The company had an SEC filing today issuing a ‘conditional “WARN” notice’ to 221 of Mosaic’s mine employees. The notice advises those employees that that in 60 days its South Fort Meade, Florida, phosphate rock mine may close indefinitely because of a lawsuit filed on June 30, 2010 by Sierra Club, Inc., Manasota-88, Inc. and People for Protecting Peace River, Inc.
The suit was filed in the United States District Court for the Middle District of Florida, Jacksonville Division. This suit contests the issuance by the U.S. Army Corps of Engineers of a federal wetlands permit for the extension of Mosaic’s South Fort Meade, Florida, phosphate rock mine into Hardee County, alleging that the issuance of the permit by the Corps violates several federal laws relating to the protection of the environment. The suit also called the permit as being “arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law.”
After the suit was filed, the court issued a temporary restraining order on July 1, 2010 which prohibits the Corps and prohibits Mosaic from conducting activities in the waters of the United States in reliance on the federal wetlands permit. The TRO also remains in effect through July 28, 2010 unless modified or extended by the court, and the court set a hearing on plaintiffs’ motion for a preliminary injunction for July 22, 2010.
The company expects that it will receive a ruling on the motion for preliminary injunction prior to the expiration of the temporary restraining order.
Mosaic said that without the federal wetlands permit, mining at the South Fort Meade mine cannot continue without adverse consequences. The company also noted that three of the mine’s four draglines have been idled awaiting access to the new reserves in Hardee County. Furthermore, output from the single remaining dragline “cannot economically support the operating costs of the mine.” In short, this mine is effectively being shut down until a resolution can be found.
The company said that the WARN notices were necessary because of the 60 day notice period required by law prior to layoffs of affected employees, if the court grants a preliminary injunction halting mining until a trial is held to decide the merits of the lawsuit. The company also stated that should a preliminary injunction not be entered by the court, work will continue on the Hardee County Extension and the WARN notices will be allowed to expire without any layoffs occurring.
Mosaic is going to fight this. It noted, as you would expect, that it believes that the plaintiffs’ claims are without merit and intends to vigorously defend the Corps issuance of the federal wetlands permit for the Hardee County Extension.
As expected, potash and fertilizer investors are shooting first and asking questions later. Mosaic shares are down 7.5% at $42.67 on almost triple-average volume with over 12 million shares traded today.
It is impossible to know if more suits are coming based on environmental issues. So far, traders are keeping this as a fairly isolated event.
Mosaic makes up approximately 8% of the The Market Vectors Agribusiness ETF (NYSE: MOO), and that ETF is down 1.3% at $38.62 without any volume alerts having gone off. CF Industries Holdings, Inc. (NYSE: CF) is down 1.5% at $73.11 on only about 2.1 million shares. Potash Corp. of Saskatchewan, Inc. (NYSE: POT), based in Canada, is probably more farther removed and its shares are down 0.4% at $92.61 on rather light share volume.
JON C. OGG
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