Good morning, everyone, and thank you for joining us today at the first of four company-hosted presentations. Each of these chapters was created to provide you with better insight into our strategy and operational focus areas. When complete, we hope that you have a clear understanding about Mosaic's path forward, including the actions we will take to drive superior shareholder value. Before we begin, please review the safe harbor and familiarize yourself with our conference capabilities, especially the Q&A box on your screen. You may enter questions at any time, and we will address them at the end of the presentation. It was five years ago that I was appointed CEO of Mosaic. Since then, we have made exceptional progress by establishing transformational performance expectations across the enterprise that have significantly improved Mosaic's competitiveness. Operating costs are down, and productivity is up.
Our functions have become more efficient and better aligned to the needs of the business. Our financial foundation has strengthened. We have expanded and fortified our position in key agricultural regions around the world, and we have stayed true to our mission, which is to help the world grow the food it needs in ways that recognize and embrace our social responsibilities. We have proven year after year that we are capable of driving operational and financial improvements that have the potential to deliver long-term positive outcomes for our shareholders. These improvements are the direct result of a unified leadership team and the efforts of over 13,000 employees that are focused on organizational-wide strategic priorities. I'm sure many of you are already familiar with our six strategic priorities, which we refreshed and introduced earlier this year.
These priorities are built under a value-first framework that enables us to deliver the next step change in performance needed over the next five years. In short, my goal is to run the business in a way that balances the short-term needs of our stakeholders with our ability to deliver the value they expect over the long term. Now, one note before we move on, what you don't see called out specifically under any one priority is technology and innovation. That's because you'll see these used as accelerators or enablers, where appropriate, across the entire organization. Which brings us back to today and the series of strategic chapters we have scheduled for the months ahead. We will be taking a deeper look into two of our strategies today, the North American Transformation and our drive for functional efficiency and collaboration.
Earlier this year, we announced our intent to combine the company's potash and phosphate operations under one management team, which became effective April 1st. This week, we shared our plans to further integrate and transform our North American business by bringing all customer-facing roles into the business in a way that mirrors our very successful setup in Brazil. We won't be discussing these changes in detail today, but you can expect to hear additional details during our Q3 earnings call in November. Instead, what I want you to focus on today is the $500 million. This is the EBITDA growth we expect to generate annually over the next five years, using 2019 as a base year from the North American transformational initiatives Karen and Bruce will discuss today. In November, we'll focus on Mosaic Fertilizantes and our South American growth engine strategic priority.
Here, you will hear details about the additional $200 million we expect to generate from that business per year over the next five years. In December, we'll shift to sustainability and our Act Responsibility and Grow and Strengthen Our Product Portfolio strategic priorities. We'll talk about our product portfolio, highlighting our performance products and the 13 new ESG targets we rolled out this summer. In each of these presentations, we will cover how we expect to reach our updated 2023 targets, and in the final chapter, we will address our optimized operating assets and capital management priority by reviewing the combined financial implications based on where we were at the end of fiscal 2020. Let's shift and take a look at these updated targets, which were built upon the targets we established in 2019 with two key modifications.
First, in phosphates, we've modified our cash cost of conversions to show ARO cash spending separately. This shift will give you more transparency into the costs and drivers as we move forward. Secondly, we are expanding our prior MicroEssentials target to include more of our performance products, including [Sus-Terra], which is a new product we announced two weeks ago. We are committed to helping the world grow the food it needs in a sustainable way through improvements in soil health and increased yield. The 2023 performance product targets include MicroEssentials plus other products. We'll talk more about these in our December strategic priority session. In addition, we've included updated targets for Mosaic Fertilizantes as well as SG&A. In our November session on Mosaic Fertilizantes, you will hear more about our plans to meet these targets, along with the adjusted EBITDA impact that they bring with them.
During our wrap-up session next February, we'll provide additional insight into SG&A. This target reflects our belief that we can continue to offset growth and technology investments as well as inflation, and minimally hold SG&A flat for the next three years. Altogether, we believe these targets reflect our drive to continuously improve Mosaic's cost position while positioning us to improve margins across the fertilizer sector. Setting aggressive targets and driving cost improvements is not new to Mosaic. Over the past five years, we have paired transformational thinking with formal transformation processes to everything we do. We view transformation as a systematic approach to identifying, planning, and tracking operational improvements. We leverage the knowledge and innovation we have with the organization to drive continuous improvement with minimal capital investment.
The savings can be seen in maintenance costs, contractor expenses, and increasing recovery rates across the business, and we maintain robust internal protocols to validate our savings. Collectively, this work has already generated an impressive $1 billion in improvements over the last five years throughout our global businesses. These efforts have proven that transformation is more than a buzzword. At Mosaic, it is real. It is adding tremendous value, and it is here to stay. One last point before we shift the conversation to our two North American-focused strategic priorities today. As one of the largest fertilizer producers, Mosaic's earnings are impacted by market conditions. While we will provide more color on our current markets during our earnings call, I want to briefly address and set aside one frequently expressed market concern. The recent New Orleans price increase for phosphates have not made fertilizer unaffordable to the U.S. farmer.
