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Item 1A. Risk Factors

2022-03-08 compared with 2021-03-02 · 309 added, 221 removed, 303 unchanged (64% of the section changed)

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See "Cautionary Note Regarding Forward-Looking Statements."

Summary Risk Factors

Below is a summary of some of the principal risks that could adversely affect our business, operations and financial results:

Risks Related to Our Business

The outbreak of the novel coronavirus (“COVID-19”) has, and may continue to, disrupt our business, including, among other things, demand for our products, our personnel and production processes, each of which has and could continue to materially affect our operations, liquidity, financial condition and results of operations.

• The COVID-19 pandemic has, and may continue to, disrupt our business, including, among other things, demand for our products, our personnel and production processes, each of which has and could continue to materially affect our operations, liquidity, financial condition and results of operations.

• Our potash sales are subject to price and demand volatility resulting from periodic imbalances of supply and demand, which could negatively affect our results of operations.

• We are working to expand our sales of Trio ® , and our sales and results of operations could be negatively impacted if we are unsuccessful in our plans.

• We may not be successful in our efforts to sustain or expand water sales due to the status of our water rights, challenges to our water rights, changes in the demand for water in the areas around our facilities, or other events, which could adversely impact our financial condition and results of operations.

• A decline in oil and gas drilling or a reduction in the use of potash in drilling fluids could decrease our revenue.

• We may alter or expand our operations or continue to pursue acquisitions, which could adversely affect our business if we are unable to manage any expansion or acquisition effectively.

• Aggressive pricing or operating strategies by our competitors could adversely affect our sales and results of operations.

• The seasonal demand for our products, and the resulting variations in our cash flows from quarter to quarter, could have an adverse effect on our results of operations and working capital requirements.

• Our Trio ® profitability could be affected by market entrants or the introduction of langbeinite alternatives.

• International sales could present risks to our business.

• If potash or Trio ® prices decline, or oil and gas activity declines, we could be required to record write-downs of our long-lived and indefinite-lived assets, which could adversely affect our results of operations and financial condition.

• If we are required to write down the value of our inventories, our financial condition and results of operations would be adversely affected.

• Weakening of foreign currencies against the U.S.

dollar could lead to lower domestic potash prices, which would adversely affect our results of operations.

Currency fluctuations could cause our results of operations to fluctuate.

• Our business depends on skilled and experienced workers, and our inability to find and retain quality workers could have an adverse effect on our development and results of operations.

• Increases in the prices of energy and other important materials used in our business, or disruptions to their supply, could adversely impact our sales, results of operations, or financial condition.

• Increased costs could affect our per-ton profitability.

• A shortage of railcars or trucks for transporting our products, increased transit times, or interruptions in railcar or truck transportation could result in customer dissatisfaction, loss of sales, higher transportation or equipment costs, or disruptions in production.

• We rely on our management personnel for the development and execution of our business strategy, and the loss of one or more members of our management team could harm our business.

• We have less product diversification than nearly all of our competitors, which could have an adverse effect on our financial condition and results of operations.

• Heavy precipitation or low evaporation rates at our solar solution mines could impact our potash production at those facilities, which could adversely affect our sales and results of operations.

• Inflows of water into our langbeinite mine from heavy rainfall or groundwater could result in increased costs and production downtime and could require us to abandon the mine, any of which could adversely affect our results of operations.

• A significant disruption to our information technology systems could adversely affect our business and operating results.

• Our business may be adversely affected by union activities.

• We will be subject to a number of uncertainties while we pursue the initial public offering of Intrepid Acquisition Corporation I (“IACI”), and during the timeframe when IACI pursues an initial business combination, which could adversely affect our business, financial condition, results of operations, cash flows and stock price.

Risks Related to Our Industry

• Changes in the agricultural industry could exacerbate the cyclical nature of the prices and demand for our products or adversely affect the markets for our products.

• Mining is a complex process that frequently experiences production disruptions, which could adversely affect our results of operations.

• Mining is a hazardous process, and accidents could result in significant costs or production delays.

• The grade of ore that we mine could vary from our projections due to the complex geology and mineralogy of reserves, which could adversely affect our production and our results of operations.

• If the assumptions underlying our reserve estimates are inaccurate or if future events cause us to negatively adjust our previous assumptions, the quantities and value of our reserves, and in turn our financial condition and results of operations, could be adversely affected.

• Existing and further oil and gas development in the Designated Potash Area could impair our potash reserves, which could adversely affect our financial condition or results of operations.

