Intrepid Potash Inc

NYSE:IPI

Earnings Call Analysis

Intrepid Potash's Focused on Cost Control and Growth

In 2023, Intrepid faced operational challenges with its HB IP30A well impacting its profitability, with adjusted EBITDA at $41.6 million. Despite this, potash and Trio sales volumes increased by 16%, and Q4 saw $43 million in noncash impairment charges. Looking forward, potash production is anticipated to grow 10-15% in 2024, subsequently rising by 15-20% in 2025. Intrepid is aligning with XTO for additional potential earnings of $100 million. The company has no long-term debt and a strong cash position of $35 million. It is also focusing on maintaining a solid financial position with reduced capital expenditures projected to be down by about 30% to $40-50 million in 2024.

Highlights and Strategic Moves Amidst Headwinds

In the delicate balance of achievements and challenges, Intrepid Potash reported an adjusted EBITDA of $7.1 million for the fourth quarter and $41.6 million for the year 2023, marked by higher costs and moderated potash prices. Though production was down due to the HB IP30A well's failure, Intrepid's commitment to restoring production levels is evident, with forecasts pointing to a 10-15% increase in potash production for 2024 and even further growth expected in subsequent years. The company has also managed to keep sales volumes steady, with agriculture markets comprising the bulk of their potash sales and increased volumes in feed markets capitalizing on premium pricing.

Resilient Demand and Market Positioning

Intrepid witnessed a resilient demand for their fertilizer products, and market potash pricing has now stabilized at about 35% above the previous cycle. This stability bodes well for future sales, with optimism carried by the trend of yield maximization which positively influences fertilizer demand. The company is also entering a fruitful partnership with XTO, which has already brought a $50 million cash infusion and promises up to an additional $100 million dependent on future drilling activities, thereby strengthening Intrepid’s financial runway.

Financial Stability and Investment Prudence

Intrepid's balance sheet remains robust, with cash nearly covering their 2024 capital program, projected at $40-$50 million, approximately 30% lower than the prior year's. This careful financial management is aligned with their strategic priority to increase potash production, which is expected to lead to a gradual improvement in unit economics and margins starting in late Q3 and into Q4 of 2024. Intrepid also maintains a strong liquidity position with significant cash reserves and no long-term debt.

Innovations and Capacity Expansion

Production enhancements are underway, including the Eddy Shaft project, which has allowed for a higher brine grade input into the ponds, setting the stage for increased future production. The construction of a new pipeline system promises a positive long-term effect on brine grades and future harvesting capability. Furthermore, Intrepid is actively pursuing joint ventures for their sand and lithium growth projects, aiming to leverage operational expertise and financial strength without heavy upfront capital commitments.

Future Prospects and Owner's Commitment

With a forecast of steady agricultural product growth and price support for potash, Intrepid is focused on protecting their balance sheet and enhancing margins and cash flow. The future is not only bright for the primary potash business but also for auxiliary projects in sand and lithium that promise attractive returns and opportunities for joint venture partnerships. The CEO, as the largest shareholder, expresses unwavering optimism for Intrepid's direction, emphasizing the control over controllable factors and projecting confidence in the company's trajectory.

Clarifications and Additional Insights

During the Q&A session, the executives provided details on the impact of the well IP30A failure and the mitigation efforts for the IP30B well, which should lead to significant improvements in potash production by the second half of 2024. Additionally, discussions highlighted the company's strategic approach to capital allocation, with a focus on prioritizing growth-inducing projects in the first half of the year to enable long-term production benefits. They also elaborated on the potential and economics of their upcoming sand project in Southeast New Mexico, which is poised to offer logistical advantages due to its prime location.

Earnings Call Transcript 2023-Q4

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the Intrepid Potash, Inc. Fourth Quarter 2023 Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Evan Mapes, Investor Relations. Please go ahead.

[Evan Mapes, executive]

Thank you, Krista. Good morning, everyone. Thanks for joining us to discuss and review Intrepid's Fourth Quarter 2023 results. With me today is Intrepid's Co-Founder, Executive Chairman and CEO, Bob Jornayvaz; and CFO, Matt Preston. Also available to answer questions during the Q&A session is the Vice President of Sales and Marketing, Zachry Adams; and our Vice President of Operations, John Galassini.

