Good morning, ladies and gentlemen. Welcome to the Compass Minerals Fiscal Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded. After the speaker's prepared remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. At this time, I would like to turn the call over to Mr. Brent Collins, Vice President, Investor Relations. Please go ahead, Mr. Collins.
Thank you, operator. Good morning and welcome to the Compass Minerals Fiscal 2023 Second Quarter Earnings Conference Call. Today, we will discuss our recent results and update our outlook for the remainder of 2023. We will begin with prepared remarks from our President and CEO, Kevin Crutchfield, and our CFO, Lorin Crenshaw. Joining in for the question-and-answer portion of the call will be George Schuller, our Chief Operations Officer, James Standen, our Chief Commercial Officer, and Chris Yandell, our Head of Lithium. Before we get started, I will remind everyone that the remarks we make today reflect financial and operational outlooks as of today's date, May 10, 2023. These outlooks entail assumptions and expectations that involve risks and uncertainties that could cause the company's actual results to differ materially.
A discussion of these risks can be found in our SEC filings located online at investors.compassminerals.com. Our remarks today also include certain non-GAAP financial measures. You can find reconciliations of these items in our earnings release or in our presentation, both of which are also available online. The results in our earnings release issued last night and presented during this call reflect only continuing operations of the business, other than amounts pertaining to the condensed consolidated statements of cash flows or unless noted otherwise. I'll now turn the call over to Kevin.
Thanks, Brent. Good morning, everyone, and thank you for joining us on our call today. Before beginning the call, I wanted to welcome Jill Gardiner to our board of directors. Jill joined the board last week and brings a wealth of financial and extractive industry experience to our board. We're looking forward to her contributions and insights. Now, halfway through our fiscal year, we continue to push forward in our pursuit to create value for you, our shareholders, seizing opportunities and mitigating challenges when either arise. To guide us in this pursuit, we focus our efforts around six strategic objectives that we set for the organization in fiscal 2023. You've heard me outline these objectives on past calls, and I'll take a few minutes to provide an update on each of those areas.
I'll comment briefly on the quarter before turning the call over to Lorin to discuss our financial performance in more detail. Safety, specifically our drive towards zero harm, will always be a key area of focus for our company. We owe it to our employees and their families to foster an environment where employees know they will go home to their families at the end of the shift in the same condition as when they left. Safety performance is also often a leading indicator of operational performance. The safest mines in the world are also the most productive. We make safety a priority because it's the right thing to do for our people, and it's the right thing to do for our business.
Last year was an outstanding year for safety performance, and I'm proud to say that year to date, we're performing even better with our track safety metrics than we did in fiscal 2022. Achieving zero harm is a high bar, particularly in the complex operating environment that we operate in. However, several of our sites have proven it's possible, and we'll continue to pursue that goal each and every day. With respect to our salt business, our objective for 2023 was to improve the profitability of that segment to levels that we've historically delivered. Specifically, we've talked about restoring profitability to around $20 of EBITDA per ton for this segment for fiscal 2023. As I've outlined previously, we approached the 2023 bidding season with a disciplined pricing strategy and focused on securing sales commitments in markets that are geographically advantageous and relatively efficient to serve.
For the second quarter, we saw the average gross sales price for the salt segment increase 12% to approximately $82 per ton, driven by improved pricing in highway de-icing salt from the comparable period last year. Favorable pricing dynamics, combined with essentially flat distribution and cash operating costs, resulted in EBITDA per ton increasing 64% to just over $20 per ton, up nearly $8 from roughly $12 per ton last year. Although the year's not over, I'm pleased with the progress the team has made to restore profitability following the extremely challenging inflationary environment we experienced in 2022. Charting a path to improve the reliability and sustainability of our SOP production was another strategic objective for this year, though we continue to face significant headwinds on this front.
One thing I do want to make clear is the reduced sales volumes year-over-year that we've experienced during our second quarter are not a function of production issues. Operationally, we've been ready to service customer demand. However, ongoing precipitation challenges in our key California market have continued to delay the application season for growers. Again, when those challenges abate for our customers, we stand ready to respond. From a longer-term perspective, however, our focus with respect to this part of our business remains optimizing sustainable production levels of our Ogden Pond Complex across a variety of weather scenarios. Progress continues to be made in that regard, and we'll provide a more detailed update on this initiative when appropriate. The next objective I want to touch upon involves the advancement of our battery-grade lithium development at Ogden.
