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UPDATE 2-Mosaic cuts estimate on Florida mine legal woes
July 19, 2011 / 3:30 PM / 6 years ago

UPDATE 2-Mosaic cuts estimate on Florida mine legal woes

* Now expects injunction increases costs by $100 million

* Previously forecast higher costs of $200 million

* Expects ruling on injunction appeal by the fall

* Mosaic shares up 4 percent in midday trading (Adds executive quotes, byline; updates stock)

By Ernest Scheyder

NEW YORK, July 19 (Reuters) - Mosaic Co (MOS.N) has cut in half the estimated cost of a judge’s ruling that keeps the fertilizer producer from expanding a Florida phosphate mine.

Last week a U.S. judge extended an injunction that keeps Mosaic from expanding production at its South Fort Meade, Fla., mine. [ID:nL3E7IB1V6]

Just after the ruling was issued, Mosaic said it could increase its annual costs by $200 million as it would need to buy more phosphate rock on the open market.

On a conference call with investors on Tuesday to discuss the company’s quarterly earnings, Mosaic executives said the damage could now be $100 million due to excess phosphate capacity they have found at other Mosaic mines.

“The analysis that we’ve gone through suggests that we are going to be able to mitigate more of the impact than we first thought possible,” Larry Stranghoener, Mosaic’s chief financial officer, said on the conference call. “We believe we can significantly mitigate what otherwise might have been a worse-case situation in terms of purchased rock.”

Mosaic processes mined phosphate rock into pebble and fine phosphate, which are turned into diammonium phosphate, or DAP. That is what farmers use in their fields.

Effectively, Mosaic’s mining operation sells phosphate rock to its fertilizer production operation. If its own supply were dented, Mosaic would have to buy from competitors, a situation executives would like to avoid.

Mosaic has asked a higher U.S. court to cancel the injunction, though the company does not expect a ruling until the fall.

The South Fort Meade, Fla., mine has about 15 years of phosphate reserves and produces 6.5 million tons of the fertilizer each year. That represents a third of Mosaic’s yearly phosphate capacity and 4 percent of the world‘s.

Shares of Mosaic were up 4.0 percent to $69.12 in midday trading on Tuesday. On Monday the company reported earnings that beat expectations. [ID:nN1E76H1LJ] (Reporting by Ernest Scheyder, editing by Gerald E. McCormick)

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