##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 
|  
|   |  | For the Quarterly Period Ended September 30, 2006                                           
|  
|OR
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-10351


POTASH CORPORATION OF SASKATCHEWAN INC.


(Exact name of registrant as specified in its charter)


|                                                                                                   |  |                                         
|-------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Canada                                                                                             |  | N/A                                     
|(State or other jurisdiction of
    incorporation or organization)                                 |  | (I.R.S. Employer
    Identification No.)
|                                                                                                  
|122  1st Avenue South
    Saskatoon, Saskatchewan, Canada(Address of principal executive offices) |  | S7K 7G3(Zip Code)                       

306-933-8500


(Registrants telephone number, including area code)




þ o


12b-2


þ o o


12b-2).


o þ












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TABLE OF CONTENTS



|                                                                   |  |  |  |  |  |  |  | 
|------------------------------------------------------------------ |  |  |  |  |  |  |  | 
|Fourth Amending Agreement made September 27, 2006                 
|Computation of Per Share Earnings - Nine Months Ended September 30
|Certification of William J. Doyle                                 
|Certification of Wayne R. Brownlee                                
|Sarbanes-Oxley Certification                                      



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##### Table of Contents



PART I.       FINANCIAL
INFORMATION


ITEM 1.       FINANCIAL
STATEMENTS


Potash Corporation of Saskatchewan Inc.


Condensed Consolidated Statements of Financial Position


(in millions of US dollars except share amounts)


(unaudited)


|                                                                |                                                                                                                                                                                  |               |         |              |  |   |         |       | 
|--------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | ------- | ------------ |  | - | ------- | ----- | 
|                                                                |                                                                                                                                                                                  | September 30, |         | December 31,
|                                                                |                                                                                                                                                                                  | 2006          |         | 2005        
|                                                               
|Assets                                                          |                                                                                                                                                                                  |               |         |              |  |   |         |      
|Current assets                                                  |                                                                                                                                                                                  |               |         |              |  |   |         |      
|                                                                | Cash and cash equivalents                                                                                                                                                        |               | $       | 191.4        |  |   | $       | 93.9  | 
|                                                                | Accounts receivable                                                                                                                                                              |               |         | 454.4        |  |   |         | 453.3 | 
|                                                                | Inventories (Note 2)                                                                                                                                                             |               |         | 491.4        |  |   |         | 522.5 | 
|                                                                | Prepaid expenses and other current assets                                                                                                                                        |               |         | 64.4         |  |   |         | 41.1  | 
|                                                               
|                                                                |                                                                                                                                                                                  |               | 1,201.6 |              |  |   | 1,110.8 |      
|                                                               
|Property, plant and equipment                                   |                                                                                                                                                                                  |               | 3,455.6 |              |  |   | 3,262.8 |      
|Other assets (Note 3)                                           |                                                                                                                                                                                  |               | 985.3   |              |  |   | 852.8   |      
|Intangible assets                                               |                                                                                                                                                                                  |               | 30.5    |              |  |   | 34.5    |      
|Goodwill                                                        |                                                                                                                                                                                  |               | 97.0    |              |  |   | 97.0    |      
|                                                               
|                                                                |                                                                                                                                                                                  | $             | 5,770.0 |              |  | $ | 5,357.9 |      
|                                                               
|                                                               
|Liabilities                                                     |                                                                                                                                                                                  |               |         |              |  |   |         |      
|Current liabilities                                             |                                                                                                                                                                                  |               |         |              |  |   |         |      
|                                                                | Short-term debt                                                                                                                                                                  |               | $       | 530.0        |  |   | $       | 252.2 | 
|                                                                | Accounts payable and accrued charges                                                                                                                                             |               |         | 490.5        |  |   |         | 842.7 | 
|                                                                | Current portion of long-term debt                                                                                                                                                |               |         | 400.7        |  |   |         | 1.2   | 
|                                                               
|                                                                |                                                                                                                                                                                  |               | 1,421.2 |              |  |   | 1,096.1 |      
|                                                               
|Long-term debt                                                  |                                                                                                                                                                                  |               | 857.1   |              |  |   | 1,257.6 |      
|Future income tax liability                                     |                                                                                                                                                                                  |               | 575.6   |              |  |   | 543.3   |      
|Accrued pension and other post-retirement benefits              |                                                                                                                                                                                  |               | 218.4   |              |  |   | 213.9   |      
|Accrued environmental costs and asset retirement obligations    |                                                                                                                                                                                  |               | 102.5   |              |  |   | 97.3    |      
|Other non-current liabilities and deferred credits              |                                                                                                                                                                                  |               | 20.2    |              |  |   | 17.2    |      
|                                                               
|                                                                |                                                                                                                                                                                  |               | 3,195.0 |              |  |   | 3,225.4 |      
|                                                               
|Contingencies and Guarantees(Notes 11 and 12,
    respectively) |                                                                                                                                                                                  |               |         |              |  |   |         |      
|Shareholders Equity                                            |                                                                                                                                                                                  |               |         |              |  |   |         |      
|Share capital                                                   |                                                                                                                                                                                  |               | 1,397.8 |              |  |   | 1,379.3 |      
|                                                                | Unlimited authorization of common shares without par value;
    issued and outstanding 103,997,569 and 103,593,792 at
    September 30, 2006 and December 31, 2005, respectively |               |         |              |  |   |         |       | 
|                                                                | Unlimited authorization of first preferred shares; none
    outstanding                                                                                                          |               |         |              |  |   |         |       | 
|Contributed surplus                                             |                                                                                                                                                                                  |               | 61.0    |              |  |   | 36.3    |      
|Retained earnings                                               |                                                                                                                                                                                  |               | 1,116.2 |              |  |   | 716.9   |      
|                                                               
|                                                                |                                                                                                                                                                                  |               | 2,575.0 |              |  |   | 2,132.5 |      
|                                                               
|                                                                |                                                                                                                                                                                  | $             | 5,770.0 |              |  | $ | 5,357.9 |      
|                                                               



2



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##### Table of Contents



Potash Corporation of Saskatchewan Inc.


Condensed Consolidated Statements of Operations and Retained
Earnings


(in millions of US dollars except per-share amounts)


(unaudited)


|                                       |         |                    |       |                   |  |      |       |      |  |   |         |      |  |   |         |      | 
|-------------------------------------- | ------- | ------------------ | ----- | ----------------- |  | ---- | ----- | ---- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                       |         | Three Months Ended |       | Nine Months Ended
|                                       |         | September 30       |       | September 30     
|                                       |         | 2006               |       | 2005              |  | 2006 |       | 2005
|                                      
|Sales(Note 6)                          |         | $                  | 953.5 |                   |  | $    | 938.0 |      |  | $ | 2,743.8 |      |  | $ | 2,916.7 |     
|Less: Freight                          |         |                    | 65.6  |                   |  |      | 59.9  |      |  |   | 182.8   |      |  |   | 194.5   |     
|Transportation
    and distribution    |         |                    | 37.6  |                   |  |      | 29.8  |      |  |   | 104.6   |      |  |   | 90.8    |     
|Cost of goods
    sold                 |         |                    | 604.5 |                   |  |      | 568.8 |      |  |   | 1,753.7 |      |  |   | 1,748.6 |     
|                                      
|Gross Margin                           |         |                    | 245.8 |                   |  |      | 279.5 |      |  |   | 702.7   |      |  |   | 882.8   |     
|                                      
|Selling and administrative             |         |                    | 35.9  |                   |  |      | 31.8  |      |  |   | 114.6   |      |  |   | 116.0   |     
|Provincial mining and other taxes      |         |                    | 12.5  |                   |  |      | 28.8  |      |  |   | 41.2    |      |  |   | 111.4   |     
|Foreign exchange (gain) loss           |         |                    | (4.7  | )                 |  |      | 24.4  |      |  |   | 9.2     |      |  |   | 12.4    |     
|Other income (Note 9)                  |         |                    | (21.1 | )                 |  |      | (20.4 | )    |  |   | (72.3   | )    |  |   | (54.3   | )   
|                                      
|                                       |         |                    | 22.6  |                   |  |      | 64.6  |      |  |   | 92.7    |      |  |   | 185.5   |     
|                                      
|Operating Income                       |         |                    | 223.2 |                   |  |      | 214.9 |      |  |   | 610.0   |      |  |   | 697.3   |     
|Interest Expense                       |         |                    | 25.2  |                   |  |      | 20.4  |      |  |   | 69.1    |      |  |   | 61.7    |     
|                                      
|Income Before Income Taxes             |         |                    | 198.0 |                   |  |      | 194.5 |      |  |   | 540.9   |      |  |   | 635.6   |     
|Income Taxes(Note 4)                   |         |                    | 52.8  |                   |  |      | 64.2  |      |  |   | 95.1    |      |  |   | 209.8   |     
|                                      
|Net Income                             |         | $                  | 145.2 |                   |  | $    | 130.3 |      |  |   | 445.8   |      |  |   | 425.8   |     
|                                       |         |                    |       |                   |  |      |       |      |  |  
|Retained Earnings, Beginning of Period |         |                    |       |                   |  |      |       |      |  |   | 716.9   |      |  |   | 701.5   |     
|Repurchase of Common Shares            |         |                    |       |                   |  |      |       |      |  |   |        |      |  |   | (182.9  | )   
|Dividends                              |         |                    |       |                   |  |      |       |      |  |   | (46.5   | )    |  |   | (49.2   | )   
|                                      
|Retained Earnings, End of Period       |         |                    |       |                   |  |      |       |      |  | $ | 1,116.2 |      |  | $ | 895.2   |     
|                                      
|Net Income Per Share(Note 5)           |         |                    |       |                   |  |      |       |      |  |   |         |      |  |   |         |     
|                                       | Basic   |                    | $     | 1.40              |  |      | $     | 1.20 |  |   | $       | 4.30 |  |   | $       | 3.88 | 
|                                       | Diluted |                    | $     | 1.37              |  |      | $     | 1.17 |  |   | $       | 4.21 |  |   | $       | 3.79 | 
|                                      
|Dividends Per Share                    |         | $                  | 0.15  |                   |  | $    | 0.15  |      |  | $ | 0.45    |      |  | $ | 0.45    |     
|                                      



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Potash Corporation of Saskatchewan Inc.


