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Mosaic shares plumb six-year low, as potash mine mothballed

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Shares in Mosaic Co fell to six year lows, as the US fertilizer giant downplayed its production prospects and announced the mothballing of a potash facility.

Shares reached down 7.2% to $33.83 a share, after analysts cut their price outlook for the company.

Investment bank Cannaccord Genuity slashed its price target for shares in Mosaic to $35, from $45, giving the stock a "hold" rating.

And trading firm Susquehanna cut its target price for Mosiac shares to $50, from $54, though it maintained a "buy" rating on the stock.

The moves followed the announcement by Mosaic late on Monday that it would cut potash production and maintain its current slow phosphate production pace, as it cautioned that its sales would come in towards the bottom of ranges it had previously guided to.

"Since the company announced its third quarter guidance on August 4, domestic and international crop nutrient markets have softened," Mosaic said.

Sales volumes "are lower than expected, and prices have weakened".

'Maintaining our discipline'

Mosaic said it would mothball its Colonsay potash mine in Saskatchewan, Canada, extending a previously announced closure for maintenance for an unspecified period.

"We are managing our production levels to match current demand, controlling our costs, and maintaining our discipline," said Joc O'Rourke, the Mosaic chief executive.

The group cited slow purchases from key buyers in Brazil and North America, amid pressure worldwide on fertilizer markets from weak crop prices, which have undermined farmers' willingness to spend.

The strengthening dollar makes product from US producers less competitive against nutrients from other jurisdictions.

"Currency volatility, lower grain and oilseed prices, political and economic uncertainty, as well as global equity market declines have adversely impacted market sentiment."

Volumes fall

Mosaic saw potash sales volumes for the three months to September 30 coming in at the bottom half of its previous guidance range of 1.6m-2m tonnes.

The company cut its forecast for average selling price for muriate of potash, seeing it at the bottom half of the previously announced range of $260-280 a tonne.

Falling prices and volumes would also eat into the profitability of potash sales.

"The potash segment gross margin rate is now expected to be in the high teens, compared to prior guidance of the low-twenty range," the company said.

Mosaic's phosphate volumes are now expected to be "at the low end" of its range of 2.1m-2.4m tonnes in the three months to September 30.

But the average selling price for diammonium phosphate - or DAP, a key phosphate fertilizer type - is expected to fall within the upper half of a forecast range of $435-455 a tonne.

Mosaic shares in New York were trading down 6.9% at $33.91 a share in morning deals.


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