopoly for over two decades. Bob Burnham and his team are entrepreneurs, as well as fire, aviation, chemistry, and government contract experts, who saw an opportunity to develop a suite of products that were more effective and better for the environment than the incumbent products being used. Our relationship with Fortress began in early 2020, initially as a supplier of magnesium chloride, which we produce out of our Ogden facility. Through the years, we had the opportunity to work closely with Bob and his team, and as we learned more about their business, we ultimately made a strategic investment in their company. In December 2022, Fortress became the first new company in over two decades to have long-term aerial fire retardants added to the US Forest Service Qualified Product List, or QPL, after meeting or exceeding rigorous testing across a number of categories and evaluations. Being added to the QPL was a significant step toward full commercialization of Fortress products as it provides the pre-approval to government agencies around the world who use the U.S. Forest Service QPL as the chief qualifier for purchasing and which allows them to procure and use the company's products. Then early this month, Fortress reached an agreement with the U.S. Forest Service that will result in Fortress supporting up to five mobile deployed air bases with product and associated services in the upcoming 2023 fire season, utilizing Fortress' new state-of-the-art mobile and fixed retardant mixing units. The U.S. government recognizes that competition in the market is preferable to sole sourcing for essential products and services, and accordingly, there are programs that provide on-ramps into the retardant market where it would like to see competition occur. Under a framework used by U.S. government agencies, including the U.S. Forest Service, to boost competition in critical sectors where government is the primary buyer, a substantial portion of fortress activity will be contracted by the U.S.

Forest Service.

In the simplest terms, this program establishes a glide path for new competitors like fortress to attain critical mass for their products and services in the first couple of years of commercial operation scale. The combination of Fortress products being added to the QPL and the recent agreement with the U.S. Forest Service granting the company its first tranche of bases provides sufficient visibility to the growth potential of this business to give us confidence to exercise our right to acquire the outstanding stake in Fortress. Fortress business model has always aimed at achieving at least a 50% share of the market, and we believe progress toward that goal can be accelerated as a result of this transaction. There's a meaningful value creation opportunity to realize by fully integrating Fortress into our company, thereby taking full advantage of our deep logistical and production capabilities. I'm thrilled that Bob and his highly experienced leadership team will be staying on to run the fortress business and joining the Compass Minerals family. Enhancing our financial position was the final strategic objective that we set for fiscal 23. A strategic equity investment by Koch in October of 2022 was a critical step in achieving that goal, as it provides a substantial amount of non-debt related funding to pursue phase one of our lithium development. Another important element to achieving this objective was addressing the near-term maturity of the $250 million in notes that were set to mature in July of 24. In recent days, we've issued $200 million in Term Loan A notes and expanded our credit facility to allow us to fund the redemption of the July 2024 notes. In doing so, the maturity of our revolving credit facility has been pushed out three years to 2028, and our closest significant maturity is now four years away with our $500 million senior notes due in 27. Obviously, the credit markets have been somewhat fragile in recent months, given the recent banking sector turmoil. So I want to acknowledge Lauren and his team for successfully navigating that process against a very challenging macro backdrop. We expect to see a strengthening of our credit profile in the near term and over time with improved SALT segment profitability and the incremental financial contribution from Fortress. driving deleveraging in the shorter term and eventually contributions from lithium longer term.

Both of these new business ventures are expected to do it.

In early April, we announced via an AK that we had taken the initial steps to rationalize the cost structure of our company with the express goal of improving and maximizing the profit profitability of our to approximately 16% of our corporate workforce, which combined with elimination of certain consulting services and other overhead costs is expected to benefit our operating earnings Phase two of our cost rationalization exercise will be completed in the second half of the year, and we'll be focused on reducing costs at our production and packaging sites. These types of actions are never easy, but we're committed to improving the profitability of those core businesses, and this initiative is a proactive, important step.

Regarding salt,

I'm pleased that we were able to improve operating earnings and EBITDA for salt on both an absolute and per unit. The icing business were down 19% year over year with a portion of this decrease due to the moderate weather that we experienced during the second quarter and a portion of it relating to our decision last volume. We deliberately chose not to pursue certain business last year so that we can improve our profitability. It goes without saying that it's hard to grow volumes when you're reducing .