Please be advised that our remarks today include forward-looking statements, as defined by U.S. securities laws. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated, are based upon information available to us today, and we assume no obligation to update them. These risks and uncertainties are described in our periodic reports filed with the SEC, which are incorporated here by reference.

During today's call, we'll refer to certain non-GAAP financial and operational measures. Reconciliations to the most directly comparable GAAP measures are included in yesterday's press release. Our SEC filings and press releases are available on our website at intrepidpotash.com.

I'll now turn the call over to Bob.

[Robert Jornayvaz, executive]

Thank you, Evan. Good morning, everyone. We appreciate your interest in Intrepid and attendance for our fourth quarter earnings call. I'll be structuring my remarks today beginning with a high-level overview of the quarter, our market outlook and production updates, and then dive into more details of the recent XTO deal and takeaways for Intrepid's equity.

In the fourth quarter, our adjusted EBITDA totaled $7.1 million, bringing our 2023 figure to $41.6 million. Significantly higher production costs from our lower production as well as moderating potash prices drove down the decline in profitability this year, while our results continue to be negatively impacted by our current production profile, primarily due to the failure of our HB IP30A well in the fourth quarter of 2022.

Fortunately, the replacement well has been fully permitted and has been constructed as we speak. This individual well failure created a major impact to our unit economics, so correcting our mistake as well as our overall potash production trend remains the #1 strategic priority for Intrepid. Before getting into the highlights, also included in our fourth quarter results were approximately $43 million of noncash impairment charges, which were primarily directed at our East langbeinite mine in the Trio segment.

During the fourth quarter, we saw continued strong demand for our fertilizer products. And for 2023, our potash and Trio sales volumes were both up 16% compared to the prior year. Market potash pricing has also recently stabilized at levels that are about 35% higher than the previous cycle, and we expect our sales to remain steady, ahead of spring application.

Longer term, we will remain constructive on the outlook for agriculture and fertilizer markets even with pricing for key crops recently coming down over the past few months. As we discussed in our earnings call in August, following the last period of moderating U.S. farmer incomes off peak years, which we saw back in 2012 and the period thereafter, annual U.S. potash demand still averaged roughly 5% growth rate through 2017.

And given the significant profits generated by U.S. farmers over the past 3 years, they're currently in a very solid financial position. Putting this together, we expect the trend of yield maximization to continue past the upcoming spring application season, which, of course, is positive for fertilizer demand.

Moving on to our potash production. The #1 strategic priority at every level within the company has been to correct our declining production trend. To that extent, I'm excited to share that our recent production execution has put us on the path for a meaningful increase in production, starting in the second half of the year.

We've included comprehensive project updates in yesterday's earnings release. But for a quick summary on the key takeaway, we'll forecast that our total potash production will be at least 10% to 15% in 2024 compared to 2023, with an additional 15% to 20% increase expected the following year and higher upside looking long term.

In mid-December, we announced the third amendment for our cooperative development agreement with XTO. For some background, XTO is one of ExxonMobil's subsidiaries that has a very large acreage position in the Delaware Basin for DPA. For many years, we've been successful in co-developing our respective interest within the DPA, and this amendment helps ensure that this continues, while also formalizing several items.

For Intrepid, what this amendment stipulates is that in exchange for us agreeing to support and not oppose XTO's development and operation of their oil and gas interest within the DPA, Intrepid receives certain payments from XTO. To date, we've received the initial $50 million, with $50 million more guaranteed by the seventh year anniversary of the amendment, but possibly received sooner if XTO receives approval for a new or expanded drilling island within this specific area.

Intrepid could also receive up to an additional $100 million, with the amount of that payment and timing being dependent on certain drilling activities by XTO. We feel we are now more properly aligned with XTO in the co-development in the area. We can't emphasize enough the importance of this transaction with the cash infusion significantly bolstering our liquidity position and helping derisk our outlook.

Our current balance sheet cash is close to fully funding our 2024 capital program, providing a solid cash runway until we see the positive impacts to our unit economics associated with the higher potash production expected later this year. Overall, we think Intrepid is extremely well positioned. But when looking at where the equity is trading, we're close to being priced for worst-case scenarios, which is certainly not the case, and I want to clarify several key points.