We expect strong fall and spring demand in North America. In fact, the overall cost of fertilizer for an acre of corn or an acre of beans is down compared to the last two fall seasons. In addition, we've seen material price increases for corn and for beans, boosting expected farmer revenues from their 2021 harvest. This is the crop farmers are fertilizing for this fall. Prices for 2020 have also increased, and combined with government payments, U.S. net farm income is forecast to hit $102.7 billion in 2020, up $19 billion from 2019, according to the most recent projection from the U.S. Department of Agriculture's Economic Research Service. With that, I'd like to pass the meeting over to Karen Swager, our Senior Vice President of Supply Chain. Karen will take a deeper look at a number of initiatives under our drive functional collaboration and efficiency strategic priority.
The benefit of these actions support our cost targets, and they enhance our delivered cost curve positioning through lower transportation costs, better netback optimization, and improved raw material sourcing. Karen?
Thank you, Joc. Good morning, everyone. Our drive functional collaboration and efficiency strategic priority sets an important tone at Mosaic, which is that our functions are here to serve the business and that they are a critical enabler of both operational and financial success. This priority covers many areas at Mosaic. For today, I'll focus on our key initiatives that are aligned to and very closely connected with our North America transformation, which includes supply chain optimization and the creation of a North America shared services center. This combined opportunity in these two initiatives is over $100 million in annual benefits by 2023. About half of the benefits are embedded in the 2023 business unit and SG&A cost targets. Remaining benefit will improve our delivered cost position and our ability to optimize netback prices. Let's start with supply chain.
Over the past five months, I have spent significant time learning more about supply chain, I'm impressed by what I've seen. The team is talented, highly engaged, and focused on what counts, keeping our operations running smoothly, effectively, and safely. As you can see on the screen, Mosaic's North American supply chain, which includes shipments of K-Mag and phosphates to international destinations, is equivalent to a standalone company. It is the critical connection point for raw materials coming into our operations. On the flip side, it completes the mine-to-market delivery of Mosaic's finished products. These supply chain operations represent over $1 billion in annual expenditures, which are reported in freight, raw material costs, and other components of COGS. I am also responsible for our procurement organization, including raw materials, which accounts for an additional $2.7 billion in annual spend.
Each of these areas also has additional transformative opportunities beyond what we'll discuss today. Looking deeper at supply chain, the focus here is to build on the progress we've made and take actions that continue to improve an already efficient operation. Innovative digital solutions will play a central role as we move forward. However, I believe the real value comes when we partner people with technology in ways that best serve our internal and external customers. This approach to supply chain optimization has 3 phases. The first phase is to create increased visibility across every reasonable step in the process using IoT-enabled assets. Here, we are adapting proven in-place technologies to connect the unconnected, which will allow us to view and monitor performance across the system. You can see 3 examples of projects underway during this phase on your screen.
Second, we will use the data, analytics, and insight from phase 1 to further optimize our transportation assets and to make decisions that improve our short-term agility and long-term cost structure. Finally, the phase 3 is full integration and, where possible, automation. At the end of the 3 phases, we expect our supply chain operations to be fully integrated with visibility across all aspects of the network from a centralized control center. The benefits to Mosaic are significant. We expect to improve efficiency, reduce both cost and risk, and better serve our operations and our customers through better insight and decision-making. What's important to note here is that the project is self-funding from 2021 on, with investments made from operating expenses, not capital. This vision for supply chain isn't unique to Mosaic.
In fact, you'll hear more about how we are applying the same strategic thought process across the enterprise as we move through each of the presentation chapters with you in the coming months. A second key initiative under our drive functional collaboration and efficiency strategic priority is the creation of a shared services center, or SSC for short, in North America. Using our successful Brazilian solution center as a model, we believe a dual center environment can deliver substantial value for Mosaic. The SSC will consolidate our North America functional service centers into a single organization with unified governance, clearly defined service level commitments, and an established methodology for continuous improvement.
It will provide an aligned service support platform between North and South America that gives Mosaic flexibility to deliver services efficiently and effectively, a scalable platform to support future business growth, improve service levels through a combination of automated processes and well-trained, highly capable professionals, and a lower cost service delivery model. The SSC will begin operations late this year and should be complete by mid-2021. As I said earlier, we have many additional opportunities in play to improve the efficiency of our functions beyond what I've highlighted today, including several projects in our procurement organization, such as better leveraging our global spend, revisiting our energy strategy, and leveraging technology to improve contractor management. To keep our eye on the time together today, we'll shift to our next strategic priority, North America transformation, with Bruce Bodine. Bruce, over to you.