And I'm pleased that we were able to make a substantial improvement in that regard. segment is centered on managing costs and maximizing profitability through optimizing our customer and geographic sales mix we provide in our served markets. As I noted in my earlier comments, plant nutrition unfortunately California that is hindering our sales efforts in that important market.

The amount of precipitation that California has received this year is frankly amazing, ranking as the seventh wettest year over the last 129 years as an immediate consequence of all this rain and snow that growers simply cannot access their fields and orchards. And as a result, they're not able to make applications that we would normally expect to see in our second fiscal quarter. The good news is we don't see any structural changes with respect to use and demand of SOP in California. Fortunately, pricing for SOP continues to be strong, with the average selling price increasing approximately 8% year over year. Per unit distribution costs increased primarily due to changes in regional sales mix. The increase we saw all in product costs per ton reflects operational measures taken to mitigate the impact of the below average 2022 evaporation season and the impact of the temporary natural gas bite that we had in the first quarter. We also had a small belt fire at our Ogden facility during the quarter, and the related repairs added some incremental operating costs in the quarter. We were able to quickly implement a temporary system that allowed us to have minimal downtime. Kudos to George and his team for how they responded to that incident. As a result of these puts and takes, we saw adjusted EBITDA for plant nutrition decrease to $8 million in the second quarter. Reflecting on where we stand at mid-year, I think we've done a good job addressing the things that are within our control.

Salt is performing well, and the fortress acquisition is an exciting to take advantage of opportunities as weather conditions normalize.

Regarding lithium, I'm guardedly optimistic that we'll come to an agreement with the state regarding essential agreements, particularly the royalty structure. And operating parameters that are prudent economically enable us to confidently advance phases of our project.

Our lithium vision remains battery supply chain. So with that, I'll now turn the call over to Lauren to provide more detail on the quarter. Thank you, Kevin.

Revenue was $411 million for the first quarter, down 8% year-over-year. Second quarter consolidated operating earnings improved to $47.9 million, up 140% year-over-year.

with $77.4 million, up 19% year over year.

A key takeaway is that despite revenue declining due to lower volumes, we substantially improved our profitability year over year.

Revenue totaled $361 million for the quarter, down 8% year over year, driven by 17% lower sales volumes, offset by a 12% increase in average rich growth selling price.

While sales volumes were down 19% year over year, reflecting a combination of our value over volume commercial strategy and a second quarter within the markets that we serve. Looking at the 11 representative cities we've discussed in the past, There were 83 snow events reported during the second quarter.

Down 27% average of approximately 108 snow events.

With this year's de-icing season behind us, the winter, as measured by snow days in our core markets, was roughly 80% of the .

Specifically,

For the winter-to-date period through April, we had 127 snow events, which is lower than last year's 152, and below the 10-year average year-over-year, driven by below-average winter activity, offset by increased sales in non-deicing product lines. Average pricing within CNI rose 1%, costs essentially flat year over year. And driving through the price increases last bidding season, we were able to drive SALT segment operating earnings and adjusted EBITDA higher despite lower sales volumes on both an absolute and per ton basis. Operating earnings for the segment were $73 million in the quarter, an increase of almost 50% year over year. EBITDA came in at $88.9 million, an increase of 36% year over year. Importantly, EBITDA per ton was $20.19, which is in line with historic levels of profitability. As Kevin discussed earlier, restoring the profitability of the salt business was a strategic objective for this year. Turning to our plant nutrition segment, unusual weather developments in some of our most important markets continue to weigh on our sales efforts in the second quarter. Sales volumes were down 19% year over year. As I'm sure most of you are aware, California has seen an incredible amount of precipitation over the last several months, and it has wreaked havoc on the agricultural community out there. The rain and snow they have received has made even the most basic tasks, like growers accessing their fields and orchards, difficult to do due to mud, This in turn impacted their ability to apply fertilizer resulting in lower volumes year over year. On a positive note, prices were up 8% year over year to $796 per ton. The net impact to revenue during the quarter was a decrease of around $7 million or 12% year over year. Distribution costs on a per ton basis were up 12% year over year due primarily to changes in regional sales mix. All-in product costs per ton were up 19% year over year. Operational steps that we took following the subpar 22 evaporation season included the use of KCL to bolster production yields and the impact of the natural gas from last quarter on our standard costs pushed all-in product costs higher. While these items were known and included in our last outlook, The buyer Kevin mentioned obviously was not.