Condensed Consolidated Statements of Cash Flow


(in millions of US dollars)


(unaudited)


|                                                                                      |                                                           |                    |        |                   |   |      |        |       |   |   |        |        |   |   |        |       |  
|------------------------------------------------------------------------------------- | --------------------------------------------------------- | ------------------ | ------ | ----------------- | - | ---- | ------ | ----- | - | - | ------ | ------ | - | - | ------ | ----- | -
|                                                                                      |                                                           | Three Months Ended |        | Nine Months Ended
|                                                                                      |                                                           | September 30       |        | September 30     
|                                                                                      |                                                           | 2006               |        | 2005              |   | 2006 |        | 2005 
|                                                                                     
|Operating Activities                                                                  |                                                           |                    |        |                   |   |      |        |       |   |   |        |        |   |   |        |      
|Net income                                                                            |                                                           | $                  | 145.2  |                   |   | $    | 130.3  |       |   | $ | 445.8  |        |   | $ | 425.8  |      
|                                                                                     
|Adjustments to reconcile net income to cash provided by
    operating activities      |                                                           |                    |        |                   |   |      |        |       |   |   |        |        |   |   |        |      
|                                                                                      | Depreciation and amortization                             |                    |        | 62.2              |   |      |        | 59.0  |   |   |        | 181.4  |   |   |        | 181.0 |  
|                                                                                      | Stock-based compensation                                  |                    |        | 2.8               |   |      |        | 1.7   |   |   |        | 26.8   |   |   |        | 25.7  |  
|                                                                                      | (Gain) loss on disposal of long-term assets               |                    |        | (4.2              | ) |      |        | 0.2   |   |   |        | (3.9   | ) |   |        | 5.7   |  
|                                                                                      | Provision for plant shutdowns  phosphate segment         |                    |        | 6.3               |   |      |        |      |   |   |        | 6.3    |   |   |        |      |  
|                                                                                      | Foreign exchange on future income tax                     |                    |        |                  |   |      |        | 14.0  |   |   |        | 12.1   |   |   |        | 10.0  |  
|                                                                                      | Provision for future income tax                           |                    |        | 17.8              |   |      |        | 6.4   |   |   |        | 3.9    |   |   |        | 21.0  |  
|                                                                                      | Undistributed earnings of equity investees                |                    |        | (10.6             | ) |      |        | (10.3 | ) |   |        | (9.1   | ) |   |        | (24.7 | )
|                                                                                      | Other long-term liabilities                               |                    |        | 9.3               |   |      |        | 3.6   |   |   |        | 11.9   |   |   |        | 22.6  |  
|                                                                                     
|                                                                                      | Subtotal of adjustments                                   |                    |        | 83.6              |   |      |        | 74.6  |   |   |        | 229.4  |   |   |        | 241.3 |  
|                                                                                     
|                                                                                      | Changes in non-cash operating working capital             |                    |        |                   |   |      |        |       |   |   |        |        |   |   |        |       |  
|                                                                                      | Accounts receivable                                       |                    |        | (52.6             | ) |      |        | (42.8 | ) |   |        | (1.1   | ) |   |        | (70.8 | )
|                                                                                      | Inventories                                               |                    |        | 23.3              |   |      |        | (43.5 | ) |   |        | 21.8   |   |   |        | (33.9 | )
|                                                                                      | Prepaid expenses and other current assets                 |                    |        | 10.4              |   |      |        | (14.7 | ) |   |        | (23.3  | ) |   |        | (14.2 | )
|                                                                                      | Accounts payable and accrued charges                      |                    |        | 15.0              |   |      |        | 200.6 |   |   |        | (319.0 | ) |   |        | 226.3 |  
|                                                                                     
|                                                                                      | Subtotal of changes in non-cash operating working capital |                    |        | (3.9              | ) |      |        | 99.6  |   |   |        | (321.6 | ) |   |        | 107.4 |  
|                                                                                     
|Cash provided by operating activities                                                 |                                                           |                    | 224.9  |                   |   |      | 304.5  |       |   |   | 353.6  |        |   |   | 774.5  |      
|                                                                                     
|Investing Activities                                                                  |                                                           |                    |        |                   |   |      |        |       |   |   |        |        |   |   |        |      
|Additions to property, plant and equipment                                            |                                                           |                    | (133.8 | )                 |   |      | (109.0 | )     |   |   | (384.9 | )      |   |   | (246.4 | )    
|Purchase of long-term investments                                                     |                                                           |                    |       |                   |   |      | (97.4  | )     |   |   | (130.0 | )      |   |   | (190.9 | )    
|Proceeds from disposal of property, plant and equipment and
    long-term investments |                                                           |                    | 7.8    |                   |   |      | 0.6    |       |   |   | 10.0   |        |   |   | 11.1   |      
|Other assets and intangible assets                                                    |                                                           |                    | (0.7   | )                 |   |      | 4.7    |       |   |   | 2.3    |        |   |   | 7.7    |      
|                                                                                     
|Cash used in investing activities                                                     |                                                           |                    | (126.7 | )                 |   |      | (201.1 | )     |   |   | (502.6 | )      |   |   | (418.5 | )    
|                                                                                     
|Cash before financing activities                                                      |                                                           |                    | 98.2   |                   |   |      | 103.4  |       |   |   | (149.0 | )      |   |   | 356.0  |      
|                                                                                     
|Financing Activities                                                                  |                                                           |                    |        |                   |   |      |        |       |   |   |        |        |   |   |        |      
|Repayment of long-term debt obligations                                               |                                                           |                    | (0.3   | )                 |   |      | (0.3   | )     |   |   | (1.0   | )      |   |   | (0.9   | )    
|(Repayment of) proceeds from short-term debt obligations                              |                                                           |                    | (26.5  | )                 |   |      | 1.4    |       |   |   | 277.8  |        |   |   | 1.2    |      
|Dividends                                                                             |                                                           |                    | (15.2  | )                 |   |      | (16.2  | )     |   |   | (45.7  | )      |   |   | (49.4  | )    
|Repurchase of common shares                                                           |                                                           |                    |       |                   |   |      | (213.5 | )     |   |   |       |        |   |   | (530.9 | )    
|Issuance of common shares                                                             |                                                           |                    | 5.5    |                   |   |      | 29.9   |       |   |   | 15.4   |        |   |   | 93.1   |      
|                                                                                     
|Cash (used in) provided by financing activities                                       |                                                           |                    | (36.5  | )                 |   |      | (198.7 | )     |   |   | 246.5  |        |   |   | (486.9 | )    
|                                                                                     
|Increase (decrease) in Cash and Cash Equivalents                                      |                                                           |                    | 61.7   |                   |   |      | (95.3  | )     |   |   | 97.5   |        |   |   | (130.9 | )    
|Cash and Cash Equivalents, Beginning of Period                                        |                                                           |                    | 129.7  |                   |   |      | 423.3  |       |   |   | 93.9   |        |   |   | 458.9  |      
|                                                                                     
|Cash and Cash Equivalents, End of Period                                              |                                                           | $                  | 191.4  |                   |   | $    | 328.0  |       |   | $ | 191.4  |        |   | $ | 328.0  |      
|                                                                                     
|Supplemental cash flow disclosure                                                     |                                                           |                    |        |                   |   |      |        |       |   |   |        |        |   |   |        |      
|                                                                                      | Interest paid                                             |                    | $      | 24.4              |   |      | $      | 14.1  |   |   | $      | 74.5   |   |   | $      | 54.8  |  
|                                                                                      | Income taxes paid                                         |                    | $      | 18.7              |   |      | $      | 19.0  |   |   | $      | 243.2  |   |   | $      | 126.4 |  
|                                                                                     



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##### Table of Contents



Potash Corporation of Saskatchewan Inc.


