J.P. Morgan Lowers Price Target on Mosaic Co. (MOS)

J.P. Morgan is out with a research report this morning, where it reiterates its Neutral rating on The Mosaic Company MOS; it also lowered its price target from $60.00 to $45.00. The JPM analysts highlighted some key legal issues for the company, saying, “On July 1, 2010 the U.S. District Court for the Middle District of Florida, Jacksonville division, issued a temporary restraining order (TRO), which effectively prohibits Mosaic from conducting activities related to the extension of its South Fort Meade phosphate rock mine into Hardee County. Mosaic believes that this extension is crucial to the existing mine, and without the extension the mine will need to be closed." "The TRO was issued as a result of a lawsuit filed on June 30, 2010 by non-profit organizations Sierra Club, Inc., People for Protecting Peace River, Inc., and ManaSota-88, Inc. The plaintiffs are contesting a dredge and fill permit issued by the United States Army Corps of Engineers (Corps) on June 14, 2010 to Mosaic, and requesting a judgment that the permit is void due to various violations of the law, as well as requesting a permanent injunction prohibiting the Corps from reissuing the permit until full compliance with environmental laws takes place. The TRO remains in effect through July 28, 2010 and Court hearings are set for July 22, 2010.” They added, “On July 1, 2010 the U.S. District Court for the Middle District of Florida, Jacksonville division, issued a temporary restraining order (TRO), which effectively prohibits Mosaic from conducting activities related to the extension of its South Fort Meade phosphate rock mine into Hardee County. Mosaic believes that this extension is crucial to the existing mine, and without the extension the mine will need to be closed. The TRO was issued as a result of a lawsuit filed on June 30, 2010 by non-profit organizations Sierra Club, Inc., People for Protecting Peace River, Inc., and ManaSota-88, Inc. The plaintiffs are contesting a dredge and fill permit issued by the United States Army Corps of Engineers (Corps) on June 14, 2010 to Mosaic, and requesting a judgment that the permit is void due to various violations of the law, as well as requesting a permanent injunction prohibiting the Corps from reissuing the permit until full compliance with environmental laws takes place. The TRO remains in effect through July 28, 2010 and Court hearings are set for July 22, 2010.” The JPM analysts further added, “The potential mine closure in theory could reduce Mosaic’s annual EPS by about ($0.25/sh). The closure would lower Mosaic’s phosphate rock production by 3.7 million tons per year (5.1 million lost in South Fort Meade less 1.4 million new supply from Bayovar) and 2.2 million tons less in DAP/MAP production (about 1.7 tons of rock makes 1 ton of DAP/MAP). Assuming DAP/MAP gross profit of $70/ton, the capacity reduction would theoretically result in ($0.25/sh) less EPS. Should Mosaic decide to keep the DAP/MAP production at the current level and purchase rock from the market, the extra costs would reduce EPS by $0.30/sh.”