Segments and Operations

Potash Operations

The company's potash operations include the mining and production of potash (potassium chloride), which is predominantly used as fertilizer. The company mines potash ore from deposits which are located at depths of approximately 1,000 meters and hoists the ore to the surface. The refining process consists of separating clays and sodium chloride from the raw potash ore, and drying the potassium chloride product. The product is screened and compacted, if required, to meet customer size specifications. In 2007, the company produced a record 9.2 million tonnes, surpassing the previous high of 8.8 million tonnes in 2005.

Nitrogen Operations

PotashCorp's nitrogen operations include production of fertilizers, feed products and industrial chemicals.

Unlike potash and phosphate, nitrogen is not mined. Nitrogen exists in the atmosphere but, like potash and phosphate, it cannot be utilized by plants in its natural state. It must be converted to forms that can be absorbed. Ammonia is one form, but it also serves as the basic building block for other nitrogen products. Nitrogen gas extracted from the air and hydrogen extracted from natural gas are reacted together to form ammonia. The company can produce ammonia at all of its nitrogen plants, although Geismar has not produced any since mid-2003. The ammonia is used to produce a full line of upgraded nitrogen products, including urea, nitrogen solutions, ammonium nitrate and nitric acid. Ammonia, urea and nitrogen solutions are sold as fertilizers. Urea is sold for animal feed applications, and all of the products except nitrogen solutions are sold for industrial use. The total amount of nitrogen in the company's products in 2007 was 3.0 million tonnes, up from 2.6 million tonnes in 2006.

Phosphate Operations

Phosphate comes from ore beds rich with the fossils of ancient marine life. The rock is crushed and combined with acids to produce phosphoric acid (P₂O₅), used as a feedstock for solid fertilizers [diammonium phosphate (DAP) and monoammonium phosphate (MAP)], liquid fertilizers such as merchant-grade phosphoric acid (MGA), superphosphoric acid (SPA) and other products. It can be combined with limestone or phosphate rock to produce animal feed products or purified by solvent extraction to produce industrial-grade phosphoric acid. In 2007, the company produced 7.3 million tonnes of phosphate rock for its own use, down from 7.7 million tonnes in 2006. In 2007, the company produced and 2.2 million tonnes of phosphoric acid (measured as P₂O₅), up from 2.1 million tonnes in 2006 .

Investments

PotashCorp's major investments are in publicly traded companies focused in potash and include a 28 percent interest in Arab Potash Company Ltd. (APC) in Jordan; a 32 percent interest in Sociedad Quimica y Minera de Chile S.A. (SQM) in Chile, which produces, among other things, upgraded specialty potash products; a 10 percent interest in Israel Chemicals Ltd. (ICL) in Israel, another leading low-cost potash producer; and a 20 percent interest in Sinofert Holding Limited (Sinofert) which distributes fertilizer in China.

Sinofert distributes approximately 60 percent of the fertilizer imported into China. In 2007, it was the largest offshore purchaser of Canadian potash, and more than half its gross margin is generated through potash sales.

Suppliers

Production feed stocks such as natural gas, ammonia and sulfur account for a major part of PotashCorp's annual procurement. Other significant goods, services and materials purchased include rail and ocean freight services, electricity, materials for maintenance and repair, and contract services.

The total value of goods, materials and services purchased in 2007 was $2.8 billion. These are provided by more than 380 key suppliers, mainly in the United States, Canada and Trinidad.