That added approximately $2 million in costs in the second. So that three and a half times.

Also, as Kevin indicated earlier, we were pleased to successfully execute a refinancing of our notes due in July 24.

Banking sector backdrop.

We approached the refinancing with four objectives in mind. Refinancing on reasonable pricing terms, pushing out our debt maturity profile, bolstering our to accommodate a wide range of potential non-debt financing sources to fund our lithium efforts in the coming years. We achieved each of these objectives as part of the refinancing with pricing up only

our next closest meaningful maturity, now not occurring, $75 million, and reduction in term debt outstanding by $50 million, and a credit agreement that now contemplates the prospect of a wide range of potential non-debt to streaming to equity at the Ogden asset level.

A supportive bank group is essential on our journey to accelerate rate growth and reduce weather sensitivity by expanding into the adjacent markets.

We're thankful to have a long-term oriented supportive bank group on our transformation journey.

Turning to our outlook for the rest of the year, I'll begin with SALT.

The performance guidance that results are likely to come in within the range of 215 to 200 year outlook for plant nutrition remains unchanged from our prior guidance with profitability out which reflects the heightened uncertainty regarding SOP fertilizer pricing and sales higher production costs

and extraordinary weather in several core markets, including California.

During our last earnings call, we laid out three scenarios that frame the range of the range. Turning to Fortress, this acquisition changes our financial disclosure some going forward.

rather than just picking up our proportionate share of its net income. As a result of this transaction, whereas our prior guidance assumed Fortress would incur operating losses throughout fiscal 23, we are now reducing our guidance for corporate and other expenses by approximately $10 million at the midpoint to a range of $65 to $70 million, down from our prior range of $75 to $80 million, reflecting our now positive expectation of the profit contribution from Fortress this fiscal year. As we noted in our press release yesterday, we expect Fortress to generate revenue of $20 to $25 million in fiscal 23 with operating earnings and EBITDA expected to be in the low double digit millions of dollars. Fortress aspires to win 50% market share over time and has a business strategy to achieve that goal. While we are pleased with a contribution this fiscal year to EBITDA in the low double-digit millions of dollars, we certainly didn't buy Fortress for its year one financial contribution. Its earnings power is much higher than that and quite substantial in our view. We see a path for the company to grow earnings meaningfully through sizable market share gains and at scale expected to enjoy profitability levels as good as, and we think likely better than, what the market incumbent currently generates. We estimate the addressable North America market for aerial fire retardants to be roughly 70 million gallons, or between $200 and $250 million in revenue. If we are successful at gaining market share at attractive margins as we expect, the implied multiple that we are paying for fortress will prove to have been quite reasonable.

to $175 million.

This is comprised of lithium development capex in the range of $60 to $75 million, funded by proceeds from the Coke transaction, and sustaining capex in the range of $90 to $100 million, which is unchanged from our prior estimate.

The $30 million reduction in

which has resulted in a lower estimate of project costs for the demonstration unit and adjustments in the timing of select long lead of the commercial scale DOE unit, which remains on track for mechanical completion by the end of this calendar year. Finally, from an interest expense perspective, We have raised our projection for fiscal 23 slightly to a range of $55 to $60 million, up approximately $5 million at the midpoint from our prior range, reflecting the increase in our pricing grid by 25 basis points as part of the recent refinancing.

With that, I will turn it back to the operator to open the lines for Q&A.

Good job. Ladies and gentlemen, at this time, if you do have any questions, simply press star 1. And just a quick reminder, if you find your question has been addressed, you can remove yourself from the queue by pressing star 1 again.

We'll take our first question. Good morning, everyone.

So we have a few questions for me. I think it's It's confusing, to be honest, some of your guidance around salt. So you say the company indicates that it's the same guidance as February for salt.

When you say it's one of the guidance that's open this year. And answer that also for volume two, please, for the, excuse me, interrupt the highway de-icing block. Thank you. Financial guidance of 215 to 255 for salt is unchanged.

Directionally, we now do believe that we've got a path towards the midpoint of that range, but the 215 to 255 is unchanged.

But directionally, we do feel more comfortable.

