Intrepid Potash (NYSE:IPI) is a primary potash producer that has six operating mines in the US. Along with potash majors Potash Corp (NYSE:POT) and Mosaic (NYSE:MOS), Intrepid Potash has seen its earnings decline amid a slide in potash prices. Is Intrepid Potash currently a good buy?

Intrepid Potash produces muriate of potash and sulfate of potash magnesia, which it markets as Trio, at its properties in New Mexico and Utah. For the most recent quarter, Intrepid Potash reported a loss of $0.4 million compared to a profit of $14.9 million in the first quarter of 2013. This was the result of Intrepid Potash suffering a 24% decrease in their average net realized sales price of potash in the first quarter of 2014 compared to the first quarter of 2013, partially offset by a 31% increase in sales volume. While potash prices declined drastically, the average net realized sales price of Trio decreased only 3% in the first quarter of 2014 from the first quarter of 2013 as buyers recognized the value of the product .

Capital projects nearly complete
Intrepid Potash spent $253 million in 2012 and $256 million in 2013 on capital investments, including the construction of its HB Solar Solution mine. The HB Solar Solution Mine is estimated to have a cash margin of $198 per ton compared to an average of $93 per ton for Intrepid Potash's other mines. This is projected to improve combined operating cash costs by 9% once the HB Solar Solution Mine achieves full ramp up. Ramp up of the mine will continue throughout 2014 with production levels increasing into 2015 and reaching full capacity in 2016. At maximum capacity, the HB Solar Solution mine will produce 150,000 to 200,000 tons annually and should boost return on invested capital substantially.

With major capital spending out of the way, Intrepid Potash is estimating capital investments of only $40 million-50 million for 2014, which it hopes will help it generate free cash flow this year. Intrepid Potash has stated that if potash prices remain weak in 2014, they anticipate recording a loss for the year. With first quarter potash prices already lower than at the end of 2013, it looks like that may be the case. Cash and cash equivalents totaled only $3.2 million at the end of the first quarter of 2014, which means Intrepid Potash may have to tap its credit facility. With long-term debt of only $150 million and a $250 million credit facility of which $157 million is available, Intrepid Potash's financial position appears stable despite its lack of cash on hand .

Cost advantages
Intrepid Potash has a major advantage over other potash producers such as Potash Corp and Mosaic due to its proximity to its customers. In the first quarter of 2014, Intrepid Potash received a realized average net sales price of $317 per ton, much higher that Potash Corp which received $250 per ton and Mosaic which received $267 per ton. With most of Intrepid Potash's sales coming from the central and western states and the Rocky Mountain and Permian Basin areas, its proximity to clients keeps freight transportation costs low. Intrepid Potash focuses marketing and sales specifically on the markets for which it has a transportation cost advantage, which allows it to compete with larger rivals.

Foolish bottom line
Despite cost advantages that allow Intrepid Potash to receive higher average net sales prices than its rivals and relatively strong pricing of its Trio product, Intrepid Potash reported a first quarter loss, which follows a fourth quarter loss in 2013. With major capital spending out of the way, Intrepid Potash may be able to squeeze out a profit for 2014; however, the real catalyst for profit will come if potash prices rise. Without a rise in potash prices, Intrepid Potash is likely to tread water until it can realize better average cash margins as its HB Solar Solution mine reaches full production levels in 2016. Until potash prices rise, investors are probably better off on the sidelines.

Charles Sherwood has no position in any stocks mentioned. The Motley Fool owns shares of PotashCorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.