As indicated in our release yesterday, we were engaged in what turned out to be a particularly busy legislative session in Utah this past quarter for those of us who share in the overall goal of maintaining a healthy Great Salt Lake while at the same time balancing the needs of its many diverse stakeholders, including the mineral extraction industry. Specifically, legislation promulgated as a part of this recent Utah state legislative session introduced new regulatory and cost elements into the framework that will govern the development of lithium on the Great Salt Lake. Certain of these provisions relating to severance taxes, royalty agreements, leasing rights, and berm management have created some near-term uncertainty until regulatory rulemaking can be completed in the coming months. Our operations at Ogden were founded over 50 years ago with the original intent to extract lithium.
Unfortunately, at that time, a commercially viable technology wasn't available. Today, with our technology provider, EnergySource Minerals, we have a commercially viable technology that allows us to extract a fourth mineral from our existing operating stream and recycle the brine back into our pond system. Lithium development is new for the state, and we fully appreciate its desire to receive fair value from the development of that resource. However, we'll continue to pursue this opportunity only if two critical criteria are met. Number one, that it makes economic sense for our shareholders from a risk-adjusted financial return perspective. two, predictability of the regulatory regime in Utah. These criteria are true in any mining jurisdiction or project, and Utah can be no exception. Historically, Utah has long been considered an attractive operating environment due to their historic understanding of the economic and social value our industry creates.
Based on preliminary discussions, we expect this mindset to continue. As we've previously announced, the full development of phases I and II of our lithium project would represent an approximate one billion-dollar investment on the Great Salt Lake. Clearly, to justify that investment, we must have clarity and certainty on the evolving regulatory framework we would be working under to assess the potential impacts on our project. Therefore, as we continue advancing the demonstration unit presently under construction and proceeding with developing an FEL2 engineering estimate with all deliberate speed and an abundance of caution, we'll defer publicly sharing the updated disclosure of any project-related economic and engineering estimates until we have such clarity. Again, we've been a responsible and productive operator on the Great Salt Lake for over 50 years.
We've been an important contributor to the Utah economy for decades. This project has the potential to bring Utah to the forefront as part of the domestic supply chain for critical minerals. I'm cautiously optimistic that as we've done time and again with regard to our other mineral resources on the Great Salt Lake, we will reach a favorable accord with the state of Utah on a path forward for our planned lithium development that serves the best interest of all stakeholders.
Moving on to our other commercial growth pillar, yesterday we announced that we had acquired the outstanding 55% interest in Fortress North America, bringing our ownership stake to 100% for upfront consideration of approximately $26 million in cash, contingent milestone consideration in cash or stock valued at approximately $28 million, and an earn-out of $0.30 per gallon of product sold over the next decade. For those of you who are not familiar with Fortress, it's a next-gen fire retardant company that utilizes our magnesium chloride and other salt production as the key ingredients in its formulations of aerial and ground fire retardants. The aerial fire retardant industry has essentially been a monopoly for over two decades.
Bob Burnham and his team are entrepreneurs as well as fire, aviation, chemistry, and government contract experts who saw an opportunity to develop a suite of products that were more effective and better for the environment than the incumbent products being used. Our relationship with Fortress began in early 2020, initially as a supplier of magnesium chloride, which we produce out of our Ogden facility. Through the years, we had the opportunity to work closely with Bob and his team, and as we learned more about their business, we ultimately made a strategic investment in their company. In December 2022, Fortress became the first new company in over two decades to have long-term aerial fire retardants added to the U.S. Forest Service Qualified Product List, or QPL, after meeting or exceeding rigorous testing across a number of categories and evaluations.
Being added to the QPL was a significant step toward full commercialization of Fortress products as it provides the pre-approval to government agencies around the world who use the U.S. Forest Service QPL as the chief qualifier for purchasing and which allows them to procure and use the company's products. Early this month, Fortress reached an agreement with the U.S. Forest Service that will result in Fortress supporting up to five mobile deployed air bases with product and associated services in the upcoming 2023 fire season, utilizing Fortress' new state-of-the-art mobile and fixed retardant mixing units. The U.S. government recognizes that competition in the market is preferable to sole sourcing for essential products and services, and accordingly, there are programs that provide on-ramps into the retardant market where it would like to see competition occur.