Our potash production will be inflecting higher following the summer's evaporation season, so we're only a few quarters away from seeing those results. We also want to be clear that as we progress through the commodity cycle, we'll be focusing on measures that protect our balance sheet and enhance our margins and cash flow. And accordingly, we'll be evaluating our options for Trio.

Our primary business of selling a product that supports crops is forecast to see steady growth, and we're seeing price support for potash. We have long-lived reserves and resources that can support many decades of production, which significantly helps reduce our terminal value risk.

The nonpotash growth projects already underway, namely sand and lithium, offer attractive returns and upside. For these projects, Intrepid won't be committing significant upfront capital in owning all of the risk. So we are currently negotiating with various parties in pursuit of a JV partnership structure for each of those commodities.

We have a very strong balance sheet, no long-term debt, a cash position of $35 million and $150 million revolver with maturity of August of 2027. Moreover, we'll have another $50 million guaranteed from our XTO deal, the possibility of an additional $100 million in payments from XTO over time.

And this is the most important point. No one has a more important stake or greater stake in wanting to see Intrepid succeed and have this translate to the price of our common stock than myself as the largest shareholder. I firmly believe that for the items we can control, our outlook is the best we've had in many years, and I'm excited in the direction we're going.

I'll now turn the call over to Matt. Please go ahead.

[Matt Preston, executive]

Thanks, Bob. In the fourth quarter, Intrepid generated adjusted EBITDA of $7.1 million and had an adjusted net loss of $5.2 million. Although our sales volumes and demand for our key products have remained steady, moderating potash pricing and higher unit costs associated with the lower production levels continue to be headwinds for our financial results.

As Bob noted, returning our potash production to prior peak historical levels remains the most effective way of improving our margins, with the first key inflection expected later this year. The improvement in our unit economics will be gradual, but should start to be evident in the second half of 2024 and keep improving from there, with the higher levels of potash production.

For segment highlights, in Potash, our Q4 and 2023 sales volumes totaled 45,000 and 258,000 tons, respectively, with the fourth quarter volume down 10% compared to last year, while the full year sales volumes increased 16%. Sales volumes into agriculture markets comprise about 74% of our overall potash sales, while sales into feed markets made up approximately 23% of our tons sold in 2023. Despite lower overall production levels, we've been successful in continuing to grow sales into feed markets to ensure we take advantage of the premium pricing.

In the fourth quarter, our potash production totaled 79,000 tons, which brings our 2023 calendar year production to 224,000 tons. Reduced brine grades at HB and Wendover were the primary drivers of the lower-than-expected production. But since commissioning the Eddy Shaft project in October, we've been filling our ponds at HB with some of the highest-grade brine in Intrepid's history, which will translate to a production benefit we should see beginning with the fall 2024 harvest. As for the first quarter potash outlook, we expect our sales volumes to be in the range of 65,000 to 75,000 tons at an average net realized sales price in the range of $3.85 to $3.95 per ton.

In Trio, our Q4 and 2023 sales volumes totaled 49,000 and 228,000 tons, respectively, which compares to 28,000 and 197,000 tons in the same prior year periods. In the fourth quarter, we produced 57,000 tons of Trio, which was up about 5,000 tons, both sequentially and year-over-year. As for the first quarter Trio outlook, we expect our sales volumes to be in the range of 80,000 to 90,000 tons at an average net realized sales price of $290 to $300 per ton.

In Oilfield Solutions, our fourth quarter sales saw an approximately $2 million sequential increase, which was largely attributable to a roughly $3 million increase in our water sales from a large frac job on our South range. Our fourth quarter gross margin was double the prior year figure and our brine business is becoming a steady contributor with room for more organic growth, although we are still subject to quarterly fluctuations based on the timing of larger frac jobs like we saw in the fourth quarter.

Finally, given our improved financial position and recent period of high investments, I'll end my remarks clarifying our capital allocation priorities as we look ahead. First and foremost, we are focused on successfully finishing the remaining potash revitalization efforts. This is far and away the most important initiative Intrepid can undertake. And for 2024, we expect our capital expenditures to be between $40 million and $50 million, which is down about 30% compared to 2023 at the midpoint.