• The mining business is capital intensive, and our inability to fund necessary or desirable capital expenditures could have an adverse effect on our growth and profitability.

Risks Related to Financial Position, Indebtedness and Additional Capital Needs

• The execution of strategic projects could require more time and money than we expect, which could adversely affect our results of operations and financial condition.

• Future indebtedness could adversely affect our financial condition and impair our ability to operate our business.

• Despite our current level of indebtedness, we may incur more debt and undertake additional obligations.

Incurring such debt or undertaking such additional obligations could further exacerbate the risks to our financial condition.

• The phase out of the London Interbank Offered Rate ("LIBOR") could adversely affect our financial results.

• Adverse conditions in the global economy and disruptions in the financial markets could negatively affect our results of operations and financial condition.

• Market upheavals due to military actions, terrorist attacks, other catastrophic events, or economic repercussions from those events could reduce our sales or increase our costs.

Risks Related to Compliance, Regulatory and Legal

• Changes in laws and regulations affecting our business, or changes in enforcement practices, could have an adverse effect on our financial condition or results of operations.

• If we are unable to obtain and maintain the required permits, governmental approvals, and leases necessary for our operations, our business could be adversely affected.

• Anti-corruption laws and regulations could subject us to significant liability and require us to incur costs.

Risks Related to the Environment and Climate

• Physical effects of climate change, and climate change legislation, could have a negative effect on us and our customers, and, in turn, our results of operations.

• Environmental laws and regulations could subject us to significant liability and require us to incur additional costs.

Risks Related to Our Common Stock

• The price of our common stock may be volatile and you could lose all or part of your investment.

• The market price of our common stock may be adversely affected by the future issuance and sale of additional shares of our common stock, or by our announcement that the issuances and sales may occur.

• We do not anticipate paying cash dividends on our common stock.

• Provisions in our charter documents and Delaware law may delay or prevent a third party from acquiring us.

• We may issue additional securities, including securities that are senior in right of dividends, liquidation, and voting to our common stock, without your approval, which would dilute your existing ownership interests.

• If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our stock, or if our operating results do not meet their expectations, our stock price could decline.

Risks Related to Our Business

The COVID-19 pandemic has, and may continue to, disrupt our business, including, among other things, demand for our products, our personnel and production processes, each of which has and could continue to materially affect our operations, liquidity, financial condition and results of operations.

The COVID-19 pandemic has, and could continue to, negatively affect our operations, liquidity, financial condition and results of operations.

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We experienced a significant decrease in the sale of water and other oilfield related products and services, which negatively impacted our overall results.

During 2021, many of these restrictions were reduced or removed and overall economic activity and our financial results improved.

The situation remains dynamic and subject to rapid and possibly material change, including, but not limited to, changes that may materially affect the demand for our products, our mining operations, and the operations of our customers and supply chain partners.

These changes could result in material negative effects on our business, results of operations, financial condition, liquidity position and ability to maintain compliance with our debt covenants.

While certain COVID-19 containment measures implemented by governmental authorities have been eased or lifted, we have not seen oil and gas activity return to pre-pandemic levels.

If expanded containment measures are deemed necessary to mitigate the public health effects of the COVID-19 pandemic, we may continue to experience reduced demand for water and other oilfield related products and services.

Our efforts to manage and mitigate the risks may be unsuccessful, and the effectiveness of these efforts depends on factors beyond our control, including the duration and severity of COVID-19 and related variants, the efficacy and adoption of vaccines against COVID-19 and related variants, as well as third party actions taken to contain the spread of COVID-19 and related variants and mitigate public health effects.

The rapid development and fluidity of the pandemic precludes any prediction as to the ultimate impact of COVID-19.

The full extent of the impact and effects of COVID-19 on our future business, operations, liquidity, financial condition, and results of operations remain uncertain at this time.

Our potash sales are subject to price and demand volatility resulting from periodic imbalances of supply and demand, which could negatively affect our results of operations.

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This growth continues until the market is over-saturated, leading to decreased prices and lower-capacity utilization until the cycle repeats.

We are currently experiencing an oversupplied potash market and expect these conditions to continue for several years.

Also, individual potash producers have, at times, independently suspended production in response to market outlook.

Global productive capacity remains higher than demand and we expect this will last for at least the next few years, although individual potash producers have, at times, independently suspended production in response to market outlook.

As a result of these factors, the prices and demand for potash can be volatile.

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See also " International sales could present risks to our business.

We may not be successful in our efforts to sustain or expand water sales due to challenges to our water rights, changes in the demand for water in the areas around our facilities, or other events, which could adversely impact our financial condition and results of operations.