Under a framework used by U.S. government agencies, including the U.S. Forest Service, to boost competition in critical sectors where government is the primary buyer, a substantial portion of Fortress activity will be contracted by the U.S. Forest Service in fiscal 2023. We anticipate operating under a similar framework in 2024 as well, and then moving into more open competition in 2025. In the simplest terms, this program establishes a glide path for new competitors like Fortress to attain critical mass for their products and services in the first couple of years of commercial operation, and encourages Fortress to build additional scale.
The combination of Fortress products being added to the QPL and the recent agreement with the U.S. Forest Service granting the company its first tranche of bases provides sufficient visibility to the growth potential of this business to give us confidence to exercise our right to acquire the outstanding stake in Fortress. Fortress business model has always aimed at achieving at least a 50% share of the market, and we believe progress toward that goal can be accelerated as a result of this transaction. There's a meaningful value creation opportunity to realize by fully integrating Fortress into our company, thereby taking full advantage of our deep logistical and production capabilities. I'm thrilled that Bob and his highly experienced leadership team will be staying on to run the Fortress business and joining the Compass Minerals family.
Enhancing our financial position was the final strategic objective that we set for fiscal 2023. A strategic equity investment by Koch in October 2022 was a critical step in achieving that goal, as it provides a substantial amount of non-debt-related funding to pursue phase I of our lithium development. Another important element to achieving this objective was addressing the near-term maturity of the $250 million in notes that were set to mature in July 2024. In recent days, we've issued $200 million in Term Loan A notes and expanded our credit facility to allow us to fund the redemption of the July 2024 notes.
In doing so, the maturity of our revolving credit facility has been pushed out three years to 2028, and our closest significant maturity is now four years away with our $500 million senior notes due in 2027. Obviously, the credit markets have been somewhat fragile in recent months given the recent banking sector turmoil. I want to acknowledge Lorin and his team for successfully navigating that process against a very challenging macro backdrop. We expect to see a strengthening of our credit profile in the near term and over time with improved salt segment profitability and the incremental financial contribution from Fortress, driving deleveraging in the shorter term and eventually contributions from lithium longer term. Both of these new business ventures are expected to enhance our long-range credit profile from a growth business diversification and scale perspective.
In early April, we announced via an 8-K that we had taken the initial steps to rationalize the cost structure of our company with the express goal of improving and maximizing the profitability of our salt and plant nutrition businesses. The first phase of that effort began with headcount reductions equivalent to approximately 16% of our corporate workforce, which, combined with elimination of certain consulting services and other overhead costs, is expected to benefit our operating earnings and Adjusted EBITDA by approximately $17 million-$18 million per year beginning in fiscal 2024, year-over-year, all else being equal. Phase II of our cost rationalization exercise will be completed in the second half of the year and will be focused on reducing costs at our production and packaging sites.
These types of actions are never easy, but we're committed to improving the profitability of those core businesses, and this initiative is a proactive, important step toward achieving that goal. Before I turn the call over to Lorin, I want to make a couple of comments about the quarter. Regarding salt, I'm pleased that we were able to improve operating earnings and EBITDA for salt on both an absolute and per unit basis. Volumes in the highway de-icing business were down 19% year-over-year, with a portion of this decrease due to the moderate weather that we experienced during the second quarter and a portion of it relating to our decision last bid season to focus on value over volume. We deliberately chose not to pursue certain business last year so that we can improve our profitability.
It goes without saying that it's hard to grow volumes when you're reducing the areas you plan to service. As I mentioned earlier, restoring salt profitability was an important goal for us this year, and I'm pleased that we were able to make a substantial improvement in that regard in the second quarter. Our focus for the salt segment is centered on managing costs and maximizing profitability through optimizing our customer and geographic sales mix. As we approach the upcoming bidding season, we intend to pursue full value for the salt products we provide in our served markets. As I noted in my earlier comments, plant nutrition unfortunately continues to be impacted by exceptionally difficult weather in California that is hindering our sales efforts in that important market.