Our next priority is maintaining a solid financial position with a strong balance sheet through the cycle. Third, we'll continue to develop the sand and lithium projects already underway. But for these projects, we'll be very thoughtful moving forward to ensure we limit Intrepid's capital commitments, reduce potential operational risks and make sure our operations teams remain focused on the successful completion of our key potash projects.

Operator, we're now ready for the Q&A portion of the call.

[Operator]

[Operator Instructions] Your first question comes from the line of Joel Jackson from BMO Capital Markets.

[Joel Jackson, analyst]

A couple of questions. I'll ask them one by one. Maybe on costs, you gave some good volume increases expected for potash this year and next year, and talked about costs starting to improve in the second half of the year. Can you give us a bit of color on the magnitude of cost reductions you might see -- unit cost second half of the year for potash into '25 if you hit your production numbers? And then maybe you can give a bit of color on how you see Trio cost -- trajectory of Trio cost this year and next?

[Robert Jornayvaz, executive]

Matt, do you want to take that?

[Matt Preston, executive]

Yes, happy to. Given where our production is today, Joel, we're in that 10% to 15% increase in production. We expect to see the same decrease in our unit economics on potash, 10% to 15%. That will really start to come into effect kind of late Q3 and really into Q4 results. As those tons go into inventory, we start to sell down that inventory from the fall harvest beginning in the fourth quarter of '24.

For Trio, right now, our outlook is pretty consistent. Production cost per ton, not a lot changing there on our production profile. And while we certainly look to limit cash investments, capital investments and kind of cut back wherever we can, I'd say, the outlook is pretty steady there with '23.

[Joel Jackson, analyst]

Okay. And then it looked like on your freight costs were a lot lower in the fourth quarter. Is that something we should expect going through for the next bunch of quarters? Or how much you have locked in?

[Matt Preston, executive]

No, our freight fluctuates depending on just location of sales, mix between truck and rail. Freight, really, for us, is mostly a pass-through cost. So when we give our net realized -- that is why we focus on that average net realized sales price factor when we give that forward guidance. And so we'll see normal fluctuations based on where we're selling, but no reason to think we won't just go back to sort of long-term trends and averages.

[Joel Jackson, analyst]

And finally, the first $50 million payment, I think, in the press release, that came in December. But I think you actually got it in Q1, if I look at some of your other color. And then the second $50 million, what is kind of the -- I know you said it's within 7 years, but what is kind of the best case scenario you envisioned for getting the second $50 million? What does that look like?

[Robert Jornayvaz, executive]

Well, Exxon is -- or XTO is currently applying for drill islands, which is a small geographic area within the known potash area that the BLM has to approve. And so I don't know if you're following XTO. I can't speak as to Exxon and their merger with Pioneer, but they've made it very clear that the Permian Basin, overall, both the Delaware and the Midland Basin, are critical areas for them in terms of areas of focus.

So it's much more a question for Exxon as to the timing of their development plan. But given our reading of their public statements, and -- there's significant merger with Pioneer and their commitment to the Delaware Basin. The sooner that they go to work and receive permits, the sooner we get paid. So I think, given Exxon's commitment to the Delaware Basin, there's an opportunity for that payment to happen significantly sooner, but that's not under our control.

[Operator]

Your next question comes from the line of Josh Spector from UBS.

[Lucas Beaumont, analyst]

This is Lucas Beaumont on for Josh. I just want to clarify the volume guidance for fiscal. I'm not sure if I wrote this down back to front. But it sounded like you guys said 65,000 to 75,000 for potash and 80,000 to 90,000 for Trio. Or was that the other way around?

[Matt Preston, executive]

No, that's correct.

[Lucas Beaumont, analyst]

Sorry, potash is 65,000 to 75,000?

[Matt Preston, executive]

That's right.

[Lucas Beaumont, analyst]

Okay. So I guess then just could you kind of talk to us as to why that's kind of you're expecting that to be down kind of year-on-year in the first quarter, just the dynamics from 4Q to 1Q there?

[Matt Preston, executive]

Yes. It's just a function of tons in inventory and our 2023 production obviously being down. We took advantage of high pricing, selling as much as we could in 2023.