Positive dynamics that Jamie can elaborate on, whereby despite an 80%

winter several of our markets track much higher than that uh in terms of our budget but jamie yeah i think that uh while on balance the winter was was pretty mild we we have uh higher than average margins there so while the volumes are down we were able to sell higher margin tons which uh which helps us get into the middle of that guidance range, even though volumes are lower than normal, than average.

Okay, that's helpful. Then a couple questions more on Fortress. So can you talk about, if you think about fiscal 24, what are some realistic bull, bear, and base cases for the kind of volume type of gallons you might be able to do type of earnings you might be able to do, however you want to talk about, like a reasonable bear case, but I say bear case, base case, bull case. Thanks.

Yeah, I would start and then let Jamie elaborate. This is Lauren by saying, as we think about this business, we think about the long term and think what I should share with you is what we think the earnings power of this business is. These founders who we salute today have a case to, established 50% market share. And if we're successful, we think this business has earnings power in the $40 to $50 million of EBITDA range, $40 to $50 million. We're just getting started and are thrilled to have this first tranche of bases, but are not in a position or comfortable talking about 2024, but thrilled to reach this milestone. And we'll share more in the coming quarters. Jamie, anything you want to share?

No, I just think that under this construct, we're currently working with the U.S. Forest Service on what 2024 looks like, so we don't want to talk about that.

And like Lauren said, we'll give more information in due time.

And then just finally, it's early, but what are your...

like in different regions, you know, you've got a lot of things kind of volatile up and down, but what's kind of your view on how bid season should go? Should we use, you know, the average winter?

I would say that, obviously, bid elevated because the winter was not...

was below average. It varies in pockets. I already mentioned this drink we saw in the Upper Miss.

The Ohio River was pretty weak, but supplies in that Ohio River Valley.

You also have to consider inflation is still a factor to the market, and competitors supply. There is some activity there. Some mines being down, absorbed.

And, you know, we feel good about extracting value, optimal value through this.

To be perfectly clear, we plan to continue this value over volume approach. And to Jamie's point, there are, you know, there's a mine that fell out of the mix.

one that's strikes. So, you know, nothing's unfolding thus far that we would consider surprising. And we continue to approach this season from a value-over-value perspective.

Thank you.

Thank you.

We go next now to Vincent Anderson of Stifle.

Yeah, good morning. So to follow on that Fortress line of questioning, I guess just when we think about 2023, equipment sales to the basis.

This is, you know, it's going

We don't know what the revenue exactly is going to look like in 2024. So it wouldn't be appropriate to just use average run rates and some growth mechanism. We're just not ready to talk about 2024 yet. 2024 as this ramps up, but we're just not ready to talk about that on a per unit basis.

And I would say, I know that folks would want us to share sort of a five-year view of market share. I would just reiterate, we think the earnings power of this business is around $40 to $50 million. You would discount that back to determine how long it takes us to achieve that at some reasonable discount rate, and we'll provide more perspective. But that's the earnings power, and we think it's quite an attractive transaction.

All right, fair enough. Maybe I'll shift gears then a little bit. So, will the acres that deploy your product this year, assuming it's required, will those receive some kind of active monitoring to continue to compare and contrast with the competitive product? anchors that are you talking are you still talking about fire retardants still fortress yep this is a study yeah i'm not quite a yeah i'm not sure i understand sorry yeah can you ask that again you're going to be deployed you're going to be deployed this year in the field officially and will there be active monitoring of how your product performs

Yeah, no, so the product efficacy is defined, established, and that's actually what gets us on the QPL, as well as the environmental benefits, etc. So there is not, this is a process where we are ramping up, you know, kind of five mobile retardant bases through the summer to various locations where

base deployed in June and then ramps up through the season.

And it'll be working. The bases will be in similar locations to the incumbent and able to operate at the same time and at the same places throughout the season.

Okay, got it. I'll switch to something similar.

I believe your current royalty rate at Ogden is around 5%. There's a new severance tax that needs to be put in, but it's like 2.6% on something. But on that base 5% royalty rate, does the new legislation explicitly change that? Is the number not really the big question mark and it's more around omitting the berm? but from an economic perspective, is that number really subject to change?