The amount of precipitation that California has received this year is frankly amazing, ranking as the seventh wettest year over the last 129 years. As an immediate consequence of all this rain and snow that is, the growers simply cannot access their fields and orchards. As a result, they're not able to make applications that we would normally expect to see in our second fiscal quarter. The good news is we don't see any structural changes with respect to use and demand of SOP in California. Fortunately, pricing for SOP continues to be strong, with the average selling price increasing approximately 8% year-over-year. Per unit distribution costs increased primarily due to changes in regional sales mix.
The increase we saw all-in product costs per ton reflects operational measures taken to mitigate the impact of the below average 2022 evaporation season and the impact of the temporary natural gas spike that we had in the first quarter. We also had a small belt fire at our Ogden facility during the quarter. The related repairs added some incremental operating costs in the quarter. We were able to quickly implement a temporary system that allowed us to have minimal downtime. Kudos to George and his team for how they responded to that incident. As a result of these puts and takes, we saw Adjusted EBITDA for plant nutrition decrease to $8 million in the second quarter. Reflecting on where we stand at mid-year, I think we've done a good job addressing the things that are within our control.
Salt is performing well, and the Fortress acquisition is an exciting new avenue for growth. We'll continue to work on optimizing the plant nutrition business so that we're primed to take advantage of opportunities as weather conditions normalize. Regarding lithium, I'm guardedly optimistic that we'll come to an agreement with the state regarding essential agreements, particularly the royalty structure and operating parameters that are prudent economically enable us to confidently advance both phases of our project. Our lithium vision remains serving as the critical input enabler toward the creation of a robust North American advanced battery supply chain. With that, I'll now turn the call over to Lorin to provide more detail on the quarter.
Thank you, Kevin. On a consolidated basis, revenue was $411 million for the first quarter, down 8% year-over-year. Second quarter consolidated operating earnings improved to $47.9 million, up 140% year-over-year, while Adjusted EBITDA from continuing operations was $77.4 million, up 19% year-over-year. A key takeaway is that despite revenue declining due to lower volumes, we substantially improved our profitability year-over-year. Beginning with our salt segment, salt revenue totaled $361 million for the quarter, down 8% year-over-year, driven by 17% lower sales volumes, offset by a 12% increase in average gross selling price.
The highway de-icing business experienced 12% higher pricing year-over-year to just shy of $70 per ton, while sales volumes were down 19% year-over-year, reflecting a combination of our value over volume commercial strategy and a second quarter that was below average from a weather perspective within the markets that we serve. Looking at the 11 representative cities we discussed in the past, there were 83 snow events reported during the second quarter, down 27% year-over-year and down 23% from the 10-year average of approximately 108 snow events. With this year's de-icing season behind us, the winter, as measured by snow days in our core markets, was roughly 80% of the historical 10-year average for snow days. Not a normal winter, but not an exceptionally poor one either.
Specifically, for the winter to date period through April, we had 127 snow events, which is lower than last year's 152 and below the 10-year average of 159. Within our C&I business, volumes declined 5% year-over-year, driven by below average winter activity, offset by increased sales in non-de-icing product lines. Average pricing within C&I rose 1% to approximately $178 per ton. By holding total cost essentially flat year-over-year and driving through the price increases last bidding season, we were able to drive salt segment operating earnings and Adjusted EBITDA higher despite lower sales volumes on both an absolute and per ton basis. Operating earnings for the segment were $73 million in the quarter, an increase of almost 50% year-over-year.
EBITDA came in at $88.9 million, an increase of 36% year-over-year. Importantly, EBITDA per ton was $20.19, which is in line with historic levels of profitability. As Kevin discussed earlier, restoring the profitability of the salt business was a strategic objective for this year. Turning to our plant nutrition segment. Unusual weather developments in some of our most important markets continued to weigh on our sales efforts in the second quarter. Sales volumes were down 19% year-over-year. As I'm sure most of you are aware, California has seen an incredible amount of precipitation over the last several months, it has wreaked havoc on the agricultural community out there. The rain and snow they have received has made even the most basic tasks, like growers accessing their fields and orchards, difficult to do due to mud.