[Robert Jornayvaz, executive]

Yes. To be clear, the well failure that happened in the fourth quarter of 2022 resulted in lost production somewhere between 60,000 and 100,000 tons at the HB Facility. So that one well failure had a very significant impact on our overall production failure, and that's why I called it out in the early part of my remarks.

[Lucas Beaumont, analyst]

Great. So and I mean you have a lot -- sorry, go ahead.

[Robert Jornayvaz, executive]

I was just going to say -- go ahead.

[Lucas Beaumont, analyst]

Sorry. You go ahead, mate, sorry. If you had something to add, please finish.

[Robert Jornayvaz, executive]

I was just going to say, the reason we called it out in the initial part of our remarks is we own the fact that, that well failed and the replacement well is actually being constructed as we speak. But it had a major impact to our production profile. And correcting that mistake will have an immediate impact once it's down completed and commissioned, which is expected to occur in the next 60 to 90 days.

[Lucas Beaumont, analyst]

Great. So I mean -- and I guess, just then you gave a lot of good color on sort of where the projects are, kind of in the press release. So I mean, you have kind of key milestones kind of coming up sort of here in March in the second quarter and the third quarter. So I mean, could you just kind of help us understand how you feel about your confidence in sort of hitting the timing there and around the completion dates? And is it -- I mean is there any risks? Or how does that kind of stand currently?

[Robert Jornayvaz, executive]

Well, we -- in order to mitigate the risk of the redrilling of that well, we completely changed the drilling design. We brought on a whole new team to drill the second well. Unfortunately, the permitting took an unusual amount of time. It took us almost a year to repermit that replacement well.

And so the good news is, it's fully permitted. It's actually -- there's a rig on site, drilling the conductor pipe as we speak. And so we hope to have that well done and completed by the end of the month and hopefully commissioned by the end of April. And given that, that's in our largest best brine pool within the entire company structure, being able to put that high-grade brine into our ponds at Carlsbad will have a material impact as we begin the harvest of those ponds.

[Lucas Beaumont, analyst]

And I guess, I mean, if all of this goes to plan, so I mean you said [ probably ] that you're expecting a material uplift in the production volumes in the second half, can you kind of help sort of frame that for us relative to the kind of 90,000 tons in the second half of last year? Is it 10,000 tons this year, 20,000 tons in the second half?

[Robert Jornayvaz, executive]

Well, in terms of trying to break it down by quarters, it's the hard part, given the seasonality in the evaporation cycle. But I want to be clear that we lost somewhere between 75,000 and 100,000 tons from that 1 big brine pool that we were unable to access. It's still there. And so those tons will be going into our ponds, and we'll begin to harvest those. So I know you're trying to build a quarterly model, but it basically starts a pinwheel effect, if you will, because we have multiple. As we've tried to outline in our IR decks, we've got multiple abandoned mines that we have now flooded, and this has given those abandoned mines time for the brine grades to resaturate and build up so that we're now going to be producing for several years a much higher brine grade, as we just explained from our HB -- from the Eddy Shaft project, which has been putting in some of the highest brine grade in our history, into our ponds. So if you could take 5 minutes and look at our IR deck and familiarize yourself with the HB pond system, I think it will become more evident to you.

[Lucas Beaumont, analyst]

And then maybe just lastly, sort of similar -- following on from sort of the question in terms of the hurdles of the incremental sort of $50 million payment. I mean it sounds like you have a reasonable degree of confidence that, that one we'll sort of pursue it. I mean could you talk a bit more about sort of what the contingent sort of hurdles are on the further $100 million that would need to kind of happen over time?

[Robert Jornayvaz, executive]

Well, there's really no hurdles. Once they get their next drilling island approved, then there really aren't any hurdles. It's described as contingent payments as they drill off those drilling islands. And so it all starts happening very quickly once they get that first drill island approved, and we are now very much aligned in terms of them receiving that drill island.

And I would just take you back to looking at Exxon's comments and look to Exxon for guidance as to their importance and the significance of the Delaware Basin in terms of where Exxon believes are going with their production. So that's more of an Exxon question.