Notes to the Condensed Consolidated Financial Statements


For the Three and Nine Months Ended September 30,
2006


(in millions of US dollars except share and per-share
amounts)


(unaudited)




|   |                                
|-- | -------------------------------
|1. | Significant Accounting Policies

Basis of Presentation






Changes in Accounting Policies


Implicit Variable Interests




Conditional Asset Retirement Obligations




Recent Accounting Pronouncements


Comprehensive Income, Equity, Financial Instruments and
Hedges






| |   |                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Financial assets will be classified as either held-to-maturity,
    held-for-trading or available-for-sale. Held-to-maturity
    classification will be restricted to fixed maturity instruments
    that the company intends and is able to hold to maturity and
    will be accounted for at amortized cost. Held-for-trading
    instruments will be

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | recorded at fair value with realized and unrealized gains and
    losses reported in net income. The remaining financial assets
    will be classified as available-for-sale. These will be recorded
    at fair value with unrealized gains and losses reported in a new
    category of the Consolidated Statements of Financial Position
    under shareholders equity called other comprehensive
    income (OCI);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Financial liabilities will be classified as either
    held-for-trading or other. Held-for-trading instruments will be
    recorded at fair value with realized and unrealized gains and
    losses reported in net income. Other instruments will be
    accounted for at amortized cost with gains and losses reported
    in net income in the period that the liability is derecognized;
    and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Derivatives will be classified as held-for-trading unless
    designated as hedging instruments. All derivatives, including
    embedded derivatives that must be separately accounted for, will
    be recorded at fair value on the Consolidated Statements of
    Financial Position. For derivatives that hedge the changes in
    fair value of an asset or liability, changes in the
    derivatives fair value will be reported in net income and
    be substantially offset by changes in the fair value of the
    hedged asset or liability attributable to the risk being hedged.
    For derivatives that hedge variability in cash flows, the
    effective portion of the changes in the derivatives fair
    value will be initially recognized in OCI and the ineffective
    portion will be recorded in net income. The amounts temporarily
    recorded in OCI will subsequently be reclassified to net income
    in the periods when net income is affected by the variability in
    the cash flows of the hedged item.



Stripping Costs Incurred in the Production Phase of a Mining
Operation




Accounting Changes




Stock-Based Compensation for Employees Eligible to Retire
Before the Vesting Date




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Determining the Variability to be Considered in Applying the
Variable Interest Entity Standards




2.   Inventories


|                       |  |               |       |              |  |   |       | 
|---------------------- |  | ------------- | ----- | ------------ |  | - | ----- | 
|                       |  | September 30, |       | December 31,
|                       |  | 2006          |       | 2005        
|                      
|Finished product       |  | $             | 220.4 |              |  | $ | 268.5 | 
|Intermediate products  |  |               | 98.2  |              |  |   | 94.9  | 
|Raw materials          |  |               | 68.3  |              |  |   | 59.9  | 
|Materials and supplies |  |               | 104.5 |              |  |   | 99.2  | 
|                      
|                       |  | $             | 491.4 |              |  | $ | 522.5 | 
|                      

3.   Other Assets








4.   Income Taxes






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the three months ended June 30, 2006, the company
    reduced its consolidated effective income tax rate from
    33 percent to 30 percent for the 2006 year. The
    impact of this change on prior periods, as applicable, was
    reflected during that quarter. The change was primarily
    attributable to two factors. First, during the three months
    ended June 30, 2006, the Province of Saskatchewan enacted
    changes to the corporation income tax. The corporate income tax
    rate will be reduced from 17 percent to 12 percent
    over the next three years, with a 3 percentage point reduction
    (to 14 percent) effective July 1, 2006 and further
    1 percentage point reductions on July 1, 2007 and
    July 1, 2008. The impact of this change on the
    companys future income tax liability was recognized during
    the second quarter of 2006. Second, during the three months
    ended June 30, 2006, the company revised its estimated
    allocation of annual income before income taxes by jurisdiction.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the three months ended June 30, 2006, the Government
    of Canada enacted changes to the federal corporation income tax
    and the corporate surtax. The federal corporate income tax rate
    will be reduced from 21 percent to 19 percent over the next
    four years, with a 0.5 percentage point reduction effective
    January 1, 2008 and January 1, 2009, and a further
    1 percentage point reduction on January 1, 2010. The
    federal corporate surtax will be reduced from 1.12 percent
    to nil in 2008. The impact of this change on the companys
    future income tax liability was recognized during the second
    quarter of 2006.                                                                                                                                                 
|
| |  | Income tax refunds totaling $22.4 were recorded relating to a
    recent Canadian appeal court decision (pertaining to a uranium
    producer) which affirmed the deductibility of the Saskatchewan
    capital tax resource surcharge. Refunds of $12.3 were recognized
    during the three months ended March 31, 2006, a refund of
    $3.5 was recognized during the three months ended June 30,
    2006, and a refund of $6.6 was recognized during the three
    months ended September 30, 2006 (refunds were for taxation
    years 1999 and 2001 through 2004). The company also expects
    further income tax refunds in respect of previous taxation
    years. These refunds are currently under review and have not
    been reflected in these interim condensed consolidated financial
    statements.

5.   Net Income Per Share






6.   Segment Information




|                                |  |                                       |       |          |  |           |       |            |  |              |       |  |  |   |     |  |  |   |       | 
|------------------------------- |  | ------------------------------------- | ----- | -------- |  | --------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ----- | 
|                                |  | Three Months Ended September 30, 2006
|                                |  | Potash                                |       | Nitrogen |  | Phosphate |       | All Others |  | Consolidated
|                               
|Sales                           |  | $                                     | 334.3 |          |  | $         | 292.6 |            |  | $            | 326.6 |  |  | $ |    |  |  | $ | 953.5 | 
|Freight                         |  |                                       | 33.6  |          |  |           | 9.4   |            |  |              | 22.6  |  |  |   |    |  |  |   | 65.6  | 
|Transportation and distribution |  |                                       | 10.5  |          |  |           | 13.4  |            |  |              | 13.7  |  |  |   |    |  |  |   | 37.6  | 
|Net sales  third party         |  |                                       | 290.2 |          |  |           | 269.8 |            |  |              | 290.3 |  |  |   |    |  |  |   |       | 
|Cost of goods sold              |  |                                       | 136.6 |          |  |           | 207.4 |            |  |              | 260.5 |  |  |   |    |  |  |   | 604.5 | 
|Gross margin                    |  |                                       | 153.6 |          |  |           | 62.4  |            |  |              | 29.8  |  |  |   |    |  |  |   | 245.8 | 
|Depreciation and amortization   |  |                                       | 16.4  |          |  |           | 19.5  |            |  |              | 23.3  |  |  |   | 3.0 |  |  |   | 62.2  | 
|Inter-segment sales             |  |                                       | 0.2   |          |  |           | 25.4  |            |  |              | 0.9   |  |  |   |    |  |  |   |      | 

8



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|                                |  |                                       |       |          |  |           |       |            |  |              |       |  |  |   |     |  |  |   |       | 
|------------------------------- |  | ------------------------------------- | ----- | -------- |  | --------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ----- | 
|                                |  | Three Months Ended September 30, 2005
|                                |  | Potash                                |       | Nitrogen |  | Phosphate |       | All Others |  | Consolidated
|                               
|Sales                           |  | $                                     | 313.4 |          |  | $         | 332.7 |            |  | $            | 291.9 |  |  | $ |    |  |  | $ | 938.0 | 
|Freight                         |  |                                       | 30.6  |          |  |           | 8.9   |            |  |              | 20.4  |  |  |   |    |  |  |   | 59.9  | 
|Transportation and distribution |  |                                       | 8.5   |          |  |           | 11.0  |            |  |              | 10.3  |  |  |   |    |  |  |   | 29.8  | 
|Net sales  third party         |  |                                       | 274.3 |          |  |           | 312.8 |            |  |              | 261.2 |  |  |   |    |  |  |   |       | 
|Cost of goods sold              |  |                                       | 106.7 |          |  |           | 233.1 |            |  |              | 229.0 |  |  |   |    |  |  |   | 568.8 | 
|Gross margin                    |  |                                       | 167.6 |          |  |           | 79.7  |            |  |              | 32.2  |  |  |   |    |  |  |   | 279.5 | 
|Depreciation and amortization   |  |                                       | 14.6  |          |  |           | 18.1  |            |  |              | 23.8  |  |  |   | 2.5 |  |  |   | 59.0  | 
|Inter-segment sales             |  |                                       | 0.5   |          |  |           | 26.2  |            |  |              | 2.5   |  |  |   |    |  |  |   |      | 

|                                |  |                                      |       |          |  |           |       |            |  |              |       |  |  |   |     |  |  |   |         | 
|------------------------------- |  | ------------------------------------ | ----- | -------- |  | --------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ------- | 
|                                |  | Nine Months Ended September 30, 2006
|                                |  | Potash                               |       | Nitrogen |  | Phosphate |       | All Others |  | Consolidated
|                               
|Sales                           |  | $                                    | 856.5 |          |  | $         | 966.9 |            |  | $            | 920.4 |  |  | $ |    |  |  | $ | 2,743.8 | 
|Freight                         |  |                                      | 91.4  |          |  |           | 28.1  |            |  |              | 63.3  |  |  |   |    |  |  |   | 182.8   | 
|Transportation and distribution |  |                                      | 28.9  |          |  |           | 40.3  |            |  |              | 35.4  |  |  |   |    |  |  |   | 104.6   | 
|Net sales  third party         |  |                                      | 736.2 |          |  |           | 898.5 |            |  |              | 821.7 |  |  |   |    |  |  |   |         | 
|Cost of goods sold              |  |                                      | 359.0 |          |  |           | 665.0 |            |  |              | 729.7 |  |  |   |    |  |  |   | 1,753.7 | 
|Gross margin                    |  |                                      | 377.2 |          |  |           | 233.5 |            |  |              | 92.0  |  |  |   |    |  |  |   | 702.7   | 
|Depreciation and amortization   |  |                                      | 43.2  |          |  |           | 57.8  |            |  |              | 70.5  |  |  |   | 9.9 |  |  |   | 181.4   | 
|Inter-segment sales             |  |                                      | 5.0   |          |  |           | 85.8  |            |  |              | 5.5   |  |  |   |    |  |  |   |        | 