This, in turn, impacted their ability to apply fertilizer, resulting in lower volumes year-over-year. On a positive note, prices were up 8% year-over-year to $796 per ton. The net impact to revenue during the quarter was a decrease of around $7 million or 12% year-over-year. Distribution costs on a per ton basis were up 12% year-over-year, due primarily to changes in regional sales mix. All-in product costs per ton were up 19% year-over-year. Operational steps that we took following the subpar 2022 evaporation season, including the use of KCl to bolster production yields and the impact of the natural gas spike from last quarter on our standard costs, pushed all-in product costs higher. While these items were known and included in our last outlook, the fire Kevin mentioned obviously was not.
That added approximately $2 million in costs in the second quarter. At quarter end, we had liquidity of $536 million, comprised of roughly $250 million of cash and revolver capacity of around $286 million, while net leverage stood at 3.5 x. As Kevin indicated earlier, we were pleased to successfully execute a refinancing of our notes due in July 2024, despite the current banking sector backdrop. We approached the refinancing with four objectives in mind: refinancing on reasonable pricing terms, pushing out our debt maturity profile, bolstering our liquidity, and creating flexibility within the credit agreement to accommodate a wide range of potential non-debt financing sources to fund our lithium efforts in the coming years.
We achieved each of these objectives as part of the refinancing, with pricing up only 25 basis points at the current portion of the pricing grid. Our next closest meaningful maturity now not occurring until 2027, an increase in our revolver by $75 million and reduction in term debt outstanding by $50 million. A credit agreement that now contemplates the prospect of a wide range of potential non-debt lithium funding sources ranging from government grants to streaming to equity at the Ogden asset level. A supportive bank group is essential on our journey to accelerate growth and reduce weather sensitivity by expanding into the adjacent markets of lithium and next generation fire retardants. We're thankful to have a long-term-oriented, supportive bank group on our transformation journey. Turning to our outlook for the rest of the year, I'll begin with salt.
The performance guidance for the salt segment across various weather scenarios remains unchanged from the guidance we provided last quarter. We expect that results are likely to come in within the range of $215 million-$255 million of EBITDA. Our full year outlook for plant nutrition remains unchanged from our prior guidance, with profitability outcomes ranging from $30 million-$60 million of EBITDA, which reflects the heightened uncertainty regarding SOP, fertilizer pricing and sales, higher production costs, and extraordinary weather in several core markets, including California. During our last earnings call, we laid out three scenarios that frame the range of guidance that we have provided. Currently, we are tracking most closely to the midpoint of the range. Turning to Fortress. This acquisition changes our financial disclosure some going forward.
We will now fully consolidate its results rather than just picking up our proportionate share of its net income. As a result of this transaction, whereas our prior guidance assumed Fortress would incur operating losses throughout fiscal 2023, we are now reducing our guidance for corporate and other expenses by approximately $10 million at the midpoint to a range of $65 million-$70 million, down from our prior range of $75 million-$80 million, reflecting our now positive expectation of the profit contribution from Fortress this fiscal year. As we noted in our press release yesterday, we expect Fortress to generate revenue of $20 million-$25 million in fiscal 2023, with operating earnings and EBITDA expected to be in the low double-digit millions of dollars. Fortress aspires to win 50% market share over time and has a business strategy to achieve that goal.
While we are pleased with a contribution this fiscal year to EBITDA in the low double-digit millions of dollars, we certainly didn't buy Fortress for its year one financial contribution. Its earnings power is much higher than that and quite substantial in our view. We see a path for the company to grow earnings meaningfully through sizable market share gains and at scale expected to enjoy profitability levels as good as, and we think likely better than, what the market incumbent currently generates. We estimate the addressable North American market for aerial fire retardants to be roughly 70 million gallons, or between $200 million-$250 million in revenue. If we are successful at gaining market share at attractive margins as we expect, the implied multiple that we are paying for Fortress will prove to have been quite reasonable.
Turning to our CapEx guidance, we have lowered our projected total CapEx for fiscal 2023 by $30 million at the midpoint to a range of $150 million-$175 million. This is comprised of lithium development CapEx in the range of $60 million-$75 million, funded by proceeds from the Koch transaction, and sustaining CapEx in the range of $90 million-$100 million, which is unchanged from our prior estimate. The $30 million reduction in projected lithium-related spending reflects two drivers: further refinement in the project's engineering, which has resulted in a lower estimate of project costs for the demonstration unit, and adjustments in the timing of select long lead time items.