We have water rights in New Mexico under which we sell water primarily for industrial uses such as in the oil and gas services industry.

We may not be successful in our efforts to sustain or expand water sales due to the status of our water rights, challenges to our water rights, changes in the demand for water in the areas around our facilities, or other events, which could adversely impact our financial condition and results of operations.

We have permitted, licensed, declared and partially adjudicated water rights in New Mexico under which we sell water primarily for industrial uses such as in the oil and gas services industry.

We continue to work to expand sales of water, especially to support oil and gas development in the Permian Basin near our New Mexico facilities.

If there are changes in state or federal regulations regarding oil and gas production or

water usage, this could materially impact our ability to monetize our water rights.

Third parties regularly challenge our applications for permits to sell water under our water rights.

We may not be successful in these efforts.

If there are changes in state or federal regulations regarding oil and gas production or water usage, this could materially impact our ability to monetize our water rights.

Third parties regularly challenge our applications to the OSE to change our water rights permits so that we authorized to sell water to oil and gas producers.

We may not be successful in our efforts to obtain the requisite permit changes.

In many cases, sales of water require governmental permits or approvals.

A decision to deny, delay, revoke, or modify a permit or approval could prevent us from selling water, increase the cost to provide water, or result in our having to refund prepayments that we have received for future water sales.

A decision to deny, delay, revoke, or modify a permit or approval could prevent us from selling water, increase the cost to provide water, or result in our having to refund

prepayments that we have received for future water sales.

If oil or gas prices decline, if oil and gas development in the Permian Basin decreases, or if demand for fresh water in the Permian Basin declines for other reasons, the demand for water under our water rights could be adversely affected.

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Any of these events could adversely impact our financial condition and results of operations.

Water rights in New Mexico are subject to a stated purpose and place of use, and our water rights were originally issued for uses relating to our mining operations.

To sell water under these rights for oil and gas development, we must apply for a permit from the OSE to change the purpose and/or place of use of the underlying water rights.

The OSE reviews and makes a determination as to the validity of the right and if it determines the requested change will not negatively impact other valid interests, the OSE can issue a preliminary authorization for the change.

The preliminary authorization allows for water sales to begin immediately, subject to repayment if the underlying water rights were ultimately found to be invalid.

Third parties may protest the preliminary authorization at minimal cost and frequently do so.

Once protested, the OSE is required to hold a hearing to determine if the preliminary authorization was appropriate.

Water rights in New Mexico are subject to a stated place of withdrawal, purpose and place of use.

Some of our water right permits, declarations and licenses were originally issued for uses relating to our mining operations.

To sell water under these rights for oil and gas development, we must apply for a permit from the OSE to change the point of diversion, purpose and/or place of use of the underlying water rights.

The OSE reviews such applications and makes a determination as to the validity of the right and, will approve the proposed change if it determines the requested change will not impair existing water rights, will not be contrary to the conservation of water within the state, and will not be detrimental to the public welfare of the state.

In some situations, the OSE can issue a preliminary authorization for the change, which allows for the proposed change to go into effect immediately while pending further administrative review.

Such authorizations for water sales are often subject to repayment if the underlying water rights were ultimately found to be invalid.

Third parties may protest an application to change a point of diversion, purpose or place of use or a preliminary authorization at minimal cost and frequently do so.

Once protested, an administrative process begins, whereby the OSE will ultimately determine if the subject application or preliminary authorization will impair existing water rights, will be contrary to the conservation of water within the state or will be detrimental to the public welfare of the state.

The OSE’s findings can be appealed to a New Mexico district court.

A significant portion of our water sales are being made under preliminary authorizations issued by the OSE.

Additionally, some of our water rights are permitted water rights for which we still need to provide proof of completion of works and proof of beneficial use to the OSE.

Please see Note 14 of the Notes to Consolidated Financial Statements for an update on challenges to our water rights.

We may face political and regulatory issues relating to the potential use of the maximum amount of our rights.

However, we believe that our legal position with respect to the validity of our water rights is solid and that we will be able to meet our water commitments.

Any decrease in our water rights could materially impact our ability to monetize our water rights.

A decline in oil and gas drilling or a reduction in the use of potash in drilling fluids could decrease our revenue.

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A decline in oil and gas drilling, especially in the Permian Basin, could reduce our sales of water and potassium chloride.

For example, the decline in oil and gas drilling in 2020 due to restrictions implemented by local, state and federal authorities in response to the COVID-19 pandemic and the resulting impacts of these restrictions on the global economy as a whole, reduced our sales of water and potassium chloride into industrial markets.