|                                |  |                                      |         |          |  |           |         |            |  |              |       |  |  |   |     |  |  |   |         | 
|------------------------------- |  | ------------------------------------ | ------- | -------- |  | --------- | ------- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ------- | 
|                                |  | Nine Months Ended September 30, 2005
|                                |  | Potash                               |         | Nitrogen |  | Phosphate |         | All Others |  | Consolidated
|                               
|Sales                           |  | $                                    | 1,067.1 |          |  | $         | 1,001.9 |            |  | $            | 847.7 |  |  | $ |    |  |  | $ | 2,916.7 | 
|Freight                         |  |                                      | 105.3   |          |  |           | 29.0    |            |  |              | 60.2  |  |  |   |    |  |  |   | 194.5   | 
|Transportation and distribution |  |                                      | 27.1    |          |  |           | 36.5    |            |  |              | 27.2  |  |  |   |    |  |  |   | 90.8    | 
|Net sales  third party         |  |                                      | 934.7   |          |  |           | 936.4   |            |  |              | 760.3 |  |  |   |    |  |  |   |         | 
|Cost of goods sold              |  |                                      | 367.6   |          |  |           | 692.0   |            |  |              | 689.0 |  |  |   |    |  |  |   | 1,748.6 | 
|Gross margin                    |  |                                      | 567.1   |          |  |           | 244.4   |            |  |              | 71.3  |  |  |   |    |  |  |   | 882.8   | 
|Depreciation and amortization   |  |                                      | 51.0    |          |  |           | 52.5    |            |  |              | 70.1  |  |  |   | 7.4 |  |  |   | 181.0   | 
|Inter-segment sales             |  |                                      | 4.9     |          |  |           | 74.7    |            |  |              | 11.4  |  |  |   |    |  |  |   |        | 

Provision for Plant Shutdowns  Phosphate
Segment






7.   Stock-Based Compensation




9



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|                         |  |   |           | 
|------------------------ |  | - | --------- | 
|Expected dividend        |  | $ | 0.60      | 
|Expected volatility      |  |   | 30%       | 
|Risk-free interest rate  |  |   | 4.90%     | 
|Expected life of options |  |   | 6.5 years | 

8.   Pension and Other Post-Retirement
Expenses


|                               |  |                    |      |                    |  |      |      |      |  |   |       |   |  |   |       |  
|------------------------------ |  | ------------------ | ---- | ------------------ |  | ---- | ---- | ---- |  | - | ----- | - |  | - | ----- | -
|                               |  | Three Months       |      | Nine Months       
|                               |  | Ended September 30 |      | Ended September 30
|Defined Benefit Pension Plans  |  | 2006               |      | 2005               |  | 2006 |      | 2005
|                              
|Service cost                   |  | $                  | 3.6  |                    |  | $    | 3.4  |      |  | $ | 10.8  |   |  | $ | 10.4  |  
|Interest cost                  |  |                    | 8.5  |                    |  |      | 7.8  |      |  |   | 25.3  |   |  |   | 23.4  |  
|Expected return on plan assets |  |                    | (9.7 | )                  |  |      | (9.5 | )    |  |   | (28.9 | ) |  |   | (27.9 | )
|Net amortization               |  |                    | 2.9  |                    |  |      | 1.9  |      |  |   | 8.6   |   |  |   | 4.9   |  
|                              
|Net expense                    |  | $                  | 5.3  |                    |  | $    | 3.6  |      |  | $ | 15.8  |   |  | $ | 10.8  |  
|                              

|                            |  |                    |      |                    |  |      |     |      |  |   |      |   |  |   |      | 
|--------------------------- |  | ------------------ | ---- | ------------------ |  | ---- | --- | ---- |  | - | ---- | - |  | - | ---- | 
|                            |  | Three Months       |      | Nine Months       
|                            |  | Ended September 30 |      | Ended September 30
|Other Post-Retirement Plans |  | 2006               |      | 2005               |  | 2006 |     | 2005
|                           
|Service cost                |  | $                  | 1.1  |                    |  | $    | 1.4 |      |  | $ | 3.5  |   |  | $ | 4.2  | 
|Interest cost               |  |                    | 3.2  |                    |  |      | 3.3 |      |  |   | 9.3  |   |  |   | 9.9  | 
|Net amortization            |  |                    | (0.1 | )                  |  |      | 0.4 |      |  |   | (0.3 | ) |  |   | 1.2  | 
|                           
|Net expense                 |  | $                  | 4.2  |                    |  | $    | 5.1 |      |  | $ | 12.5 |   |  | $ | 15.3 | 
|                           



9.   Other Income and Expenses


|                                      |  |                    |      |                    |  |      |      |      |  |   |      |  |  |   |      | 
|------------------------------------- |  | ------------------ | ---- | ------------------ |  | ---- | ---- | ---- |  | - | ---- |  |  | - | ---- | 
|                                      |  | Three Months       |      | Nine Months       
|                                      |  | Ended September 30 |      | Ended September 30
|                                      |  | 2006               |      | 2005               |  | 2006 |      | 2005
|                                     
|Share of earnings of equity investees |  | $                  | 10.6 |                    |  | $    | 16.8 |      |  | $ | 39.0 |  |  | $ | 43.3 | 
|Dividend income                       |  |                    | 9.0  |                    |  |      | 6.1  |      |  |   | 21.1 |  |  |   | 9.2  | 
|Other                                 |  |                    | 1.5  |                    |  |      | (2.5 | )    |  |   | 12.2 |  |  |   | 1.8  | 
|                                     
|                                      |  | $                  | 21.1 |                    |  | $    | 20.4 |      |  | $ | 72.3 |  |  | $ | 54.3 | 
|                                     

10. Seasonality




10



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11. Contingencies


Canpotex




Mining Risk




Investment in APC




Legal and Other Matters








11



---



##### Table of Contents



















12



---



##### Table of Contents





12. Guarantees










13



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##### Table of Contents







13. Reconciliation of Canadian and United States
Generally Accepted Accounting Principles




(a) Long-term investments:




(b) Property, plant and equipment and goodwill:


(c) Depreciation and amortization:


(d) Exploration costs:


(e) Pre-operating costs:


(f) Pension and other post-retirement benefits:




14



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##### Table of Contents



(g) Foreign currency translation adjustment:


(h) Derivative instruments and hedging activities:


(i) Comprehensive income:


(j) Stock-based compensation:




(k) Stripping costs:


15



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##### Table of Contents





(l) Income taxes related to the above adjustments:


(m) Income tax consequences of stock-based employee
compensation:


(n) Cash flow statements:




The application of US GAAP, as described above, would have
had the following effects on net income, net income per share,
total assets, shareholders equity, comprehensive income
and accumulated other comprehensive income.


|                                                      |                                                        |                    |             |                   |   |      |             |      |   |   |             |      |   |   |             |       |  
|----------------------------------------------------- | ------------------------------------------------------ | ------------------ | ----------- | ----------------- | - | ---- | ----------- | ---- | - | - | ----------- | ---- | - | - | ----------- | ----- | -
|                                                      |                                                        | Three Months Ended |             | Nine months Ended
|                                                      |                                                        | September 30       |             | September 30     
|                                                      |                                                        | 2006               |             | 2005              |   | 2006 |             | 2005
|                                                     
|Net income as reported  Canadian GAAP                |                                                        | $                  | 145.2       |                   |   | $    | 130.3       |      |   | $ | 445.8       |      |   | $ | 425.8       |      
|Items increasing (decreasing) reported net income     |                                                        |                    |             |                   |   |      |             |      |   |   |             |      |   |   |             |      
|                                                      | Cash flow hedge ineffectiveness                        |                    |             | (4.8              | ) |      |             | 0.5  |   |   |             | (4.2 | ) |   |             | 1.5   |  
|                                                      | Depreciation and amortization                          |                    |             | 2.1               |   |      |             | 2.1  |   |   |             | 6.3  |   |   |             | 6.3   |  
|                                                      | Stock-based compensation                               |                    |             | (0.4              | ) |      |             |     |   |   |             | 1.5  |   |   |             |      |  
|                                                      | Stripping costs                                        |                    |             | 3.4               |   |      |             |     |   |   |             | 5.6  |   |   |             |      |  
|                                                      | Share of earnings of equity investees                  |                    |             |                  |   |      |             | 3.7  |   |   |             | 0.5  |   |   |             | 3.7   |  
|                                                      | Deferred income taxes related to the above adjustments |                    |             | (3.1              | ) |      |             | (2.0 | ) |   |             | 5.2  |   |   |             | (3.7  | )
|                                                      | Income taxes related to stock-based compensation       |                    |             | (2.8              | ) |      |             | (4.8 | ) |   |             | (7.2 | ) |   |             | (17.1 | )
|                                                     
|Net income  US GAAP                                  |                                                        |                    | 139.6       |                   |   | $    | 129.8       |      |   |   | 453.5       |      |   | $ | 416.5       |      
|                                                     
|Basic weighted average shares outstanding  US GAAP   |                                                        |                    | 103,907,000 |                   |   |      | 108,164,000 |      |   |   | 103,781,000 |      |   |   | 109,623,000 |      
|                                                     
|Diluted weighted average shares outstanding  US GAAP |                                                        |                    | 106,045,000 |                   |   |      | 111,102,000 |      |   |   | 105,934,000 |      |   |   | 112,460,000 |      
|                                                     
|Basic net income per share  US GAAP                  |                                                        | $                  | 1.34        |                   |   | $    | 1.20        |      |   | $ | 4.37        |      |   | $ | 3.80        |      
|                                                     
|Diluted net income per share  US GAAP                |                                                        | $                  | 1.32        |                   |   | $    | 1.17        |      |   | $ | 4.28        |      |   | $ | 3.70        |      
|                                                     