We continue to advance the construction of the commercial scale DLE unit, which remains on track for mechanical completion by the end of this calendar year, and for commissioning and startup to occur around this time next year. From an interest expense perspective, we have raised our projection for fiscal 2023 slightly to a range of $55 million-$60 million, up approximately $5 million at the midpoint from our prior range, reflecting the increase in our pricing grid by 25 basis points as part of the recent refinancing. I will turn it back to the operator to open the lines for Q&A. Operator?
Thank you, Mr. Crutchfield. Ladies and gentlemen, at this time, if you do have any questions, simply press star one. Just a quick reminder, if you find your question has been addressed, you can remove yourself from the queue by pressing star 1 again. We'll take our first question this morning from Joel Jackson of BMO Capital Markets.
Good morning, everyone. Maybe a few questions from me. I think it's confusing, to be honest, some of your guidance around salt. You say the confidence indicates that it's the same guidance as February for salt when you said that you'd be below the midpoint of guidance, below 235, and now you're saying you're gonna be within the range. Are you saying that you're gonna be below the midpoint of guidance still for this year? Thanks. Also for volume too, please. Excuse me, interrupt the highway de-icing volume. Thank you.
No, appreciate the question. Our financial guidance of $215 million-$255 million for salt is unchanged. Directionally, we now do believe that we've got a path towards the midpoint of that range, but the $215 million-$255 million is unchanged. Directionally, we do feel more comfortable with the middle part of that range, which reflects some positive dynamics that Jamie c an elaborate on, whereby despite an 80% winter, several of our markets have tracked much higher than that in terms of our budget. Jamie, maybe you can elaborate.
Yeah. I think that, while on balance the winter was pretty mild, there were areas of strength. In those areas such as Wisconsin, Minnesota, we have higher than average margins there. While the volumes are down, we were able to sell higher margin tons, which helps us get into the middle of that guidance range, even though volumes are lower than normal, than average.
Okay. That's helpful. A couple questions more on Fortress. Can you talk about if you think about fiscal 2024, what are some realistic bull, bear, and base cases for the kinds of volume type of gallons you might be able to do, type of earnings you might be able to do? However you want to talk about it, like a reasonable bear case. Did I say bear case? Base case for Fortress. Thanks.
I would start and then let Jamie elaborate, this is Lorin, by saying as we think about this business, we think about the long term. I think what I should share with you is what we think the earnings power of this business is. These founders, who we salute today, have a case to establish 50% market share. If we're successful, we think this business has earnings power in the $40 million-$50 million EBITDA range, $40 million-$50 million. We're just getting started and are thrilled to have this first tranche of bases, but are not in a position or comfortable talking about 2024. Thrilled to reach this milestone and we'll share more in the coming quarters. Jamie, anything you want to share?
No. I just think that under this construct, we're currently working with the U.S. Forest Service on what 2024 looks like. We don't wanna talk about that yet. And like Lorin said, we'll give more information in due time.
Okay. Just Sorry. Just finally, it's early, but what are your kind of views right now on bid season? You know, what are channel inventories like in different regions? You know, you've got a lot of things kind of volatile up and down, but what's kind of your view on how bid season should go? Should we use, you know, the average winter typical 2%-3% growth, or do we have to use some other base case here?
I would say that obviously, you know, supplier inventories are a bit elevated because the winter was not below average. It varies in pockets. I already mentioned the strength we saw in the Upper Miss. The Ohio River was pretty weak. Supplies pretty tight in the south, which is in our south region, that Ohio River Valley. You know, you also have to consider, you know, inflation is still a factor to the market and competitor supply. There is some activity there. Some mines being down, absorb some of that winter weather weakness. You know, we feel good about extracting value, optimal value, through this bid season, that's well underway now.
Joel, this is Kevin. To be perfectly clear, we plan to continue this value over volume approach. To Jamie's point, there are, you know, there's a mine that fell out of the mix. There's one that's, you know, producing way less than it used to because it's on strike. You know, nothing's unfolding thus far that we would consider surprising. We continue to approach the season from a value over volume standpoint to extract fair value for our products.