[Lucas Beaumont, analyst]

Yes. So I mean I guess you said that the first one was linked to them just doing one drilling island. So are the incremental ones linked to multiple drilling islands? Or -- I mean, what's [indiscernible]

[Robert Jornayvaz, executive]

We simply need to get their first one approved to kick off the entire process.

[Operator]

[Operator Instructions] Your next question comes from the line of Jason Ursaner from Bumbershoot Holdings.

[Jason Ursaner, analyst]

First, I just want to congratulate you on the XTO deal and for getting the final sand permits. I know that's been a long time coming. And then I appreciate all the details on the CapEx projects in terms of how they're progressing. And just your commentary at the end, Bob, I appreciate you adding that.

Just first, on the balance sheet. Is there anything notable about the timing in terms of either working capital that you've laid out ahead of the spring season or CapEx that's maybe been front loaded in 2024? Or is that a pretty clean number?

[Matt Preston, executive]

Yes, Jason, when it comes to capital, I mean, I think certainly, some of it is going to be weighted more towards the first half as a lot of those projects started in 2023, and they'll be wrapping up in kind of the first half of '24. The HP pipeline, we've obviously covered IP30B, the replacement well, which is happening right now, and the Wendover primary pond, which began in '23 as well. And so from the growth side, certainly, that will be weighted more towards the first half of the year and sustaining capital piece, which is the balance of that $40 million to $50 million, spread pretty evenly throughout the year.

[Jason Ursaner, analyst]

Okay. And for the sand project, I apologize if you've talked about this before, but can you maybe either speak to or remind me about the regional economics of the project? Because I guess my understanding is the cost of sand to whoever is using it probably has a lot to do with whoever the next closest option would be. So when this project now can get up and running, what is kind of the regional or competitive view of what's in the area besides you guys?

[Robert Jornayvaz, executive]

It will be the closest -- it will be the first and only sand mine in Southeast New Mexico. So from a logistical standpoint, of which operators pay for sand, sometimes they pay for it FOB at the mine, and they pay their own transportation costs or they buy it on a delivered basis.

Logistically, we will now be the only mine in the Delaware Basin, on the New Mexico side, and we will be the closest to the wells being permitted and drilled. So we will have a significant logistical advantage from a transportation standpoint to the wells being -- to the hundreds, if not thousands of wells that are currently permitted and scheduled to be drilled.

[Jason Ursaner, analyst]

Okay. That's pretty clear. And looking for a partner, is it someone that would have, I guess, prior experience with operating, running a sand mine, that you kind of would look to bring that on? Or is it more just the financial aspect of maybe getting money upfront instead of to kind of do it all yourself?

[Robert Jornayvaz, executive]

I would say both components are very important. The good news is, we've got a lot of interest. And so I'll just leave it at that, that we're currently negotiating and feel like we have several directions that we could go and the nature of the park.

[Jason Ursaner, analyst]

Okay. And then just -- you talked a lot about HB in some of the last questions. But on Wendover, specifically, the primary pond 7, which, I guess, will now be a second primary pond, is that one more additive? Or is that kind of replacing declining rates that, I guess, what would have been the old primary pond?

[Robert Jornayvaz, executive]

I would say it's #1 purpose is replacement. We'll still be storing brine in primary pond 6 that will then flow into primary pond 7. And we will eventually start a multiyear construction on pond 8, which we will -- just so we don't allocate a bunch of capital. We're going to look forward because Wendover has tremendous opportunity. Assuming we structure a lithium joint venture, the capital will be available to greatly enhance the facilities out there with a partner that will not only increase potash production, but increase magnesium salt and, hopefully, lithium production as well.

[Jason Ursaner, analyst]

Okay. And on the lithium, the kind of numbers, like the 2,000 tons, is that kind of contingent on pond 7 being built? Is it contingent on pond 8 being built? Is that kind of where you are today with the mag chloride as the byproduct? Or just, I guess, where is that number...

[Robert Jornayvaz, executive]

The [ 2,000 ] really is a base number that is just literally sitting in ditch 5 or collection pond 5. And so we know that we consistently, over the last many, many years, if not decades, that's where we achieved the highest concentrations of lithium. And so it's been measured over several years.

We know we have an additional 4,000 to 5,000 tons that flow through the system, and we're working with some very sophisticated partners that have ideas how we -- where we can place collection points to collect those additional tons.