16



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|                                                    |                                                                   |               |         |              |   |   |         |        |  
|--------------------------------------------------- | ----------------------------------------------------------------- | ------------- | ------- | ------------ | - | - | ------- | ------ | -
|                                                    |                                                                   | September 30, |         | December 31,
|                                                    |                                                                   | 2006          |         | 2005        
|                                                   
|Total assets as reported  Canadian GAAP            |                                                                   | $             | 5,770.0 |              |   | $ | 5,357.9 |       
|Items increasing (decreasing) reported total assets |                                                                   |               |         |              |   |   |         |       
|                                                    | Inventory                                                         |               |         | 4.9          |   |   |         | (7.2   | )
|                                                    | Available-for-sale securities (unrealized holding gain)           |               |         | 657.4        |   |   |         | 355.2  |  
|                                                    | Fair value of derivative instruments                              |               |         | 150.5        |   |   |         | 277.1  |  
|                                                    | Property, plant and equipment                                     |               |         | (111.8       | ) |   |         | (118.1 | )
|                                                    | Exploration costs                                                 |               |         | (6.4         | ) |   |         | (6.4   | )
|                                                    | Stripping costs                                                   |               |         | (18.8        | ) |   |         |       |  
|                                                    | Pension and other post-retirement benefits                        |               |         | 14.1         |   |   |         | 14.1   |  
|                                                    | Intangible asset relating to additional minimum pension liability |               |         | 11.1         |   |   |         | 11.1   |  
|                                                    | Investment in equity investees                                    |               |         | 5.5          |   |   |         | 4.8    |  
|                                                    | Goodwill                                                          |               |         | (46.7        | ) |   |         | (46.7  | )
|                                                   
|Total assets  US GAAP                              |                                                                   | $             | 6,429.8 |              |   | $ | 5,841.8 |       
|                                                   

|                                                            |                                                                                     |               |         |              |   |   |         |        |  
|----------------------------------------------------------- | ----------------------------------------------------------------------------------- | ------------- | ------- | ------------ | - | - | ------- | ------ | -
|                                                            |                                                                                     | September 30, |         | December 31,
|                                                            |                                                                                     | 2006          |         | 2005        
|                                                           
|Total shareholders equity as reported  Canadian
    GAAP  |                                                                                     | $             | 2,575.0 |              |   | $ | 2,132.5 |       
|Items increasing (decreasing) reported shareholders equity |                                                                                     |               |         |              |   |   |         |       
|                                                            | Accumulated other comprehensive income, net of related income
    taxes             |               |         | 557.5        |   |   |         | 343.2  |  
|                                                            | Foreign currency translation adjustment                                             |               |         | 20.9         |   |   |         | 20.9   |  
|                                                            | Provision for asset impairment                                                      |               |         | (218.0       | ) |   |         | (218.0 | )
|                                                            | Depreciation and amortization                                                       |               |         | 59.5         |   |   |         | 53.2   |  
|                                                            | Exploration costs                                                                   |               |         | (6.4         | ) |   |         | (6.4   | )
|                                                            | Stripping costs                                                                     |               |         | 5.6          |   |   |         |       |  
|                                                            | Cash flow hedge ineffectiveness                                                     |               |         | 0.7          |   |   |         | 4.9    |  
|                                                            | Pension and other post-retirement benefits                                          |               |         | 14.1         |   |   |         | 14.1   |  
|                                                            | Share of earnings of equity investees                                               |               |         | 4.2          |   |   |         | 3.7    |  
|                                                            | Deferred income taxes relating to the above adjustments                             |               |         | 32.2         |   |   |         | 27.0   |  
|                                                            | Cumulative-effect adjustment to retained earnings in respect of
    stripping costs |               |         | (16.3        | ) |   |         |       |  
|                                                           
|Shareholders equity  US GAAP                              |                                                                                     | $             | 3,029.0 |              |   | $ | 2,375.1 |       
|                                                           

|                               |                                                                              |                   |       |       |   |   |       |        |  
|------------------------------ | ---------------------------------------------------------------------------- | ----------------- | ----- | ----- | - | - | ----- | ------ | -
|                               |                                                                              | Nine months Ended
|                               |                                                                              | September 30     
|                               |                                                                              | 2006              |       | 2005 
|                              
|Net income  US GAAP           |                                                                              | $                 | 453.5 |       |   | $ | 416.5 |       
|                              
|Other comprehensive income     |                                                                              |                   |       |       |   |   |       |       
|                               | Change in unrealized holding gain on available-for-sale
    securities       |                   |       | 302.2 |   |   |       | 177.6  |  
|                               | Change in gains and losses on derivatives designated as cash
    flow hedges |                   |       | (58.7 | ) |   |       | 226.7  |  
|                               | Reclassification to income of gains and losses on cash flow
    hedges       |                   |       | (51.6 | ) |   |       | (36.1  | )
|                               | Share of other comprehensive income of equity investees                      |                   |       | 0.2   |   |   |       | 1.1    |  
|                               | Deferred income taxes related to other comprehensive income                  |                   |       | 22.2  |   |   |       | (121.8 | )
|                              
|                               | Other comprehensive income, net of related income taxes                      |                   |       | 214.3 |   |   |       | 247.5  |  
|                              
|Comprehensive income  US GAAP |                                                                              | $                 | 667.8 |       |   | $ | 664.0 |       
|                              

17



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|                                                                        |  |               |       |              |  |   |       |  
|----------------------------------------------------------------------- |  | ------------- | ----- | ------------ |  | - | ----- | -
|                                                                        |  | September 30, |       | December 31,
|                                                                        |  | 2006          |       | 2005        
|                                                                       
|Unrealized gains and losses on available-for-sale securities            |  | $             | 524.7 |              |  | $ | 236.3 |  
|Gains and losses on derivatives designated as cash flow hedges          |  |               | 106.9 |              |  |   | 182.4 |  
|Additional minimum pension liability                                    |  |               | (54.4 | )            |  |   | (55.4 | )
|Share of accumulated other comprehensive income of equity
    investees |  |               | 1.2   |              |  |   | 0.8   |  
|Foreign currency translation adjustment                                 |  |               | (20.9 | )            |  |   | (20.9 | )
|                                                                       
|Accumulated other comprehensive
    income(1) 
    US GAAP             |  | $             | 557.5 |              |  | $ | 343.2 |  
|                                                                       



|    |                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------
|(1) | Accumulated other comprehensive income is a separate component
    of shareholders equity under US GAAP.

Supplemental US GAAP Disclosures


Recent Accounting Pronouncements












18



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123(R)-1.