Thank you.
Thank you. We go next now to Vincent Anderson of Stifel.
Yeah, good morning. To follow on that Fortress, line of questioning, I guess just when we think about 2023 guidance then, is that an appropriate kind of per base run rate of revenue, or does that include some amount of upfront equipment sales to the bases?
This is, you know, it's gonna ramp up through the season. We don't know what the revenue exactly is going to look like in 2024. It, it wouldn't be, it wouldn't be appropriate to just use average run rates and some growth mechanism. We're just not ready to talk about 2024 yet. We believe we'll sell more gallons to the U.S. Forest Service in 2024 as this ramps up. We're just not ready to talk about that on a per unit basis.
I would say, I know that folks would want us to share sort of a five-year view of market share. I would just reiterate, we think the earnings power of this business is kind of $40 million-$50 million. You would discount that back to determine how long it takes us to achieve that at some reasonable discount rate, and we'll provide more perspective, but that's the earnings power, and we think it's quite an attractive transaction.
Fair enough. Maybe I'll shift gears then, a little bit. Will the acres that deploy your product this year, assuming it's required, will those receive some kind of active monitoring to continue to compare and contrast with the competitive product?
Acres? That... Are you still talking about fire retardant?
Yep, still Fortress. Yep.
Yeah, I'm not sure I understand. Sorry.
Yeah, no.
Can you ask that again? Sorry.
You're going to be deployed this year.
Yep.
in the field officially. Will there be active monitoring of how your product performs?
Yeah. No. The product efficacy is defined, established, and that's actually what gets us on the QPL as well as the environmental benefits, et cetera. There is not. This is a process where we are ramping up, you know, kind of five mobile retardant bases through the summer to various locations. We're currently working on that operational plan now with the expectation that the first base deploys in June and then ramps up through the season. It'll be working. The bases will be in similar locations to the incumbent and, you know, able to operate at the same time, at the same places throughout the season.
Okay. Got it. I'll switch to something simpler really quick here. Mineral rights. On the Utah legislation, I believe your current royalty rate at Ogden is around 5%. There's a new severance tax that needs to be better defined. It's, yeah, like 2.6% on something. On that base 5% royalty rate, does the new legislation explicitly change that or encourage regulators to capture greater change? Is the number not really the big question mark, and it's more around, you know, omitting the berm consideration? From an economic perspective, is that number really subject to much change?
Well, hey, Vincent. This is Kevin. Number of considerations there. First thing I would want to say is, you know, we've been on the Great Salt Lake for a long time and have a good reputation out there, and we're working very, what I would consider to be very collaboratively with the state legislature out there across a variety of fronts as it relates to rulemaking tied to House Bill 513. One of the issues is clarification around royalty, because we've been very clear with the state, you know, to the extent you want to have discussions about that, we need to know ahead of time, because we're deploying a lot of capital here, and we can't deploy capital if the royalty rate's gonna be, you know, some sort of variable structure.
It's very clear we're gonna have a severance tax. having discussions with royalties as we speak, along with, you know, leasing rights and berm management issues as it relates to lake health, et cetera. We're confident that we're gonna be able to work closely with the state towards viable outcomes here that are not gonna jeopardize this project over the long term. Anything you would wanna add to that, Chris?
Hey, thanks Kevin. This is Chris. The project remains an incredible and exciting opportunity for growth for Compass. The thing that we talked about earlier, as well as the synergy aspect that you see with the fourth mineral, and as you talked about mineral rights, just a reminder of what makes up a mineral right. There's six pieces to that. One is the lake bed leases, the upland leases, water rights, mineral extraction rights, lake bed construction and maintenance, and finally, the mineral royalties. With regards to lithium, what we're doing now and what we've been working on for the past months is really coming to a conclusion on the lithium royalties. As Kevin talked about, there is some uncertainty as to what that will be.
That's currently being negotiated, with the state right now, but we feel comfortable that we'll land in the right place.
Perfect. Thank you so much.
Thank you. Just a quick reminder, ladies and gentlemen, star one, please, for any questions. We'll go next now to Seth Goldstein of Morningstar.