What I want to say is, you know, we've been on the Great Salt Lake for a long time and have a good reputation out there, and we're working very –

House Bill 513. Yeah, one of the issues is clarification around royalty because we've been very clear with the state, you know, to the extent you want to have discussions about that, we need to know what capital, if the royalty rate is going to be, you know, some sort of variable structure. So it's very clear we're going to have a severance tax. And

having discussions with management issues as it relates to lake health etc closely with the state um towards the viable outcomes here that are not going to jeopardize this project over the long term anything you would want to add to that chris hey thanks kevin so this is

an incredible and exciting opportunity for growth for Compass. The thing that we talked about earlier as well as the synergy aspect that you see with the fourth mineral.

The upland leases, water rights, mineral extraction, the mineral royalties. And so with regards to lithium, what we're doing now and what we've been working on for the past months is really coming to a conclusion on the lithium. It's currently being negotiated with the state right now, but we feel comfortable that we'll land in the right place. Perfect. Thank you so much.

Thank you. And just a quick reminder, ladies and gentlemen, star one, please, for any questions. We'll go next now to Seth Goldstein of Morningstar. Hi, good morning, everyone. Thanks for taking my questions. If we assume normal weather in plant nutrition and markets next year, operationally, what would be your path to volumes? And is there a plan to get operating costs down to restore profits?

A couple of things I'll hit and I'll let George add some color. Good question. We do believe a restoration of normal back to more normal weather patterns given the precipitation that's occurred out there along with a way above average SOPAC is going to alleviate some of the production issues that we've been having there as it relates to the pond system. And we have every belief that we can restore volumes consistent with what we've experienced in the past. And then, as we said in our prepared remarks, we have phase two of a program we're running internally to look at costs across the entire platform of Compass, and that does not exclude Ogden. So ensuring that we maintain our costs under control and, you know, given the high fixed cost nature of some of our

asset being one, the volume effect is a big deal as it relates to cost.

Anything you want to add to that, George?

Yeah, look, maybe George Shuler, just a couple comments there, Kevin, in regards to this set. We have two same goals. One of those being to increase foremost to the second piece, that is, is really bolstering our time complex resiliency for the long term.

When you look at some of the costs that we had at the price for this year, around $3 million.

And also, in regards to that, we had a small fire out of an off-demand in our belt tube that goes up to the loadout. Really minimal impact there, but again, it did impact the cost by $2 million. We had some KCL usage. But it was wonderful.

forward around future production.

We can control the KCL as we do that as we go forward. So we'll add that when it's strategic to do so. But in addition, as Kevin highlighted, we will control our costs.

One of the things that we've talked about in our next step and probably the third thing I'd mention there is

is really you know when you look at where we are and we've talked about a lot about drought in the past and the impacts of drought and weather conditions we've had an incredible year in snowpack that sets us up for really several years going forward so we do have a lot of confidence in what we've been working on for the last year to a year and a half and i think we Okay, that's great. Thank you for all the details there. And to follow up on sort of the long-term company-wide cost optimization, can you share an update on the Goderich long-term improvement plan?

We continue to drive those new gate roads to the northeast. That's progressing nicely.

George can comment on how much that is.

Probably the new mine plan is getting those new long-term roadways connected up between the active area of the mine and the shaft bottoms.

And that progress continues.

and stop spending money on it with regard to ventilation, roof control, et cetera. And that will begin to demonstrate levels of productivity improvement over the because it's all captured of Godrich in the future is going to look like. If there's anything you want to add to that, George? Yeah, Seth, and this is George.

Just, it probably gives me an opportunity to just recognize, you know, Godrich is really performing extremely well from a production point of view. As Kevin highlighted, we're over halfway across the new main development, going extremely well. I do think that bodes well as we go forward, you know, from our, you know, from a Godrich mind perspective. looking at where we'll continue to, you know, improve our cost and improve our productivity at God rest. So that's all I'll add. Thanks, Kevin.

All right, great. Thanks for taking my question. Thank you. And just a final reminder, ladies and gentlemen, any further questions this morning, simply press star one.

And gentlemen, it appears we have no further questions this morning. Mr. Crutchfield, I'd like to turn the conference back to you for any closing comments.

We thank you for taking time to participate in our call this morning. Look forward to keeping you updated in the interim. And to the extent you have any questions or whatever, please feel free to call Brent.

Thank you, Mr. Crutchfield. Ladies and gentlemen, that will conclude the Compass Minerals fiscal second quarter 2023 earnings conference call. We'd like to thank you all so much for joining us and wish you all a great day. Goodbye.