So combining with the right strategic partner that understands our seasonality, understands DLE technology and is well financed, our primary goals -- the great news is, is that any dollar we spend to enhance lithium production will directly result in greater potash production. So it is a true win-win in terms of who and how we structure this.

[Operator]

Your next question comes from the line of Josh Spector from UBS.

[Lucas Beaumont, analyst]

It's Lucas here again. So just on the Trio side. So you've got a pretty large step up there in the volumes for the first quarter. I mean, could you just kind of talk about how you're thinking about the rest of the year for us, please?

[Zachry Adams, executive]

Yes. Thanks for the question. Certainly, here in North America, I think as others have echoed, we're seeing a spring season that's trending ahead of normal just due to mild weather conditions, and we certainly see that in our Trio segment. So we would certainly expect our Q1 to reflect that, and it does so far.

But Trio is a little bit different than some other nutrients in that the demand piece on that has a little bit of a longer tail through the first half. So we would expect to still see steady volumes through second quarter in the early summer as that product is used on a variety of different crops and not only for pre-plant applications, but also for side-dress applications as well.

[Lucas Beaumont, analyst]

And sorry, so when you say 70 there, that's implying it could stay up at this kind of 90,000 tons level. I mean that would put you kind of 180 in the first half, which will be 50% higher than last year on last 40%. Is that correct?

[Matt Preston, executive]

No. I mean. Q1 will certainly be our largest sales quarter for Trio, as Zach said. I mean, we got an early spring season, and then we're seeing strong demand there. But like all of our sales seasonality and trends, I mean, we'll certainly see sort of tail off here towards the back half of Q2. So by no means is it going to be a consistent Q1 and Q2 volume.

[Lucas Beaumont, analyst]

Sorry, go ahead.

[Matt Preston, executive]

I said, it's very consistent with prior years.

[Lucas Beaumont, analyst]

Great. And just following on from Joe's question earlier on the cost saves. So you're sort of talking about the ton cost, I think. In the Trio side, so you had the step up there in sort of the aggregate cost level as well. So were you assuming that the aggregate costs are going to kind of be flat year-on-year as well, roughly? Is that how you think about it?

[Matt Preston, executive]

Yes, that was -- yes, that's correct.

[Lucas Beaumont, analyst]

Yes. And then just on the CapEx side, just following up on that one. So you mentioned most of the growth CapEx is going to sort of start to wind down from later this year, and you highlighted that's kind of falling to sort of $20 million to $25 million. So I mean, obviously, you're going to have these like ongoing kind of well growth CapEx, I guess, as you go right into next year, too. So I guess, how much of what's happening this year is like left in terms of spend that will carry into 2025? And how you kind of see like a normal level of growth CapEx in that sense?

[Matt Preston, executive]

Yes. I mean as far as the big push on revitalization, obviously, the last 2 years have been significant CapEx in that $65 million, $70 million range, '22, '23, down a bit in '24. So certainly nothing at those levels. We'll continue to evaluate opportunities in front of us when it comes to expanding into bed 9 and Moab if we'd like to, and certainly, other areas, but no significant forward projections now for '25 as we just continue to work to complete the projects that are currently underway, make sure those are successful and get up and running, and then we'll evaluate our production profile at that point and see what makes sense in future years.

[Lucas Beaumont, analyst]

And then just lastly on the potential kind of lithium projects, I was just wondering if you could kind of give us your latest thoughts on how you think the project economics of that would sort of work if you have either sort of the royalty of the JV agreement? Is it you're going to kind of capture like a percentage of sort of revenue there or something. I mean with where prices are at the moment, like the 2,000 tons a year would be worth kind of $30 million to $45 million a year in sales, which then, obviously, there's a bit of production costs and everything, and you have to split with the JV partner. How would you kind of think about walking through that?

[Robert Jornayvaz, executive]

We look at it as a pretty significant upfront payment. We to use that oil and gas analogy. We view our -- since we own the mineral outright, we don't lease the mineral. We own the lithium in fee. And so we have the opportunity to structure, like you would a South Texas ranch in the Eagle Ford play, where, as a mineral owner, you would take a significant upfront payment they would be responsible for the majority, if not all, of the capital costs, and then you would collect a significant royalty off of that.