In addition, oil and gas developers are regularly looking for ways to use more produced, or recycled, water instead of fresh water in oil and gas development.

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We may be required to assume unanticipated liabilities or contingencies as part of an acquisition, or we may face substantial costs, delays, or other problems as part of the integration process.

In addition, acquired businesses or assets may not achieve the desired effects or otherwise perform as we expect.

In addition, acquired businesses or assets may not achieve the desired

effects or otherwise perform as we expect.

We may not realize the synergies that we expect to achieve.

Additionally, while we

execute these acquisitions and related integration activities, our attention may be diverted from our ongoing operations, which could have a negative impact on our business.

Additionally, while we execute these acquisitions and related integration activities, our attention may be diverted from our ongoing operations, which could have a negative impact on our business.

Any of these items could negatively impact our financial condition and results of operations.

Current and future indebtedness could adversely affect our financial condition and impair our ability to operate our business.

As of December 31, 2020, we had outstanding $15 million aggregate principal amount of senior notes.

We also have $29.8 million outstanding under a revolving credit facility that allows us to borrow up to $75 million, and $10 million borrowed under the CARES Act Paycheck Protection Program as of December 31, 2020.

We may incur additional indebtedness in the future.

The agreements governing the senior notes and credit facility restrict, but do not prohibit, us from incurring additional indebtedness.

Current and future indebtedness could have important consequences, including the following:

• it could limit our ability to borrow additional money or sell additional shares of common stock to fund our working capital, capital expenditures, and debt service requirements

• it could limit our flexibility in planning for, or reacting to, changes in our business

• we could be more highly leveraged than some of our competitors, which could place us at a competitive disadvantage

• it could make us more vulnerable to a downturn in our business or the economy

• it could require us to dedicate a substantial portion of our cash flows from operations to the repayment of our indebtedness, thereby reducing the availability of our cash flows for other purposes

• it could adversely affect our business and financial condition if we default on or are unable to service our indebtedness, are unable to refinance such indebtedness on favorable terms or are unable to obtain additional financing, as needed

Our debt agreements contain financial and other restrictive covenants.

For example, the agreements include financial covenants that require us to maintain a minimum fixed charge coverage ratio and a maximum leverage ratio (as these ratios are defined under the agreements).

Also, the interest rates under the notes may be adjusted quarterly subject to our financial performance and certain financial covenant levels and we may be subject to higher interest rates.

For more information about these financial covenants, see Item 7.

"Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources."

These covenants could limit our ability to engage in activities that are in our long-term best interests.

Our failure to comply with these covenants would result in an event of default that, if not waived, could result in the acceleration of all outstanding indebtedness.

The senior notes and credit facility are variously secured by substantially all of our assets.

As such, an event of default could also result in our lenders foreclosing on some or all of our assets.

The credit facility expires in 2024 and the senior notes are due in 2023.

In the future, we may be unable to obtain new financing or refinancing on acceptable terms.

Despite our current level of indebtedness, we may incur more debt and undertake additional obligations.

Incurring such debt or undertaking such additional obligations could further exacerbate the risks to our financial condition.

Although the agreements governing our indebtedness contain restrictions on our incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and the indebtedness incurred in compliance with these restrictions could increase.

To the extent new debt is added to our current debt levels, the risks to our financial condition would increase.

While the agreements governing our indebtedness also contains restrictions on our ability to make loans and investments, these restrictions are subject to a number of qualifications and exceptions, and the investments incurred in compliance with these restrictions could be substantial.

The proposed phase out of the London Interbank Offered Rate ("LIBOR") could adversely affect our financial results.

Borrowings under our revolving credit facility bear interest at LIBOR plus an applicable margin.

In July 2017, the United Kingdom's Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to phase out LIBOR by the end of 2021.

On November 30, 2020, ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the FCA, announced plans to consult on ceasing publication of LIBOR on December 31, 2021 for only the one week and two month LIBOR tenors, and on June 30, 2023 for all other LIBOR tenors.

While this announcement extends the transition period to June 2023, the United States Federal Reserve concurrently issued a statement advising banks to stop new LIBOR issuances by the end of 2021.

In light of these recent announcements, the

future of LIBOR at this time is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past or cease to exist.

Additionally, the Alternative Reference Rates Committee (“ARRC”) has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR.

ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR.

Whether or not SOFR attain market traction as a LIBOR replacement tool remains in question and the future of LIBOR at this time is uncertain.

