February 29, 2016 / 3:21 PM / a year ago

UPDATE 2-Intrepid Potash shares crash after auditor flags risks

(Adds CEO comments on production, debt agreements, stock update)

By Arathy S Nair and Rod Nickel

Feb 29 (Reuters) - Intrepid Potash Inc said on Monday its auditor has expressed doubts about its ability to stay in business, sending its shares plunging by more than half.

The U.S.-based miner, which reported its third straight quarterly loss on Monday, also said low potash prices could cause a breach in its loan covenants.

Prices of the crop fertilizer have tumbled due to soft grain prices, dropping U.S. farm incomes, bloated capacity and weak currency in importing countries such as Brazil.

North America's biggest producer, Potash Corp of Saskatchewan, has closed one Canadian mine and said Friday it will idle production temporarily at two others.

"This was an extremely volatile, chaotic quarter," Chief Executive Officer Bob Jornayvaz said on a conference call. "We believe we'll continue to survive and eventually prosper as a smaller but much more profitable company."

Intrepid is one of the world's highest-cost potash producers.

Due to falling prices, Jornayvaz said the company won't be able to comply with debt covenants that were revised in January, and is working with lenders on an updated agreement. Its auditors added going concern language to their opinion, meaning there are worries about Intrepid's ability to keep operating.

Intrepid ended 2015 with $60 million in cash and doesn't expect to drain its balance this year, the CEO said.

The company's stock plummeted 57 percent at 97 cents. Its 52-week range is $1.75 to $14.60.

Intrepid, which has more than 850 employees, said it cut 5 percent of its workforce in early 2016.

By switching its East mine at Carlsbad, New Mexico, from conventional muriate of potash (MOP) to its premium specialty fertilizer Trio, Intrepid expects to permanently remove 200,000 tons of potash capacity by mid-2016.

The company also said it was evaluating the viability of its West mine, also in Carlsbad. It can produce as much as 420,000 tons of potash annually and accounts for more than half of Intrepid's total output.

"With potash prices continuing to fall, without broader industry discipline, higher-cost producers such as IPI could face meaningful hardship with mine curtailments and shutdowns not unexpected," BMO Capital Markets analyst Joel Jackson wrote in a note.

The Denver, Colorado-based company reported a net loss of $518.3 million, or $6.85 per share, in the fourth quarter, compared with earnings of $5.8 million, or 8 cents per share, a year earlier. (Reporting by Arathy S Nair in Bengaluru and Rod Nickel in Winnipeg; Editing by Saumyadeb Chakrabarty and Jeffrey Benkoe)

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