And so we would not be expending any capital. It would give us the opportunity to expand, create more berms, more ponds, which, as I said in my remarks, every dollar that you spend to improve lithium production actually results in additional potash mag chloride and salt production as well. So the multiple effect of dollar being spent out there really has an impact on Intrepid. And that's why we're so focused on our Utah, especially our wind over facility right now because we own the lithium in fee.

[Operator]

[Operator Instructions] Your next question comes from the line of Jason Ursaner from Bumbershoot Holdings.

[Jason Ursaner, analyst]

I just wanted to try to follow-up on the HB just because there's a lot of moving parts, make sure I understand. So Eddy Shaft project, is the best way to think about that kind of like a stop gap for this year's evaporation production? And then you have the initial brine pool for the IP 30 well, the 330 million gallons, so that's a little bit of like a stop gap for kind of next year until you can get the residence time from the injection to then get out to 2025 where you sort of have it all hitting at that point? And it's kind of like a step up in the stop gap, if that makes sense?

[Robert Jornayvaz, executive]

Yes, that's a great way to put it. We're fortunate that the Eddy Shaft project turned out to be a little bit better than a stop gap. But IP30B will be in the heart of that brine pool of the best brine that's been cooking there for several years since the original IP30 well failed 3 years ago.

So that brine has had significant residence time. We've tested it numerous times. We know it to be 10% brine grade. It's the best brine that the company has, and there's enough to pump it for at least 1.5 years, if not 2 years, which gives the other mines that are currently being flooded given our new pipeline. So let's not forget, that we built an entire new pipeline system that's already -- the capital has been spent, so that we're now reinjecting at much higher levels, filling up the mines.

So in 2024, it will be the first time in 4 years where we're injecting significantly more than we're withdrawing, which has very positive long-term benefits to your brine grades and the brine that's available to you. So the investment has been made in the pipeline system. We just need to get well IP30B drilled successfully, which we're doing as we speak. That literally creates a long-term pinwheel effect because we can pull from that brine pool for at least 18 months, if not 2 years, while everything else gains residence time, at the highest injection rate it's seen since the inception of the mine.

[Jason Ursaner, analyst]

So the IP30 well, the operational life there's obviously -- that touches on a number of these different pools. So obviously, the short-term focus is this -- and I apologize, it's the initial brine pool that's at a lower depth than the Eddy Shaft. Is it -- I don't know what you're calling that one, but the initial pool. So after that, hopefully, then IP30 well is extracting from all of the other pools that you're not tapping for the next year or so?

[Robert Jornayvaz, executive]

No. Those all have successful operating extraction wells in existence and numerous wells in those other caverns. And so I would just ask that people go to our IR deck. We try to lay out all the different caverns, the well systems and everything that's there, so that you can very easily see which wells and how many different injection and withdrawal wells that we currently have that are operating in great shape.

It just gives all those other abandoned mines that are now flooded additional time for the brine grade to get higher because of residence time. And so we thought the best way to explain that to our stockholders is to give them maps so that they can literally look along as we speak to some of these more complex mining issues.

[Jason Ursaner, analyst]

And so just in that -- I'm in the presentation, the Page 7 you're talking about the Moab example. Because now you're talking about 9 -- I think it was 9% or higher on some of these pools. That's like the higher end of the range of where, I guess, the brine -- maximum of brine availability.

Is that -- is there a similar -- have you given a similar chart on the HB? Or is it just if you can get 9% brine rate, you're going to have -- assuming decent evaporation, you're going to have great performance out of HB is kind of the easiest way to think about it?

[Robert Jornayvaz, executive]

That's the easiest way to think about it. And just to give you a perspective, the brine is actually 10% underground and to get it up through the pipeline, we have to dilute it because it's so saturated in potash.

[Operator]

This concludes the question-and-answer session. I would now like to turn the conference back over to Bob Jornayvaz for any closing remarks.

[Robert Jornayvaz, executive]

Thank you, everyone, for your time today. We wish you a great week, and we really appreciate your interest in Intrepid. And we really look forward to the upcoming quarters. Thank you very much.

[Operator]

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.