Available-for-Sale Securities




Stock-based Compensation






Stock Option Plans








19



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|                                  |  |                          |           |                                                   |  |              |        |           |  |            |   |           |  |              |      |           |  |  |           |   |  |   |       |  |  |  |   |  |  |   |       | 
|--------------------------------- |  | ------------------------ | --------- | ------------------------------------------------- |  | ------------ | ------ | --------- |  | ---------- | - | --------- |  | ------------ | ---- | --------- |  |  | --------- | - |  | - | ----- |  |  |  | - |  |  | - | ----- | 
|                                  |  | Performance Option Plans |           | Officers and Employees and Directors Option Plans
|                                 
|                                  |  | Weighted-                |           |                                                   |  | Weighted-    |        |          
|                                  |  | Number of                |           | Weighted-                                         |  | Average      |        | Aggregate |  | Number of  |   | Weighted- |  | Average      |      | Aggregate
|                                  |  | Shares                   |           | Average                                           |  | Remaining    |        | Intrinsic |  | Shares     |   | Average   |  | Remaining    |      | Intrinsic
|                                  |  | Subject to               |           | Exercise                                          |  | Contractual  |        | Value (in |  | Subject to |   | Exercise  |  | Contractual  |      | Value (in
|                                  |  | Option                   |           | Price                                             |  | Term (Years) |        | millions) |  | Option     |   | Price     |  | Term (Years) |      | millions)
|                                 
|Outstanding at January 1, 2006    |  |                          | 1,186,000 |                                                   |  | $            | 90.08  |           |  |            |   |           |  |              |      |           |  |  | 3,895,756 |   |  | $ | 38.41 |  |  |  |   |  |  |   |       | 
|Granted                           |  |                          | 894,900   |                                                   |  |              | 101.01 |           |  |            |   |           |  |              |      |           |  |  |          |   |  |   |      |  |  |  |   |  |  |   |       | 
|Exercised                         |  |                          |          |                                                   |  |              |       |           |  |            |   |           |  |              |      |           |  |  | (393,283  | ) |  |   | 38.26 |  |  |  |   |  |  |   |       | 
|Cancelled                         |  |                          | (14,300   | )                                                 |  |              | 90.86  |           |  |            |   |           |  |              |      |           |  |  |          |   |  |   |      |  |  |  |   |  |  |   |       | 
|                                  |  |                          |           |                                                   |  |              |        |           |  |            |   |           |  |              |      |           |  |  |           |  
|Outstanding at September 30, 2006 |  |                          | 2,066,600 |                                                   |  | $            | 95.45  |           |  |            | 9 |           |  | $            | 14.7 |           |  |  | 3,502,473 |   |  | $ | 39.37 |  |  |  | 5 |  |  | $ | 226.8 | 
|                                 
|Exercisable at September 30, 2006 |  |                          |          |                                                   |  |              |       |           |  |            |  |           |  | $            |     |           |  |  | 3,502,473 |   |  | $ | 39.37 |  |  |  | 5 |  |  | $ | 226.8 | 
|                                 



|                         |  |               |           |      |  |      |           |  |  |  |         | 
|------------------------ |  | ------------- | --------- | ---- |  | ---- | --------- |  |  |  | ------- | 
|                         |  | Year of Grant
|                         |  | 2006          |           | 2005 |  | 2003
|                        
|Expected dividend        |  |               | $ 0.60    |      |  |      | $ 0.60    |  |  |  | $ 0.50  | 
|Expected volatility      |  |               | 30%       |      |  |      | 28%       |  |  |  | 27%     | 
|Risk-free interest rate  |  |               | 4.90%     |      |  |      | 3.86%     |  |  |  | 4.06%   | 
|Expected life of options |  |               | 6.5 years |      |  |      | 6.5 years |  |  |  | 8 years | 





|                                |  |            |           |            |  |   |       | 
|------------------------------- |  | ---------- | --------- | ---------- |  | - | ----- | 
|                                |  | Number of  |           | Weighted- 
|                                |  | Shares     |           | Average   
|                                |  | Subject to |           | Grant-Date
|                                |  | Option     |           | Fair Value
|                               
|Nonvested at January 1, 2006    |  |            | 1,186,000 |            |  | $ | 29.82 | 
|Granted                         |  |            | 894,900   |            |  |   | 38.53 | 
|Vested                          |  |            |          |            |  |   |      | 
|Cancelled                       |  |            | (14,300   | )          |  |   | 30.25 | 
|                               
|Nonvested at September 30, 2006 |  |            | 2,066,600 |            |  | $ | 33.58 | 
|                               

20



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##### Table of Contents







Deferred Share Unit and Other Plans










Derivative Instruments and Hedging Activities


Cash Flow Hedges




21



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##### Table of Contents



14. Comparative Figures






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS

10-K,


POTASHCORP AND OUR BUSINESS ENVIRONMENT








POTASHCORP VISION






POTASHCORP STRATEGY








22



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##### Table of Contents





KEY PERFORMANCE DRIVERS  PERFORMANCE COMPARED TO
GOALS




|  |                                                                                                                                                    
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | management will focus on the most important things, which will
    be reinforced by having the measurable, relevant results readily
    accessible;
| | employees will understand and be able to effectively monitor
    their contribution to the achievement of corporate goals; and                     
| | we will be even more effective in meeting our targets.                                                                                             

23



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##### Table of Contents





|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                                       |  | 
|--------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|                                                                                                          |  | Representative                                                                                             |  |  | Performance to                                                                                                                                                                                                                                                                                                                        |  | 
|Goal                                                                                                      |  | 2006 Annual Target                                                                                         |  |  | September 30, 2006                                                                                                                                                                                                                                                                                                                    |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                                       |  | 
|To continue to outperform our sector and other basic materials
    companies in total shareholder return. |  | Exceed total shareholder return performance for our sector and
    companies on the DJUSBMI for 2006.      |  |  | PotashCorps total shareholder return was 30 percent in the
    first nine months of 2006, exceeding our sector average return
    of 20 percent and the DJUSBMI return of 5 percent.                                                                                                                                                 |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                                       |  | 
|                                                                                                          |  | Carry a higher multiple than the average of other fertilizer
    companies on both earnings and cash flow. |  |  | The companys multiple at September 30, 2006 was 16.5
    on earnings and 11.3 on cash flow versus the average of other
    fertilizer companies in our sector of 13.7 on earnings and 9.1
    on cash flow.                                                                                                                          |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                                       |  | 
|To remain the leader and preferred supplier of potash, nitrogen
    and phosphate products worldwide.     |  | Increase North American realized prices for potash by
    10 percent.                                      |  |  | North American realized potash prices were 8 percent higher
    in the first nine months of 2006 compared to the 2005 annual
    average.                                                                                                                                                                                             |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                                       |  | 
|                                                                                                          |  | Increase North American realized feed prices by 20 percent.                                                |  |  | Compared to the 2005 annual average, North American realized
    feed prices increased in the nine months ended
    September 30, 2006 as follows: Monocal by 25 percent,
    Dical by 24 percent and DFP by 31 percent.                                                                                                              |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                                       |  | 
|                                                                                                          |  | Increase realized nitric acid prices by 5 percent.                                                         |  |  | Realized nitric acid prices increased 7 percent during the
    nine months ended September 30, 2006 compared to the
    average prices realized during 2005.                                                                                                                                                                          |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                                       |  | 
|To be the low-cost supplier in our industry.                                                              |  | Achieve rock costs at Aurora and White Springs 3 percent
    below 2005.                                   |  |  | Rock costs at Aurora were flat while White Springs increased 11
    percent during the first nine months of 2006 compared to the
    corresponding period in 2005. Compared to the 2005 annual
    average, rock costs were flat at Aurora and up 9 percent at
    White Springs for the first nine months of 2006.                   |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                                       |  | 
|                                                                                                          |  | Achieve 5-percent reduction in per-tonne potash conversion costs
    on a Canadian dollar basis.           |  |  | When compared to the 2005 annual average, potash conversion
    costs increased 34 percent per tonne on a Canadian dollar
    basis during the first nine months of 2006, largely as a result
    of the 426 days of production shutdowns during the first
    nine months of 2006 as the company produced to meet market
    demand. |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                                       |  | 
|                                                                                                          |  | Improve energy efficiency in Trinidad by 10 percent from 2005.                                             |  |  | Trinidad energy efficiency rate deteriorated 4 percent
    during the first nine months of 2006 compared to the 2005 annual
    average.                                                                                                                                                                                              |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                                       |  | 
|To move closer to our goal of no harm to people, no accidents,
    no damage to the environment.          |  | Reduce recordable and lost- time injury rates by 30 percent
    from 2005 levels.                          |  |  | Recordable and lost-time injury rates were reduced
    29 percent and 8 percent, respectively, as compared to
    the 2005 annual levels.                                                                                                                                                                                             |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                                       |  | 
|                                                                                                          |  | Reduce reportable releases and permit excursions by
    30 percent from 2005 levels.                       |  |  | Reportable release rates on an annualized basis declined 47
    percent while permit excursions were down 15 percent during
    the first nine months of 2006 compared to 2005 annual levels.                                                                                                                                         |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                                       |  | 

24



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FINANCIAL OVERVIEW


10-Q.