The agreement governing our revolving credit facility is indexed to USD-LIBOR and we are monitoring this activity and evaluating the related risks.

At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be enacted in the United Kingdom or elsewhere.

Uncertainty as to the nature of such potential changes, alternative reference rates or other reforms may adversely affect the trading market for LIBOR-based securities, including certain of our debt that is indexed to USD-LIBOR.

Furthermore, we may need to renegotiate any debt agreements extending beyond 2021 that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established.

There is currently no definitive information regarding the future utilization of LIBOR or of any particular replacement rate.

As such, potential effect of any such event on our business, financial condition and results of operations cannot yet be determined.

Aggressive pricing or operating strategies by our competitors could adversely affect our sales and results of operations.

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These disruptions could cause lower prices or demand for our product, which would adversely affect our sales and results of operations.

Changes in the agricultural industry could exacerbate the cyclical nature of the prices and demand for our products or adversely affect the markets for our products.

Farmers attempt to apply the optimum amounts of fertilizer to maximize their economic returns.

A farmer's decision about the application rate for each fertilizer, or the decision to forgo the application of a fertilizer, particularly potash and Trio ® , varies from year to year depending on a number of factors.

These factors include crop types, crop prices, weather patterns, fertilizer and other crop input costs, and the level of crop nutrients remaining in the soil following the previous harvest.

Farmers are more likely to increase application rates of fertilizers when crop prices are relatively high, fertilizer and other crop input costs are relatively low, or the level of crop nutrients remaining in the soil is relatively low.

Conversely, farmers are likely to reduce application of fertilizers when farm economics are weak or declining or the level of crop nutrients remaining in the soil is relatively high.

This variability in application rates can impact the cyclical nature of the prices and demand for our products.

In addition, farmers may buy and apply potash or Trio ® in excess of current crop needs, which results in a build-up of potassium in the soil that can be used by crops in subsequent crop years.

If this occurs, demand for our products could be delayed to future periods.

State and federal governmental policies, including farm and ethanol subsidies and commodity support programs, may also influence the number of acres planted, the mix of crops planted, and the use of fertilizers.

In addition, there are various city, county, and state initiatives to regulate the use and application of fertilizers due to various environmental concerns.

agricultural production or fertilizer use decreased significantly due to one or more of these factors, our results of operations could be adversely affected.

The seasonal demand for our products, and the resulting variations in our cash flows from quarter to quarter, could have an adverse effect on our results of operations and working capital requirements.

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If we are unable to accurately predict the timing of demand for our products due to variations in seasonality from year to year, our results of operations and working capital could be adversely affected.

Similarly, if we do not have adequate storage capacity to manage varying inventory needs, we may

need to reduce production or lower the price at which we sell product, either of which would adversely affect our results of operations.

Similarly, if we do not have adequate storage capacity to manage varying inventory needs, we may need to reduce production or lower the price at which we sell product, either of which would adversely affect our results of operations.

In mid-2016, we transitioned our East mine to Trio ® -only, resulting in an increased supply of Trio ® .

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International sales may also be subject to fluctuations in currency exchange rates, which could increase the price of our products outside the United States and expose us to foreign currency exchange rate risk.

Certain international markets require significant time and effort on the part of management to develop relationships and gain market acceptance for our products.

international markets require significant time and effort on the part of management to develop relationships and gain market acceptance for our products.

Overall, there are additional logistical requirements associated with international sales, which may increase the time between production and our ability to recognize related revenue.

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Any write-down of our inventory would adversely affect our financial condition and results of operations, possibly materially.

For example, due to decreased pricing during the year ended December 31, 2020, we recorded lower of cost or net realizable value ("lower of cost or NRV") inventory adjustments totaling $4.0 million.

The execution of strategic projects could require more time and money than we expect, which could adversely affect our results of operations and financial condition.

From time to time, we invest in strategic projects.

The completion of these projects could require significantly more time and money than we expect.

In some cases, the construction or commissioning processes could force us to slow or shut down normal operations at the affected facility for a period of time, which would cause lower production volume and higher production costs per ton.

In addition, our management team and other employees may be required to spend a significant amount of time addressing strategic projects, which could mean that our normal operations receive less time and attention.

As we proceed with one or more of these strategic projects, we may not realize the expected benefits despite substantial investments, they may cost significantly more than we expect, or we may encounter additional risks that we did not initially anticipate.

Mining is a complex process that frequently experiences production disruptions, which could adversely affect our results of operations.

The process of mining is complex.