Thanks, Karen. Our North America business unit was formed earlier this year with the merger and integration of our potash and phosphate businesses and includes our three Potash mines in Saskatchewan, Canada, our Phosphate mines and conversion plants in central Florida, our Louisiana operations, and our Peruvian phosphate mine. We also have a facility in Carlsbad, New Mexico that produces K-Mag, one of our performance products. The integration is expected to generate approximately $30 million in annual savings by 2022 and is included in our assessment of controllable EBITDA growth. Aside from integration, EBITDA growth is expected to come from two additional primary sources, traditional transformation initiatives and our NextGEN technology projects. First off, I'd like to distinguish between two very different kinds of initiatives we have as a company. We have continuous and evolutionary shifts to our operations that have succeeded in making real impacts to our cost structure.
Our transformation work and North America integration are good examples of this. As Joc touched on, transformation is a systematic approach to identifying, planning, and tracking operational progress. We leverage the talent we have within the organization to drive continuous improvement at various levels across our operations and address all buckets of controllable spending. Today, our business has over 700 improvement initiatives underway. In addition to the integration benefits previously mentioned, these transformational projects are expected to add over $105 million in EBITDA per year by 2023, with only marginal incremental investment. We have only to look at the work done in Mosaic Fertilizantes to know that our team excels at this sort of ground-up approach to value capture, and it's no different in North America. In addition to these evolutionary changes, we have revolutionary projects that are dramatically changing the landscape of our business.
K3 and NextGEN fall into this bucket. NextGEN reflects technology-driven changes that will revolutionize how we operate. Though they require investment, by 2023, these initiatives are expected to drive over $95 million in annual EBITDA benefits, all for a cumulative investment of around $75 million across the North America business unit. As you can see, that's a payback period of just under one year. For the remainder of my presentation, I'm going to cover each business segment separately. Combined with Karen's two initiatives, we expect to deliver $480 million of EBITDA growth in 2023 from our 2019 base. Let's start with our potash business.
We are targeting slightly below $50 per ton cash cost in 2023 based on the elimination of brine management spending at Esterhazy, asset optimization for the shifting of production from Colonsay to our low-cost Esterhazy and Belle Plaine facilities, and finally, employing new technology in our operations. Productivity will increase from 2019 to 2023 by 70% due to shifting production due to lower cost facilities and the benefits of the various improvement initiatives. It is worth noting that capacity reductions through asset optimization have largely been replaced as expansion capacity comes online. On the new technology front, increased use of autonomous miners has allowed improvements like mining higher ore grade. Another benefit is increased miner utilization, eliminating dead time during shift changes and breaks. We've improved safety by taking employees away from the mining phase, resulting in needing less people, but ones who are more highly skilled.
Combined, these initiatives are expected to generate $225 million in EBITDA in 2023 and require total capital spending in the three years shown from 2021 through 2023 of $345 million, $325 million of which is for the K3 project. There is expected capital spending to complete the K3 infrastructure after we've shifted all mining over to the K3 shafts in 2022. Of course, one of our biggest revolutionary projects our company has seen is K3. K3 is truly a mine of the future. The efficiencies and innovation we're incorporating into K3 have never been seen in a potash mine before, dramatically increasing efficiency and have contributed to our accelerated timeline. When we announced our timeline in 2018, we expected to be fully operational at the end of 2023. However, today's timeline, which has been accelerated, has K3 fully operational by mid-2022.
In 2021, we will have reduced cash brine costs to under $55 million a year by focusing on pumping and eliminating preventative maintenance, down from the $85 million we previously communicated. As a reminder, brine management costs peaked at over $180 million a year in 2013 and will be completely eliminated in 2023. We continue to make progress on the K3 project timeline. In fact, two weeks ago, we hit an exciting milestone when we finished our south shaft head frame a few days earlier than planned. We have executed this almost decade-long project on target and ahead of schedule. As you know, these types of mega projects are incredibly complex and come with a lot of uncertainty. Being so close to completion, significantly ahead of schedule, is a big accomplishment for the team.
K3 will shift our cost position and change the risk profile of the potash business, making Esterhazy the lowest-cost potash mine in North America. While we often discuss our cash cost per ton as a significant target, sales and volumes are drivers for that metric, so it's important to look at some of the gains we've made in controlling these costs, regardless of external market conditions. This depiction is intended to give you a better sense of our overall cost structure and to aid you in making your own projections based on your volume assumptions. If you take away the impact of price and volume, our success in changing our cost structure is clearly visible. Next, let's shift to the phosphate business. For the phosphate business, we've laid out targets related to both mining and conversion costs.
In mining, we're continuing to focus on our cash costs of Florida mined rock, but we are also improving the EBITDA generated from our Miski Mayo mine. By 2023, we expect to have added an incremental $75 million in annual EBITDA across our Florida and Peruvian mining assets. Our targeted cash cost of Florida rock in 2023 is $34 per ton, driven by both transformational benefits and NextGEN initiatives. Over the next few years, we'll be investing in expanding the South Fort Meade Mine reserves. We found quality adjacent reserves that will significantly extend the life of this facility. Acquiring and mining these reserves has substantially higher returns than permitting and developing a greenfield mine and beneficiation plant further south of Florida. Today, a greenfield project is estimated to cost well over $1 billion.