Earnings Guidance




Overview of Actual Results


Operations


|                                              |  |                                 |       |                                |  |        |       |        |  |      |       |      |  |        |     |        |  |   |         |  |  |   |         |  |  |   |        |   |  |  |     |  
|--------------------------------------------- |  | ------------------------------- | ----- | ------------------------------ |  | ------ | ----- | ------ |  | ---- | ----- | ---- |  | ------ | --- | ------ |  | - | ------- |  |  | - | ------- |  |  | - | ------ | - |  |  | --- | -
|                                              |  | Three Months Ended September 30 |       | Nine Months Ended September 30
|                                             
|                                              |  | Dollar                          |       | %                              |  |        |       | Dollar |  | %   
|(Dollars millions  except per-share amounts) |  | 2006                            |       | 2005                           |  | Change |       | Change |  | 2006 |       | 2005 |  | Change |     | Change
|                                             
|Sales                                         |  | $                               | 953.5 |                                |  | $      | 938.0 |        |  | $    | 15.5  |      |  |        | 2   |        |  | $ | 2,743.8 |  |  | $ | 2,916.7 |  |  | $ | (172.9 | ) |  |  | (6  | )
|Freight                                       |  |                                 | 65.6  |                                |  |        | 59.9  |        |  |      | 5.7   |      |  |        | 10  |        |  |   | 182.8   |  |  |   | 194.5   |  |  |   | (11.7  | ) |  |  | (6  | )
|Transportation and distribution               |  |                                 | 37.6  |                                |  |        | 29.8  |        |  |      | 7.8   |      |  |        | 26  |        |  |   | 104.6   |  |  |   | 90.8    |  |  |   | 13.8   |   |  |  | 15  |  
|Cost of goods sold                            |  |                                 | 604.5 |                                |  |        | 568.8 |        |  |      | 35.7  |      |  |        | 6   |        |  |   | 1,753.7 |  |  |   | 1,748.6 |  |  |   | 5.1    |   |  |  |    |  
|                                             
|Gross margin                                  |  | $                               | 245.8 |                                |  | $      | 279.5 |        |  | $    | (33.7 | )    |  |        | (12 | )      |  | $ | 702.7   |  |  | $ | 882.8   |  |  | $ | (180.1 | ) |  |  | (20 | )
|                                             
|Operating income                              |  | $                               | 223.2 |                                |  | $      | 214.9 |        |  | $    | 8.3   |      |  |        | 4   |        |  | $ | 610.0   |  |  | $ | 697.3   |  |  | $ | (87.3  | ) |  |  | (13 | )
|                                             
|Net income                                    |  | $                               | 145.2 |                                |  | $      | 130.3 |        |  | $    | 14.9  |      |  |        | 11  |        |  | $ | 445.8   |  |  | $ | 425.8   |  |  | $ | 20.0   |   |  |  | 5   |  
|                                             
|Net income per share  basic                  |  | $                               | 1.40  |                                |  | $      | 1.20  |        |  | $    | 0.20  |      |  |        | 17  |        |  | $ | 4.30    |  |  | $ | 3.88    |  |  | $ | 0.42   |   |  |  | 11  |  
|                                             
|Net income per share  diluted                |  | $                               | 1.37  |                                |  | $      | 1.17  |        |  | $    | 0.20  |      |  |        | 17  |        |  | $ | 4.21    |  |  | $ | 3.79    |  |  | $ | 0.42   |   |  |  | 11  |  
|                                             







25



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Balance Sheet






26



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##### Table of Contents









Business Segment Review






Potash


|                                |                        |                                 |       |                    |  |                            |       |       |  |      |    |          |   |      |       |       |  |          |       |       |  |  |    |    |   |   |        |        |  |   |        |        |  |  |     |     |  
|------------------------------- | ---------------------- | ------------------------------- | ----- | ------------------ |  | -------------------------- | ----- | ----- |  | ---- | -- | -------- | - | ---- | ----- | ----- |  | -------- | ----- | ----- |  |  | -- | -- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | --- | --- | -
|                                |                        | Three Months Ended September 30
|                               
|                                |                        | Dollars (millions)              |       | Tonnes (thousands) |  | Average Price per Tonne(1)
|                               
|                                |                        | 2006                            |       | 2005               |  | % Change                   |       | 2006  |  | 2005 |    | % Change |   | 2006 |       | 2005  |  | % Change
|                               
|Sales                           |                        | $                               | 334.3 |                    |  | $                          | 313.4 |       |  |      | 7  |          |   |      |       |       |  |          |       |       |  |  |    |    |   |   |        |        |  |   |        |        |  |  |     |    
|Freight                         |                        |                                 | 33.6  |                    |  |                            | 30.6  |       |  |      | 10 |          |   |      |       |       |  |          |       |       |  |  |    |    |   |   |        |        |  |   |        |        |  |  |     |    
|Transportation and distribution |                        |                                 | 10.5  |                    |  |                            | 8.5   |       |  |      | 24 |          |   |      |       |       |  |          |       |       |  |  |    |    |   |   |        |        |  |   |        |        |  |  |     |    
|                               
|                                |                        | $                               | 290.2 |                    |  | $                          | 274.3 |       |  |      | 6  |          |   |      |       |       |  |          |       |       |  |  |    |    |   |   |        |        |  |   |        |        |  |  |     |    
|                               
|Net Sales                       |                        |                                 |       |                    |  |                            |       |       |  |      |    |          |   |      |       |       |  |          |       |       |  |  |    |    |   |   |        |        |  |   |        |        |  |  |     |    
|                                | North American         |                                 | $     | 108.8              |  |                            | $     | 120.6 |  |      |    | (10      | ) |      |       | 673   |  |          |       | 714   |  |  |    | (6 | ) |   | $      | 161.89 |  |   | $      | 169.08 |  |  |     | (4  | )
|                                | Offshore               |                                 |       | 179.4              |  |                            |       | 151.9 |  |      |    | 18       |   |      |       | 1,410 |  |          |       | 1,075 |  |  |    | 31 |   |   | $      | 127.22 |  |   | $      | 141.28 |  |  |     | (10 | )
|                               
|                                |                        |                                 | 288.2 |                    |  |                            | 272.5 |       |  |      | 6  |          |   |      | 2,083 |       |  |          | 1,789 |       |  |  | 16 |    |   | $ | 138.42 |        |  | $ | 152.34 |        |  |  | (9  | )  
|                                | Miscellaneous products |                                 |       | 2.0                |  |                            |       | 1.8   |  |      |    | 11       |   |      |       |      |  |          |       |      |  |  |    |   |   |   |        |       |  |   |        |       |  |  |     |    |  
|                               
|                                |                        |                                 | 290.2 |                    |  |                            | 274.3 |       |  |      | 6  |          |   |      | 2,083 |       |  |          | 1,789 |       |  |  | 16 |    |   | $ | 139.32 |        |  | $ | 153.33 |        |  |  | (9  | )  
|Cost of goods sold              |                        |                                 | 136.6 |                    |  |                            | 106.7 |       |  |      | 28 |          |   |      |       |       |  |          |       |       |  |  |    |    |   | $ | 65.58  |        |  | $ | 59.64  |        |  |  | 10  |    
|                               
|Gross margin                    |                        | $                               | 153.6 |                    |  | $                          | 167.6 |       |  |      | (8 | )        |   |      |       |       |  |          |       |       |  |  |    |    |   | $ | 73.74  |        |  | $ | 93.69  |        |  |  | (21 | )  
|                               

27



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|                                |                        |                                |       |                    |  |                            |         |       |  |      |     |          |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |    |  
|------------------------------- | ---------------------- | ------------------------------ | ----- | ------------------ |  | -------------------------- | ------- | ----- |  | ---- | --- | -------- | - | ---- | ----- | ----- |  | -------- | ----- | ----- |  |  | --- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | --- | -- | -
|                                |                        | Nine Months Ended September 30
|                               
|                                |                        | Dollars (millions)             |       | Tonnes (thousands) |  | Average Price per Tonne(1)
|                               
|                                |                        | 2006                           |       | 2005               |  | % Change                   |         | 2006  |  | 2005 |     | % Change |   | 2006 |       | 2005  |  | % Change
|                               
|Sales                           |                        | $                              | 856.5 |                    |  | $                          | 1,067.1 |       |  |      | (20 | )        |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|Freight                         |                        |                                | 91.4  |                    |  |                            | 105.3   |       |  |      | (13 | )        |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|Transportation and distribution |                        |                                | 28.9  |                    |  |                            | 27.1    |       |  |      | 7   |          |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|                               
|                                |                        | $                              | 736.2 |                    |  | $                          | 934.7   |       |  |      | (21 | )        |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|                               
|Net Sales                       |                        |                                |       |                    |  |                            |         |       |  |      |     |          |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|                                | North American         |                                | $     | 329.9              |  |                            | $       | 405.2 |  |      |     | (19      | ) |      |       | 1,939 |  |          |       | 2,608 |  |  |     | (26 | ) |   | $      | 170.13 |  |   | $      | 155.36 |  |  |     | 10 |  
|                                | Offshore               |                                |       | 398.6              |  |                            |         | 520.7 |  |      |     | (23      | ) |      |       | 3,093 |  |          |       | 3,904 |  |  |     | (21 | ) |   | $      | 128.88 |  |   | $      | 133.39 |  |  |     | (3 | )
|                               
|                                |                        |                                | 728.5 |                    |  |                            | 925.9   |       |  |      | (21 | )        |   |      | 5,032 |       |  |          | 6,512 |       |  |  | (23 | )   |   | $ | 144.77 |        |  | $ | 142.19 |        |  |  | 2   |   
|                                | Miscellaneous products |                                |       | 7.7                |  |                            |         | 8.8   |  |      |     | (13      | ) |      |       |      |  |          |       |      |  |  |     |    |   |   |        |       |  |   |        |       |  |  |     |   |  
|                               
|                                |                        |                                | 736.2 |                    |  |                            | 934.7   |       |  |      | (21 | )        |   |      | 5,032 |       |  |          | 6,512 |       |  |  | (23 | )   |   | $ | 146.30 |        |  | $ | 143.54 |        |  |  | 2   |   
|Cost of goods sold              |                        |                                | 359.0 |                    |  |                            | 367.6   |       |  |      | (2  | )        |   |      |       |       |  |          |       |       |  |  |     |     |   | $ | 71.34  |        |  | $ | 56.45  |        |  |  | 26  |   
|                               
|Gross margin                    |                        | $                              | 377.2 |                    |  | $                          | 567.1   |       |  |      | (33 | )        |   |      |       |       |  |          |       |       |  |  |     |     |   | $ | 74.96  |        |  | $ | 87.09  |        |  |  | (14 | ) 
|                               



|    |                                                                                              
|--- | ---------------------------------------------------------------------------------------------
|(1) | Rounding differences may occur due to the use of whole dollars
    in per-tonne calculations.

