Quick Note - Additional Findings on Compass Minerals (CMP)
Union Contract
Employee wages +4% y/y commencing on April 1, 2025, vs +3.5% in 2024.
Date Base Hourly Rate
April 1, 2021 $44.71
April 1, 2022 $46.05
April 1, 2023 $47.43
April 1, 2024 $49.09
April 1, 2025 $51.05
Compass’s union contract at the Goderich mine expires on March 31, 2026. Contract negotiations are likely to start in the fall. A 12-week strike occurred in 2018, presenting an added risk.
Capex step down in 2026 – In Compass’s 2022 Goderich Technical report, they disclosed their capex outlook for the mine. 2026, there’s a notable step down in Capex from 2025-2026. Given the curtailment, the step-down is unlikely to be as significant as some spending in 2024-2025 was deferred, stemming from lower production volume. Given the continued focus on FCF for debt repayment, it provides another tailwind to cash flow.
Continue to watch Cargill Cayuga Lake Situation - In January 2025, Cayuga Lake Environmental Action Now! (CLEAN) submitted detailed objections to Cargill’s permit application seeking to renew and modify its Mined Land Reclamation Permit for the Cayuga Salt Mine in Lansing, NY. The proposal includes flooding the previously abandoned S3 Zone beneath Cayuga Lake with up to 360 million gallons of undersaturated brine over a 15+ year period. CLEAN raised material concerns about mine stability, environmental risks, and procedural shortcomings, noting that the S3 Zone had been abandoned due to instability and that brine storage in this area would preclude further monitoring. The group urged the New York State Department of Environmental Conservation (DEC) to rescind its Negative Declaration under SEQR and require a full Environmental Impact Statement (EIS) before proceeding.
CLEAN’s submission emphasizes that DEC has not sufficiently addressed the long-term public and environmental risks associated with the project. It challenges the adequacy of Cargill’s technical assessments and reclamation plan, calling for a significantly higher reclamation bond (from $3.5 million to $10 billion) and highlighting legal gaps related to zoning and the public trust doctrine. If the permit is denied or materially delayed, Cargill may face constraints on its ability to manage wastewater underground, accelerating the need for alternative surface solutions or potentially triggering an early wind-down of operations, currently projected to face reserve depletion by 2030–2032. Should this occur, more salt production comes offline, benefiting Compass.
Model changes – Compass’s financial disclosures are materially worse than most public companies. Disclosure about where D&A is recorded was not in any filing, and correspondence with the SEC revealed that a portion of D&A is recorded in SG&A, while the majority is included in product costs.
SEC - It appears some portion of DD&A already included within the DD&A line item is also included in selling, general and administrative expenses (“SG&A”). Please clarify for us whether this is the reason why we were unable to recalculate operating earnings based on the revenues and expenses presented within Selected Financial Data. If so, then please disclose the amount of DD&A also included SG&A expenses
Response: You are correct. The total DD&A line item in our Consolidated Statements of Cash Flows consists of DD&A included in product costs and DD&A included in SG&A. The amounts for DD&A included in SG&A are $14.8 million, $13.4 million, $6.1 million, $4.3 million and $3.7 million for 2018, 2017, 2016, 2015 and 2014, respectively. The increases in 2017 and 2018 primarily relate to an upgrade of our enterprise resource planning system that began in 2017.
~10% of D&A is recorded in SG&A while the remainder is in product costs. Original estimates of 2025-2027 SG&A were $127.3, $125.9m, and $129.1m vs now $121.9m, $115.5m, and $119.9m. ~$10m lower/year.
Disclosure: O’Keefe Stevens Advisory is long Compass Minerals (Ticker: CMP).