I'd now like to share with you one of the major technological advances that NextGen has allowed for our phosphate mining operations. The first phase of our NextGen mining work is an integrated operation center, or IOC, located at our FishHawk, Florida office. The IOC will be fully built out and operational by the end of the year and will be serving as mining operations mission control. It will help us make data-based, proactive decisions in as real-time as possible, allowing our team to work safer, be more efficient, and create the greatest possible overall value. You can see an architectural rendering on the slide here. The monitors shown are used to measure dragline effectiveness. The chairs are remote operation stations for our pit operators, the crew that blasts up the matrix or the draglines so that it can be piped to the beneficiation plants.
The next phase will include operator stations for our remote dozers. Development of the IOC will limit significant risk when extracting ore, provide an integrated planning system that will enable real-time diagnostics, process trends, and optimization that collectively result in significant improvements in operational performance. Let's move to concentrates. As Joc mentioned earlier, our conversion target calculation has been modified to exclude asset retirement obligation costs. We will provide that cash cost for operating facilities in a new separate disclosure. By separating these costs, you will get better insight into the company's total cost position, as well as the factors impacting it. Our 2023 target for cash conversion cost per ton is $51, and like Potash, is dependent upon assumptions for sales and volumes. For phosphates, this volume assumption is further complicated by product mix. This chart shows the impact product mix can have on production volumes.
On the right, we've provided the fixed and variable cost assumptions, as well as the denominator, dry tons, embedded in our 2023 phosphate cash conversion target. We're also providing phosphoric acid tons, or P2O5, as an alternative denominator. P2O5 is a straight commodity, we push for the lowest cost possible, then allocate our P2O5 production into our suite of products based on market demand. This product mix, including commodity products and MicroEssentials, can drive a wide variation of the amount of dry tons we produce. For each ton of P2O5 we make, we can produce either three tons of granulated MicroEssentials S15 or 1.9 tons of MAP. As you can see, that difference is significant on our finished product production in any given reporting period.
We believe adding the additional disclosure of cash cost of conversion per P2O5 ton will be helpful by showing cost trends without the impact of product mix. Before I pass it back to Joc for some concluding remarks, let me summarize our North America business unit plans. We are pulling a variety of levers to deliver maximum value, increase competitiveness, and set the North America business up for success regardless of market dynamics. As our business has evolved, initiatives like transformation and the integration of our North American business have driven significant cost synergies. We also have projects that are more capital intensive, but will completely revolutionize our business's cost structure in K3 and NextGEN. Now, let me toss it back to Joc to recap today's presentation. Joc?
Thanks, Bruce. As you heard today, we are taking a number of strategic steps that will improve Mosaic's competitiveness and that are expected to deliver long-term value to you, our shareholders. In North America, we continue to execute our transformational programs, including the K3 project, generating $305 million in annual EBITDA improvements. We also expect to deliver $95 million of annual benefits from NextGEN initiatives, along with $30 million of annual EBITDA improvement from our North American integration by 2023. In addition, our delivered cost position is expected to benefit from the $50 million in expected transportation savings through our supply chain optimization. Altogether, the investments we're making to grow the business over the next three generation of $400 million are expected to generate incremental EBITDA of $480 million by 2023, which provides a very attractive payback period. Now, I'd like to move forward and take your questions.
Thanks, Joc. As Joc said at the beginning of the presentation, please look at the box on your window for the Q&A box to enter questions. We'll compile them, and then ask them accordingly. We'll do our best to get to as many questions as we can over the next few minutes. Joc, our first question comes from Mark Connelly from Stephens, who asks, Mosaic's old operational excellence program that was in place when you were part of the operating team rather than the CEO never really delivered on its goals, at least as far as he could see. Can you talk about what makes this program different, and why you are confident that this new approach will be more successful than that one was, and where the accountability will lie?
Thank you, Mark. As we said in our opening comments, I think our first phase was extremely effective. If you look at our potash cost curves, you can see we've gone down from over $100 million or $100 per ton of potash down to under $70 per ton. With the elimination of brine, we'll continue to drive those costs down well into the second and first quartile. We think that project has been pretty effective, and we believe that what we're doing today is going to continue that. If I look at phosphates, where we've held our mining costs flat or down over a 10-year timeframe against an ever-increasing distance and an inflationary environment, we believe we've done very well on that. The NextGEN work really continues that and takes the next step, which is applying technology to that whole thing.
If we look at Brazil, of course, one would have to look at our $300 million plus of the results there in terms of integration as being a lot of that operational improvement. We think we've done pretty darn well, and we think we've certainly proved that over time, we can achieve that again.
Our next question comes from P.J. Juvekar from Citi. He asks, your automation in mining and tele-remote operations will save you $95 million in potash. How much of that is from headcount reduction versus increased productivity? Do any of your competitors have this level of automation, including new mines in Canada and Russia? What about other North American competitors?