Hi. Good morning, everyone. Thanks for taking my questions. If we assume normal weather in plant nutrition and markets next year, operationally, what would be your path to volumes? Is there a plan to get operating costs down to restore profits?
A couple of things I'll hit, then I'll let George add some color. Good question. We do believe a restoration of normal back to, you know, more normal weather patterns, given the precipitation that's occurred out there, along with a way of above average snowpack, is going to alleviate some of the production issues that we've been having there as it relates to the pond system. We have every belief that we can restore volumes, you know, consistent with what we've experienced in the past. As we said in our prepared remarks, we have phase II of a program we're running internally to look at costs across the entire platform of Compass, and that does not exclude Ogden. Ensuring that we maintain our costs under control.
You know, given the high fixed cost nature of some of our assets, Ogden being one, the volume effect is a big deal as it relates to cost. Anything you'd wanna add to that, George?
Maybe, George Schuller. Just a couple comments there, Kevin, in regards to this, Seth. We have two distinct goals, one of those being to increase our pond-based SOP production, first and foremost. The second piece of that is really bolstering our pond complex resiliency for the long term. When you look at some of the costs that we had that hit us here in 2023, I will call that somewhat one-off. We had our spike in natural gas price for this year around $3 million. Also in regards to that, we had a small fire out at Ogden in our belt tube that goes up to the loadout. Really minimal impact there, but again, it did impact cost by $2 million. We had some KCl usage.
Going forward, to address the questions around future production, we can control the KCl as we do that, as we go forward. We'll add that when it's strategic to do so. In addition, as Kevin highlighted, we will control our costs. One of the things that we're absolutely doing is addressing our total manufacturing costs, not only at Ogden, but all our sites across the platform, as we've talked about in our next step. Probably the third thing I'd mention there is really, you know, when you look at where we are, and we've talked about a lot about drought in the past and the impacts of drought and the weather conditions. We've had an incredible year in snowpack. That bodes well for us, in our pond production and our ability to have mineral returns.
It sets us up for really several years going forward. We do have a lot of confidence in what we've been working on for the last year to a year and a half, and I think we're starting to see some real progress in regards to that. Thanks, Kevin.
Okay. That's great. Thank you for all the details there. To follow up on sort of the long-term, company-wide cost optimization, can you share an update on the Goderich long-term improvement plan?
Yeah. Probably not a whole lot to update on relative to last quarter, but, you know, we continue to drive those new gate roads to the north, northeast, and that's progressing nicely. George can comment on how much that is. Probably we're at least halfway done. But that's the lens been to, you know, implementing the new mine plan is getting those new long-term roadways connected up between the active area of the mine and the shaft bottoms. That progress continues nicely, which as we've discussed, that'll allow us to, you know, abandon that old section of the mine and, you know, stop spending money on it with regard to ventilation, roof control, et cetera.
And that'll begin to demonstrate, you know, levels of productivity improvement over the course of time. All of this is occurring kinda invisible from an external perspective because it's all captured in costs, cost of goods sold. There's a big development project underway, and we're still remain very excited and very confident about what Goderich in the future is gonna look like. Anything you'd wanna add to that, George?
Yeah. Seth, again, this is George. Just, it probably gives me an opportunity to just recognize, you know, Goderich is really performing extremely well from a production point of view. As Kevin highlighted, we're over halfway across the new main development, going extremely well. I do think that bodes well as we go forward, you know, from our, you know, from a Goderich mine perspective, looking at where we'll continue to, you know, improve our cost and improve our productivity at Goderich. That's all I'll add. Thanks, Kevin.
All right, great. Thanks for taking my questions.
Thank you. Just a final reminder, ladies and gentlemen, any further questions this morning, simply press star one. Gentlemen, it appears we have no further questions this morning. Mr. Crutchfield, I'd like to turn the conference back to you for any closing comments.
We thank you for taking time to participate in our call this morning. Look forward to keeping you updated in the interim. To the extent you have any questions or whatever, please feel free to call Brent. Look forward to updating you again next quarter.
Thank you, Mr. Crutchfield. Ladies and gentlemen, that will conclude the Compass Minerals Fiscal Second Quarter 2023 Earnings Conference Call. We'd like to thank you all so much for joining us and wish you all a great day. Goodbye.