Production delays can occur due to equipment failures, unusual or unexpected geological conditions, environmental hazards, acts of nature, and other unexpected events or problems.

Furthermore, production is dependent upon the maintenance and geotechnical structural integrity of our tailings and storage ponds.

The amounts that we are required to spend on maintenance and repairs may be significant.

Our East mine, surface, and support facilities are over 50 years old.

As mining progresses at an underground mine, operations typically move further away from the shafts and, despite modernization through sustaining capital, fixed assets may require increased repair or refurbishment.

These conditions increase the exposure to higher operating costs or the increased probability of incidents.

Mining is a hazardous process, and accidents could result in significant costs or production delays.

The process of mining is hazardous and involves various risks and hazards that can result in serious accidents.

If accidents or unforeseen events occur, or if our safety procedures are not effective, we could be subject to liabilities arising out of personal injuries or death, our operations could be interrupted, or we could be required to shut down or abandon affected facilities.

Accidents could cause us to expend significant amounts to remediate safety issues or repair damaged facilities.

Existing or expanded oil and gas development near our mines could result in methane gas leaking from an oil and gas well into our mines.

We test our mines regularly for methane gas.

However, unlike coal mines, our mines are not constructed or equipped to deal with methane gas.

Any intrusion of methane gas into our mines could cause a fire or an explosion resulting in loss of life or significant property damage or could require the suspension of all mining operations until the completion of extensive modifications and re-equipping of the mine.

The costs of modifying our mines and equipment could make it uneconomical to reopen our mines.

You can find more information about the co-development of potash and oil and gas resources near our New Mexico facilities under the risk factor below entitled "-Existing and further oil and gas development in the Designated Potash Area could impair our potash reserves, which could adversely affect our financial condition or results of operations."

The grade of ore that we mine could vary from our projections due to the complex geology and mineralogy of reserves, which could adversely affect our production and our results of operations.

Ore bodies have complex geology.

Our production is affected by the mineral content and other mineralogy of the ore.

Our projections of ore grade may not be accurate.

There are numerous uncertainties inherent in estimating ore grade, including many factors beyond our control.

As the grade of our remaining ore reserves decreases over time, we need to process more ore to produce the same amount of saleable-grade product, increasing our costs and slowing our production.

In addition, there are few opportunities to acquire more reserves in the areas around our current operations.

If we are unable to process more ore to maintain current production levels, if the processing of more ore materially increases our costs, or if our ore grade projections are not accurate, our results of operations would be adversely affected.

If the assumptions underlying our reserve estimates are inaccurate or if future events cause us to negatively adjust our previous assumptions, the quantities and value of our reserves, and in turn our financial condition and results of operations, could be adversely affected.

There are numerous uncertainties inherent in estimating our potash and langbeinite reserves.

As a result, our reserve estimates necessarily depend upon a number of assumptions, including the following:

• geologic and mining conditions, which may not be fully identified by available exploration data and may differ from our experiences in areas where we currently mine or operate

• future potash and Trio ® prices, operating costs, capital expenditures, royalties, severance and excise taxes, and development and reclamation costs

• future mining technology improvements

• the effects of governmental regulation

• variations in mineralogy

In addition, because reserves are estimates built on various assumptions, they cannot be audited for the purpose of verifying exactness.

It is only after extraction that reserve estimates can be compared to actual values to adjust estimates of the remaining reserves.

If any of the assumptions that we make in connection with our reserve estimates are incorrect, the amounts of potash and langbeinite that we are able to economically recover from our mines could be significantly lower than our reserve estimates.

In addition, we periodically review the assumptions underlying our reserve estimates.

If future events cause us to negatively adjust our previous assumptions, our reserve estimates could be adversely affected.

In any of these events, our financial condition and results of operations could be adversely affected.

Weakening of foreign currencies against the U.S.

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dollar, foreign suppliers may lower prices to increase sales volume while again maintaining a margin in their local currency.

While the U.S.

dollar remains attractive to many foreign producers, the U.S.

dollar has weakened compared to the Canadian dollar since early 2020, a change which supports higher potash prices.

Future changes in the strength of the U.S.

Changes in the strength of the U.S.

dollar compared to other currencies could cause our sales prices and results of operations to decrease or fluctuate significantly.

Adverse conditions in the global economy and disruptions in the financial markets could negatively affect our results of operations and financial condition.

Global economic volatility and uncertainty can create uncertainty for farmers and customers in the geographic areas where we sell our products.

If farmers reduce, delay, or forgo their potash and Trio ® purchases due to this uncertainty, our results of operations would be adversely affected.