Yeah. Thank you. Let's start. I'm going to hand this to Bruce, but I just want to say, we started working on automation for the potash business prepping for K3 some five years ago, six years ago now. I think I can't speak to what others have done and what others are going to do, but I think we have a good first-mover advantage in this. I was at Esterhazy operation actually the day before yesterday, and really impressed with some of the automation and even the little things like putting in the conveyor supports automatically saves us a great amount of time. Our people there are talking about a productivity improvement of probably as much as 50% for those miners. We're pretty excited about where that's going. Bruce, do you want to talk about the specifics of that?
Yeah, P.J., just to clarify, the $95 million is across both phosphates and potash on NextGEN projects. That's not just in potash. In potash specifically, the majority of the cost reductions are structural on our fixed basis. Those come in a variety of ways. We talked about brine inflow elimination. We also talked about the idling of Colonsay, where we've actually taken out that entire fixed load basis in Saskatchewan and transferred the production to much lower incremental cost at Esterhazy and Belle Plaine. Remember, substantial part of the cost basis in our potash operations are fixed costs. You could see on that slide that we had a substantial change in fixed costs over the time horizon shown. The majority of the cost reductions in both potash and phosphates, quite honestly, is in fixed cost reduction.
No doubt, there is some uplift on volume, to the 2019 base. Given that, particularly in phosphates, that there was some impacts with idling of Louisiana at the end of the year and things like that we don't anticipate going forward.
Jonas Oxgaard from Bernstein asks, "Once Esterhazy is completed, what is the next major strategic priority for Mosaic?
Yeah, thank you, Jonas. If we go forward past that, and we're gonna talk a lot more about it, but if you think about our long-term strategy, and we've talked about the North American Transformation, those are very important. The one that really probably looks forward beyond that is what we call our South American Growth Engine. Probably between that and the expansion of our specialty products or our performance products, those will probably make up the base of where the next phase of growth, or at least the next phase of organic growth, will come from.
Joel Jackson from BMO asks, "18 months ago, Mosaic projected $2.8 billion-$3 billion of EBITDA for 2021. The consensus for 2021 is currently $1.7 billion. Can you talk about the discrepancy and how these changes might impact forecasting?
Yeah. Thank you, Joel. I guess I can probably hand part of this over to you, Clint, but at the same time, I will say, based on the operating performance, we are right on target for that. The differences are mostly in terms of price and volume expected, which are market-based. Clint, do you wanna highlight the key points?
I think that the thing that you just mentioned, Joc, I think is important to note is that based on CRU pricing at the time, that's what the adjusted EBITDA target was based on, as well as related volumes. I think on that slide, we also provided a sensitivity so that people could track the impact of changing prices on that number. I think that's one of the big drivers. When we look at the things that we control, particularly around costs, around the synergies that we deliver down in Brazil, I think we are ahead of schedule on those items. As an example, beyond the synergy program in Brazil, I think that number only included $70 million of incremental benefit by 2021 from additional transformation initiatives.
As you know, we've already announced a $200 million program for additional transformation down in Brazil, achieved $40 million of that in the first half of this year, we're well ahead of schedule on that. I think on the items that are around our transformation initiatives and cost initiatives around the business, I think we are at least on target, if not ahead of schedule. One thing you may wanna go back and look at is the sensitivity and the pricing that was embedded in that number.
Steve Byrne at Citi asks, "Are there any plans to expand MicroEssentials capacity and/or develop other specialty fertilizers?
Yeah, thanks, Steve. Again, I've just mentioned Sus-Terra, which is our next product that we're introducing. In terms of MicroEssentials, we continue to look at products that can improve yield. We look at products that can help the farmer, that can add value to our commodity products. We continue to look at that. As a company, we are likely the leading supplier of performance fertilizers well beyond, I think, any of our competitors. We continue to look at it. In terms of MicroEssentials, our next step in MicroEssentials will probably be when we run up against our production limitations here in Florida and Louisiana. At that point, it's a great deal if we can be looking at the next phase of expansion. Today, we're looking at that next phase and asking ourselves where the right place to expand that is.
Is it right to do it down in Brazil, or should we continue to expand in the U.S.? Those are the kind of questions we're asking, but no question in our mind with the return on MicroEssentials, we believe that that investment will probably be a good one and likely continue to grow that product.
Our next question comes from Chris Parkinson at Credit Suisse. He asks, "Given your long-term cost per ton targets into potash, how should we think about mine mix and how Colonsay plays into your goals? What are your latest thoughts on demand dynamics in 2021 through 2023?
Yeah. Thanks, Chris. I'm gonna hand part of this over to Bruce to talk about a little bit, but let me say Look, we've said this a lot. We run for value, not for volume. What we wanna do before we look at restarting Colonsay is do we have long-term sustainable demand, and do we have long-term sustainable demand at a price that justifies running a, let's call it a third quartile operation as opposed to our two big, you know, first quartile or low second quartile operations of Esterhazy and Belle Plaine? That decision is not based on one or two factors. You really have to understand the whole market, how the market is growing, and do we have long-term sustainable demand for it. Bruce, do you wanna talk a little bit about that or what our decision process would be?
