potash price rumours of close to 100pc rise

Potash Corp. could benefit on India contracts
Posted: March 07, 2008, 10:21 AM by David Pett
Market Call

Rumours that the Belarusian Potash Company is offering a 6-month contract price of US$600 per tonne of delivered potash in negotiations with India, could have positive implications for Potash Corp. of Saskatchewan Inc., according to RBC Capital analyst Fai Lee.

Widely heard, but unconfirmed, the BPC offer would represent an increase of US$330 per tonne over the current contract price that expires on Mar. 31, 2008. Mr. Lai told clients in a note that India may be very motivated to settle with BPC, given recent government statements regarding its grain production.

"The Indian government recently expressed its disappointment with grain production levels and stated its determination to make the country self-sufficient in the production of food grains. We believe proper application of fertilizer will be required to achieve this goal." Mr. Lai said.

He added that should BPC obtain a substantial price increase from India, it would put pressure on China to also settle with BPC.

The analyst said a delivered price of US$600 per tonne to India could translate to a realized price of about US$500 per tonne to PotashCorp. He

"This is significantly higher than our current realized potash price assumption for PotashCorp of US$350 per tonne for 2009. A US$10 per tonne change in our realized price assumption has an estimated impact to our 2009 earnings per share estimate of approximately 20¢." he said.

Mr. Lai said he continues to monitor the Indian and Chinese negotiations and maintained his "outperform" rating and left his $195 price target unchanged.

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