Moreover, volatility and disruptions in the financial markets could limit our customers' ability to obtain adequate financing or credit to purchase and pay for our products, which would decrease our sales volume and increase our risk of non-payment by customers.

Changes in governmental banking, monetary, and fiscal policies to restore liquidity and increase credit availability may not be effective.

It is difficult to determine the extent of economic and financial market problems and the many ways in which they could negatively affect our customers and business.

In addition, if we are required to raise additional capital or obtain additional credit during an economic downturn, we could be unable to do so on favorable terms or at all.

Changes in laws and regulations affecting our business, or changes in enforcement practices, could have an adverse effect on our financial condition or results of operations.

We are subject to numerous federal and state laws and regulations covering a wide variety of business practices.

Changes in these laws or regulations could require us to modify our operations, objectives, or reporting practices in ways that adversely impact our financial condition or results of operations.

In addition, new laws and regulations, or new interpretations of or enforcement practices with respect to existing laws and regulations, could similarly impact our business.

For example, we are subject to significant regulation under MSHA and OSHA.

High-profile mining accidents could prompt governmental authorities to enact new laws and regulations that apply to our operations or to more strictly enforce existing laws and regulations.

See also “ Environmental laws and regulations could subject us to significant liability and require us to incur additional costs.

Our business depends on skilled and experienced workers, and our inability to find and retain quality workers could have an adverse effect on our development and results of operations.

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At times, we may not be able to find or retain qualified workers.

In particular, the labor market around Carlsbad, New Mexico,

is competitive and employee turnover is generally high.

In particular, the labor market around Carlsbad, New Mexico, is competitive and employee turnover is generally high.

In that market, we compete for experienced workers with several other employers, including natural resource and hazardous waste facilities, oil and gas producers, and another producer of langbeinite.

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This may make it more difficult for us to re-hire skilled employees in the future.

Changes in the prices of energy and other important materials used in our business, or disruptions to their supply, could adversely impact our sales, results of operations, or financial condition.

Increases in the prices of energy and other important materials used in our business, or disruptions to their supply, could adversely impact our sales, results of operations, or financial condition.

Natural gas, electricity, chemicals, diesel, and gasoline are key materials that we purchase and use in the production of our products.

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We do not currently maintain "key person" life insurance on any of our management personnel.

We have less product diversification than nearly all of our competitors, which could have an adverse effect on our financial condition and results of operations.

A significant portion of our revenue comes from the sale of potash and langbeinite, whereas nearly all of our competitors are diversified, primarily into nitrogen- or phosphate-based fertilizer businesses or other chemical or industrial businesses.

In addition, a majority of our sales are to customers in the U.S., and generally these customers are concentrated in key geographies where we have a freight advantage.

As a result, we could be impacted more acutely by factors affecting our industry or the regions in which we operate than we would if our business was more diversified and our sales more global.

A decrease in the demand for potash and langbeinite would have an adverse effect on our financial condition and results of operations.

Similarly, in periods when production exceeds demand, the price at which we sell our potash and langbeinite and our sales volumes would likely fall, which would adversely affect our results of operations and financial condition more than our diversified competitors.

Heavy precipitation or low evaporation rates at our solar solution mines could impact our potash production at those facilities, which could adversely affect our sales and results of operations.

All of our potash production comes from our solar solution mines.

These facilities use solar evaporation ponds to form potash crystals from brines.

Weather conditions at these facilities could negatively impact potash production.

For example, heavy rainfall in September and October, just after the evaporation season ends, can reduce the amount of potash we produce in that year or the following year by causing the potash crystals to dissolve and consume pond capacity.

Similarly, lower‑than‑average temperatures or higher-than-average seasonal rainfall would reduce evaporation rates and therefore impact production.

We experienced significant rainfall in the summer of 2019 at our Wendover facility which reduced the product available for sale in 2020, and at our HB facility in the summer of 2021, which led to fewer tons available for sale in the second half of 2021 and we expect will result in fewer tons than our historical average available in the spring of 2022.

If we experience heavy rainfall or low evaporation rates at any of our solar solution mines, we would have less potash available for sale, and our

sales and results of operations would be adversely affected.

Reduced potash available for sale could also affect our ability to produce and sell byproducts such as salt and magnesium chloride.

Inflows of water into our langbeinite mine from heavy rainfall or groundwater could result in increased costs and production downtime and could require us to abandon the mine, any of which could adversely affect our results of operations.