Well, yeah. I think you highlighted that well, Joc. Returning to a potential restart of Colonsay, you know, what is the long-term sustainable demand, and what's the price to support that given the cost structure? The one thing I just wanna highlight for people is the journey that K3 is allowing us and the improvements we're making in general on our cost structure that affect Belle Plaine as well, have us solidly below $50 per ton with just those two facilities with an operational 10-K capacity that we've mentioned of nine million tons. Our job first is to optimize that productivity, through the NextGEN and transformation work that we're doing. When we get above a solid demand, to Joc's point, then maybe we'll look at that. By 2023, both facilities are below $50 cash cost per ton at Belle Plaine and Esterhazy.
We see continued improvement through our transformation efforts to continue to drive those incrementally down even further. Again, two solid, arguably first quartile cost producers in Saskatchewan, which is a great place to be, and we want to fully leverage that first.
Our next question comes from Vincent Andrews of Morgan Stanley. He asks, "Can you clarify total cash cost to achieve goals and how you account for it? When will adjusted earnings no longer be needed?
Okay. Thanks, Vincent. Let me highlight. I guess adjusted earnings will probably always be part of the game on the basis that there's one-time costs and one-time benefits that don't come into our overall calculation. We're trying to highlight, in terms of earnings, the same thing as what you do in your models, which is what really is driving the value of the company. Things like mark-to-market pricing on hedges really aren't part of the true drivers of the company and their accounting issues. We try to correct for that, if you will, or allow for that so that you can better understand our cost structures. Of course, they're all listed. Both are listed. Any analyst has the choice to use or not use those.
In terms of the cost to achieve, Karen and Bruce have both laid them out, but let me say the cost to achieve, you have the Esterhazy K3 cost, which is the completion of the construction. You have cost to achieve, which are in actual COGS in supply chain, which I think are about $30 million. You have cost to achieve in the NextGEN mining and these other transformation work, which some fall into capital, some fall into operations. Overall, what we've tried to look at is overall cost, whether however it's categorized, and what the return is on that. As I think both Bruce and Karen highlighted, these projects are not only fantastic returns, but they're self-funding after probably the first year. They're all pretty attractive projects.
K3 a little different than that, the ongoing projects are all self-funding, that's pretty good stuff.
John Roberts from UBS asks two questions. First, "What's the outlook for total asset retirement obligations through 2023?" Second, how much mix improvement in phosphates are you planning for through 2023?
Those are detailed enough that I'm going to hand it straight over to Clint and Bruce. Clint, do you want to talk about ARO in the next few years, or Bruce?
I'll take the ARO. AROs this year are roughly $180 million. It's a little higher than normal because we've included some work at Plant City and included that as part of the program. Typically, as we go forward, that would be in the range of, call it $100 million-$125 million a year. Again, just based on the body of work that would need to happen, that can fluctuate from year to year. That tends to be, at least over the next two to three years, kind of the right ZIP code to be in for ARO cash spend.
Paul, sorry, the second part of the question, Bruce?
Yeah. Product mix question. Excuse me. You can see from the slides and our targets for performance products, and let's use that titling as we call it now, $5.2 million by 2023. That includes us continuing to push growth, as Joc mentioned, up to the capacity within North America for MicroEssentials, and that's our plan to do that. As well as we've included Aspire, which has been a very successful performance product for us. We continue to see growth there, and we will continue to push growth on that product. Sus-Terra, which is the new product that Joc talked about, is where we're pushing our P2O5 into that kind of higher margin product as well. K-Mag is the last one, which is our performance product within potash that we make out of Carlsbad, New Mexico.
Again, we're going to continue to maximize the output of our capabilities within those performance products. The rest of our P2O5 would be allocated based on market demand to the more commodity type DAP, MAP products.
Andrew Wong from RBC asks a follow-up on the MicroEssentials question. He asks what impact on EBITDA could we see from selling more performance products like MicroEssentials.
Okay. Thanks, Paul. Or sorry, Andrew. I'll take the first piece of this and hand it to Clint and Bruce again. Look, on average, we probably get a margin. Let me highlight something Bruce said that helps you with this. If you look at the amount of P2O5 going into a ton of dry product. For MicroEssentials, you make three tons of dry product for every ton of P2O5, whereas MAP, you make just under two tons for every ton of P2O5. You can see by that ratio that a cost of making a ton of S15, which was the example, from a P2O5 and resource use perspective, is much more efficient. That that can then give a better result to the farmer and demand a premium, really means that the margin is good on both sides, both the cost and the revenue side.
What we've seen on average for our MicroEssentials has been about a $40 incremental margin. From both the cost and revenue side has amounted to $40. That we see continuing. Any ton that we can move at that incremental margin, is going to be helpful to us. Clint, is there anything on that that?
No, I really don't have anything else to add, Joc. I think kind of the incremental margin, I think is the right way to think about it, and particularly as you think about how we allocate our P2O5 between our commodity products. The more that we can allocate to MicroEssentials and other specialty products, the more financial benefit there is.
Adam Samuelson from Goldman Sachs asks, where do you see the largest technological risks, if any, from these initiatives? How much do the definitional changes in cash conversion costs to exclude ARO and turnaround costs impact the historical performance measure?
Okay, thank you. Bruce, do you want me to hand that straight to you? I think that's probably a good one for you to cover.
Definitely the reclassification of ARO, Clint gave you the magnitude that you could kind of do that based on the denominator, whatever you want to use for tonnage. Turnarounds, it's hard to say, but that varies year by year, depending on the amount of turnarounds that are necessary in any given year, whether it's north or south of the border. I think with the disclosures on ARO, you'll be able to figure that out a little bit better. Turnarounds can vary from $1.50- $2 a ton, perhaps in that range, at any given time in concentrates, and probably similar in potash north of the border.
One of the things I'd like to highlight on ARO and just the dollar value, which isn't insignificant, is if you think about our countervailing duty case, one of the aspects is the environmental actions that the others are asked to take versus what we're asked to take. I'm not saying ours are the wrong way. I think it is the right way to treat resources. When you think of ARO, you can also think of that as something that we pay that a lot of our competitors don't because of their practices. I just think that's worth highlighting.
Just a clarification, the turnaround cost is actually maybe $3-$4.5. I was thinking about ARO and concentrates particularly. Just a clarification.
Okay.
Thanks.
Michael Piken from Cleveland Research asks, if there are long-term countervailing duties placed on several of your major overseas phosphate competitors, is there a possibility of reopening Plant City? If so, what type of market conditions would be necessary to consider reopening it?
Yeah. Thanks, Michael. Our overall view of the CVD, of course, was that it wasn't going to change the supply and demand balance per se globally. It obviously has had a big impact in New Orleans North American pricing on the short term, we think that's going to balance out pretty soon. Overall, you've got to look at the long-term supply and demand. When we made the decision to shut down Plant City, we did that looking at what's the long-term supply and demand outlook, where does Plant City sit on the cost curve, and how can we best deliver globally to our customers what we think we need to deliver. Plant City has been permanently closed. From our perspective, pretty unlikely that it would come back unless there was a real change in the market.
Even then, my expectations is we would look at adding capacity at a place like New Wales, Uberaba in Brazil or something like that before we would look at Plant City. Clint or Bruce, anything on that?
No. I think it'd have to be pretty compelling. It'd take a lot of time, too. Plant City has sat idle now for quite some time.
Adam Samuelson from Goldman Sachs asks, in slide 20, you note the phosphate reserve expansion CapEx is rising to $210 million in 2023. Would it stay at or near that level for several years thereafter to sustain the current phosphate production base? Is there a further increase necessary or is this a one-year step up?
Yeah. I'm going to hand that straight to you, Bruce. I think you can give us a line on your thoughts on extending mine lives and extending distances in our eastern reserves.
Yeah. As Clint maybe mentioned in previous discussion, it's a little bit lumpy when it comes in on kind of our mining reserves, and these things come in tranches particularly. Philosophically, we have substantial reserves, and we're constantly looking at what is around the existing reserve base for our existing operations, and is there opportunity to extend those reserves, mining 2 existing beneficiation plants, versus the trade-off of when do we develop a new greenfield mine and beneficiation plant, which is going to be well over $1 billion. With technology advances that we have seen and really kind of pioneered in mining in Central Florida, we've expanded kind of the radius of footprint that we can technically mine, pump to the beneficiation plants, which has opened the door to reserve areas that otherwise weren't under consideration historically.
They were just too small for a new greenfield mine, and they didn't believe that they could technically get it to the beneficiation plant. Well, today, we've changed that paradigm, and we are finding reserves, particularly this example at South Fort Meade, adjacent to an existing low-cost facility that has plenty of life left in it from a beneficiation plant standpoint. As we do the economics, in this case, it is far better financial drivers than developing a new greenfield mine. That's the type of trade-off we continually are looking at. When do we sunset one mine and then transition to a new greenfield? If we can extend the life of a mine with high quality, low cost reserves versus that greenfield option, that's what we're going to continue to look to do.
Joc, maybe the only other thing that I would note on this extension that Bruce just talked about, as you look at the step up in spend in 2023, I think that's specific to this extension, and then we would expect that to step back down after that. We wouldn't expect spending to stay at that kind of level beyond 2023.
Yeah. I think that's an important point, is really what we're doing-
Yeah
is two things. One, extending our Four Corners into the Ona property, and then extending our South Fort Meade project into our eastern and far eastern reserves. Which are both great reserves at a great price.
P.J. Juvekar from Citi asks, the new IOC center in Florida looks quite futuristic. Are you going to bring that technology to Miski Mayo, as well as to lower their costs? How do Miski Mayo costs compare to your average cost in Florida?