Major weather events such as heavy rainfall can result in water inflows into our underground, langbeinite mine.

The presence of water-bearing strata in many underground mines carries the risk of water inflows into the mines.

If we experience water inflows at our langbeinite mine, our employees could be injured and our equipment and mine shafts could be seriously damaged.

We could be forced to shut down the mine temporarily, potentially resulting in significant production delays, and spend substantial funds to repair or replace damaged equipment.

Inflows may also destabilize the mine shafts over time, resulting in safety hazards for employees and potentially leading to the permanent abandonment of the mine.

A significant disruption to our information technology systems could adversely affect our business and operating results.

We rely on a variety of information technology and automated operating systems to manage or support our operations.

In particular, we depend on our information technology systems for a variety of functions, including, but not limited to, financial reporting, inventory management, procurement, invoicing and email.

We also have access to, and we create and store, sensitive data, including our proprietary business information and that of our customers, and personally identifiable information of our employees.

The proper functioning of these systems and the security of this data is critical to the efficient operation and management of our business.

In addition, these systems could require modifications or upgrades as a result of technological changes or growth in our business.

These changes could be costly and disruptive to our operations and could impose substantial demands on management time.

Our systems, and those of third-party providers, also could be vulnerable to damage or disruption caused by catastrophic events, power outages, natural disasters, computer system or network failures, viruses or malware, physical or electronic break-ins, unauthorized access, and cyber-attacks.

Although we take steps to secure our systems and electronic information, these cybersecurity measures may not be adequate.

Any security breaches could compromise our networks and the information stored on them could be improperly accessed, disclosed, lost or stolen.

Any such access, disclosure or other loss of information could disrupt our operations and the services we provide to customers, damage our reputation or our relationships with our customers or result in legal claims or proceedings, any of which could adversely affect our business, reputation, and operating results.

Our business may be adversely affected by union activities.

Hourly employees at our Wendover facility are represented by a labor union.

These employees represent approximately 9% of our workforce.

Our current collective bargaining agreement with the union expires on May 31, 2023.

Although we believe that our relations with our unionized employees are good, we may not be successful in negotiating a new collective bargaining agreement as a result of general economic, financial, competitive, legislative, political, and other factors beyond our control.

Any new agreement could result in a significant increase in our labor costs.

In addition, a breakdown in negotiations or failure to timely enter into a new collective bargaining agreement could materially disrupt our Wendover operations.

From time to time, efforts have been made to unionize employees at our other facilities.

Additional unionization efforts could disrupt our business, consume management attention, or increase our operating costs.

In addition, if these efforts were successful, we could experience increased labor costs, an increased risk of work stoppages, and limits on our flexibility to run our business in the most efficient manner to remain competitive.

We will be subject to a number of uncertainties while we pursue the initial public offering of Intrepid Acquisition Corporation I (“IACI”), and during the timeframe when IACI pursues an initial business combination, which could adversely affect our business, financial condition, results of operations, cash flows and stock price.

While we have announced our intention to pursue an initial public offering of IACI, a newly formed special purpose acquisition company (“SPAC”) and our indirect subsidiary, there has recently been heightened regulatory focus on SPACs, including recently issued accounting guidance, resulting in substantial uncertainty in the SPAC markets.

Pursuing the initial public offering of a SPAC in this uncertain environment has resulted in, and may continue to result in, additional costs as instrument terms are reevaluated, delays in the SPAC initial public offering process and attention from our management and employees.

There is no assurance that we will be able to consummate IACI’s initial public offering on favorable terms or at all.

Further, in the event the initial public offering of IACI is completed, the accounting guidance applicable to SPACs could subsequently be revisited, potentially necessitating restatements of IACI’s financial statements, which could then impact and necessitate restatements of our financial statements, as well as leading to delays as IACI pursues a suitable business transaction and requiring us to devote extensive management and employee attention and resources to these matters.

If we are unable to consummate IACI’s initial public offering on favorable terms or at all, or if we complete the initial public offering and IACI is unable to consummate a suitable business transaction during the prescribed time period set forth in the terms of IACI’s initial public offering, we may experience negative reactions from the financial markets and from our stockholders.

In addition, in the event that IACI is able to find a suitable initial business combination, or if the initial business combination is unsuccessful, there is no assurance that we will realize the anticipated value from such transaction.

Further, we will be required to devote significant management and employee attention and resources to matters relating to the initial public offering and the initial business combination.

These matters have the potential to disrupt us from conducting business operations or pursuing other business strategies and could adversely affect our business, financial condition, results of operations and cash flows.