Thank you, P.J. Let me say we're piloting the control center, the IOC in Florida. We fully expect to take any of our learnings from each of our operations and extend those to all of our business units as we move forward. In each case, whether it be shared services in Brazil that we're replicating in North America, or the integrated operations center in Florida, going down to Miski Mayo. Take the technology risks and stuff in a small chunk, then move forward once you have a program that really works. In terms of the cost of Miski Mayo, Bruce, I think that's a good one for you, and I think just to highlight some of the progress we've made since we've taken that operation over.
Yeah. Just on a cash cost basis, Miski Mayo, FOB mine site is definitely slightly higher than FOB mine site Central Florida. You got to remember delivered cost to a location, and we purposefully put Miski Mayo rock to Louisiana because of the benefits of transportation. Getting Central Florida rock, for example, to that same Louisiana destination, there isn't a huge advantage for Florida rock versus Miski Mayo rock. At the mine site, we expect Miski Mayo rock to be under $40 per metric ton on a cash basis, over the five-year horizon and have plenty of projects through the transformation there that are teed up to do that. That ultimately is going to be a pretty attractive mine. Again, paired with Louisiana, it's a very efficient operation from that standpoint.
We have made substantial cost improvement from a volume standpoint and cost reduction standpoint of fixed costs, that have generated large productivity improvement. It's probably close to $6, $7 a ton over the life of that facility, say over the last six, seven years.
Bruce, what was our cost going in at Miski Mayo? I think they were over $60 not that long ago.
Yeah. Back in 2011, they were definitely, I think, over $60.
Got it.
Yeah.
Since Mosaic has taken over that operation, it's done very well. I think Bruce makes a good point on the logistics. Miski Mayo is essentially on tidewater. We get good price on transport back from Peru on backhauls on ships. We get fairly good price getting it to Louisiana compared to having to move using from Central Florida to the coast and then the coast to Louisiana. It's still quite competitive. That's a good point.
Andrew Wong from RBC asks two questions. The first is it possible to apply the new remote [IntelliMining] operations that we're using on the phosphate business to the potash business? The second question is, he wants to clarify the $100 million Colonsay savings from the potash business and whether or not that's been mostly realized in 2020.
Bruce, I think that's a good one for you.
Yep. Yeah. For sure, the technology is applicable in potash. You have to customize it to the uniqueness of the mining equipment. Dragline mining and strip mining and pumping and slurrying long distance is a little bit different than underground mining. The concepts and the autonomous mining that we've developed in K3, we actually do have a pretty integrated control room at K3 that is now going to run, kind of dispatch, if you want to look at it that way, for all of Esterhazy operation. We do believe that there might be even more opportunities there as we learn some of the benefits of the IOC here in Central Florida. The beauty is we're going to be sharing that. Our same Vice President of Operations, Kelly Strong, is responsible not only for the mining in Central Florida, but the mining in Saskatchewan.
Sharing of best practice and learnings are going to be part of his key responsibility. We do believe that there's some benefit there for sure. There was a second part to the question I think that I didn't address.
He also asked us to clarify on the $100 million of Colonsay savings and whether that had been mostly realized in 2020.
Right. Clint, unless I'm wrong, a good chunk of that is being realized in 2020.
I think that's right. Certainly not all of it, as far as a full annual run rate, but certainly a meaningful part of it will be realized this year.
Our last question comes from Ben Isaacson at Scotiabank. He asks, "Do you have plans to bolster or monetize strategic investments including Ma'aden, Miski Mayo or the distribution system in India? Are there other strategic or equity investments you're considering in phosphate?
Okay. Yeah. Thanks, Ben. Look, we're continuously looking at how we optimize not only the existing operations, not only each piece, but the whole portfolio. We have been, and it will be a subject at some point for, I think, the analysts, but we have been really leveraging our distribution businesses in China and India to grow those. Both of those now have grown quite a bit, particularly in terms of the amount of potash they move for us, to the point now where Mosaic by far is Canpotex's largest customer. Those businesses, we continue to grow, we continue to optimize. From a portfolio perspective, we obviously continue to look at the value add there.
We think that's a pretty valuable piece, both from the information we get about the markets, but also from the product that we can move, and the ability to create a geographic arbitrage, if you will. In terms of the Saudi project, we still believe that the long-term, this will be one of the great low-cost producers of phosphates. We believe the market will need that phosphate. On a longer term, we still think that's an important asset. We're constantly looking at all our assets. What could we refinance? What could we recapitalize? How do we best achieve the highest return for the asset footprint we have? With that, maybe I can close. Let me close by saying, I just want to thank you all for attending the first chapter of our strategic series.
We hope today's presentation provided you with insight into our supply chain and some of our back office initiatives into our phosphate and potash segments, and the synergies we're gaining by integrating and maximizing our North American operations into one unified structure. I encourage you to come back on November 9th and listen to us when we discuss our South American business, which as I've mentioned, is a key growth engine for us. By the time we complete the four-chapter series, you should have an in-depth understanding of our strategy, our businesses, and the actions we're taking to position Mosaic for long-term success across the cycles. Goodbye for now, and thank you again for attending. Have a great day.