Highlights




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Negotiations for 2006 potash shipments from Canpotex to Sinofert
    in China concluded in late July 2006, spurring a price agreement
    in India. The China agreement calls for a base price increase of
    $25 per tonne over the 2005 contract price. Reduced volumes
    prior to conclusion of the pricing contracts raised the
    per-tonne fixed distribution costs and as a result, realized
    prices and margins declined during third-quarter 2006. As
    volumes returned
    mid-third-quarter,
    PotashCorps total offshore sales improved to
    1.4 million tonnes from 1.1 million tonnes in the
    third quarter last year. The signing of the China deal also
    served to ignite shipments across Southeast Asia and Latin
    America.
|
| |  | Higher producer inventories at the start of the quarter
    contributed to heightened competitive pressures and lower North
    American prices. PotashCorps North American realized
    prices were down 4 percent from last years same
    quarter and 7 percent from the second quarter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Year over year, reduced sales volumes led to potash gross margin
    substantially lower than nine months ended September 30,
    2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Continuing our strategy of producing to meet market demand
    increased our costs in the quarter. We incurred 12 plant
    shutdown weeks during the quarter and 61 in the first nine
    months of 2006, up from 9 weeks and 18 weeks during
    the same periods of last year, respectively. As a result, we
    produced 1.4 million tonnes of potash compared to
    1.7 million tonnes in the third quarter of 2005.                                                                                                                                                                                                                                                                                                                                           
|
| |  | PotashCorps inventories at the end of the quarter were
    reduced to 0.7 million tonnes from 1.7 million tonnes
    at the start of the year and 1.4 million tonnes at the
    beginning of the quarter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

Potash gross margin variance attributable to:


|                   |  |                                 |      |       |                                |             |       |          |              |   |         |   |             |   |            |   |          |  |   |        |   |  |   |       |   |  |   |       |   |  |   |        |  
|------------------ |  | ------------------------------- | ---- | ----- | ------------------------------ | ----------- | ----- | -------- | ------------ | - | ------- | - | ----------- | - | ---------- | - | -------- |  | - | ------ | - |  | - | ----- | - |  | - | ----- | - |  | - | ------ | -
|                   |  |                                 |     
|Dollars (millions) |  |                                 |      |       |                               
|                   |  | Three Months Ended September 30 |      |       | Nine Months Ended September 30
|                   |  | 2006 vs. 2005                   |      |       | 2006 vs. 2005                 
|                   |  |                                 |     
|                   |  | Change in                       |      |       |                                |             |       |          | Change in    |   |        
|                   |  | Prices/Costs                    |      |       |                                |             |       |          | Prices/Costs |   |        
|                   |  | Change in                       |      |       |                                | Total Gross |       |          | Change in    |   |         |   | Total Gross
|                   |  | Sales                           |      | Net   |                                | Cost of     |       | Margin   |              |   | Sales   |   | Net         |   | Cost of    |   | Margin  
|                   |  | Volumes                         |      | Sales |                                | Goods Sold  |       | Variance |              |   | Volumes |   | Sales       |   | Goods Sold |   | Variance
|                   |  |                                 |     
|North American     |  | $                               | (5.2 | )     |                                | $           | (4.6  | )        |              | $ | 0.6     |   |             | $ | (9.2       | ) |          |  | $ | (71.9  | ) |  | $ | 25.9  |   |  | $ | (1.8  | ) |  | $ | (47.8  | )
|Offshore           |  |                                 | 30.3 |       |                                |             | (16.7 | )        |              |   | (18.3   | ) |             |   | (4.7       | ) |          |  |   | (71.3  | ) |  |   | (22.7 | ) |  |   | (43.8 | ) |  |   | (137.8 | )
|Other              |  |                                 | 0.1  |       |                                |             | (0.2  | )        |              |   |        |   |             |   | (0.1       | ) |          |  |   | 0.4    |   |  |   | (1.9  | ) |  |   | (2.8  | ) |  |   | (4.3   | )
|                   |  |                                 |     
|Total              |  | $                               | 25.2 |       |                                | $           | (21.5 | )        |              | $ | (17.7   | ) |             | $ | (14.0      | ) |          |  | $ | (142.8 | ) |  | $ | 1.3   |   |  | $ | (48.4 | ) |  | $ | (189.9 | )
|                   |  |                                 |     

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Sales and Cost of Goods Sold






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Offshore sales volumes were up 31 percent. Canpotex shipped
    2.4 million tonnes, a 46-percent increase from the
    1.6 million tonnes shipped in the same quarter last year.
    This included approximately 800,000 tonnes shipped to China
    and India, which were up 70 percent and 6 percent,
    respectively, from the third quarter of 2005. This movement
    ignited shipments to other Asian countries, as Malaysia and
    Indonesia combined to take almost 350,000 tonnes from Canpotex
    in the third quarter, while Vietnam and Japan had significant
    growth as well. Canpotex also shipped a record 640,000 tonnes to
    Brazil in the third quarter of 2006, up 87 percent from
    third-quarter 2005 as volumes sharply increased in an effort to
    catch up on purchases deferred earlier in the year when
    customers delayed purchasing until negotiations with China, the
    worlds largest import market for potash, concluded.
|
| |  | Offshore realized prices were relatively flat compared to the
    second quarter of 2006 and down 10 percent versus the third
    quarter last year, as the benefit of contracted price increases
    were more than offset by higher transportation and distribution
    costs on a per-tonne basis. Transportation and distribution
    costs for Canpotex were negatively impacted by $13 per tonne in
    the quarter due to lower volumes relative to fixed costs and
    higher ocean freight rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Realized prices in the North American market declined
    4 percent as higher producer inventories at the start of
    the quarter contributed to heightened competitive pressures.
    Realized prices in the North American market were $35 per tonne,
    or 27 percent, higher than offshore prices. The gap between
    the two markets is partly due to offshore customers purchasing
    under long-term contracts that lag behind North American
    spot-market increases. The difference also reflects product mix,
    as North American customers prefer granular product that
    commands a premium over standard product, which is more
    typically consumed offshore.                                                                                                                                                                                                                                                                                   
|
| |  | Higher cost of goods sold negatively impacted the change in
    gross margin due to the combination of higher unit costs
    associated with production shutdowns (which continued into the
    third quarter as the company remained true to its strategy of
    matching production to market demand, and also occurred at the
    companys Allan division in connection with completion of
    the debottlenecking project) and escalation of prices for
    supplies and services. We also saw higher depreciation costs as
    a result of our expansion projects being completed and
    commencing depreciation during 2006.                                                                                                                                                                                                                                                                                                                                      





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Sales by Canpotex were reduced from 6.3 million to
    4.7 million tonnes, contributing to the 21-percent decline
    in offshore sales volumes. Many customers delayed purchasing
    ahead of 2006 pricing with China. Canpotex shipped
    1.8 million tonnes to its major markets (China, India and
    Brazil) in the first nine months of 2006 compared to
    3.4 million tonnes in the same period in 2005. China was
    virtually absent from the market until late in July 2006, as it
    waited to conclude new pricing contracts with suppliers,
    including Canpotex, before coming back into the market for new
    tonnage. Brazil was again affected by the strengthening of the
    Brazilian real relative to the US dollar, particularly early in
    the year. This was accompanied by lower soybean prices which
    continued to pressure margins for Brazilian farmers and limited
    their credit availability, leading to fewer acres being planted
    and in turn a decrease in imported crop inputs. Further,
    uncertainty in the Brazilian market, with a hesitancy to
    purchase large positions in potash until the outcome of the
    Chinese negotiations was known, led to customers delaying
    purchases. After the negotiations were completed, volumes
    increased sharply. The early-2006 slowdown was not global, as
    volumes to many smaller potash-consuming regions such as
    Malaysia, Indonesia, Vietnam, Europe, Ecuador and Mexico
    increased.
|
| |  | North American sales volumes also dropped as declines during the
    first and second quarters compounded the third quarter decline.
    First-quarter reductions resulted from weaker dealer fill and
    field application of potash, due to low commodity prices, high
    energy input costs, uncertainty about planting decisions and, to
    a lesser degree, weather. In the second quarter volumes were
    weakened through the spring season by low crop commodity prices
    and fewer corn acres planted. Compounding this was the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | efforts of fertilizer dealers to finish the season without
    inventories, which further reduced potash shipments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Realized prices in the offshore market were negatively impacted
    by higher per-unit throughput costs, as approximately
    78 percent of Canpotexs shipments were sold on a
    delivered basis as opposed to 50 percent during the nine
    months ended September 30, 2005. Further price reductions
    were realized on sales to Brazil due to increased competition in
    the marketplace early in the year, though rebounded strongly
    after completion of the abovementioned price negotiations with
    China and India. Realized prices in the North American market
    were 10 percent higher as 2005 announced price increases
    held into the first half of 2006, though dropped off during the
    third quarter. Prices in the North American market were $41 per
    tonne, or 32 percent, higher than offshore prices.
|
| |  | The change in gross margin was negatively impacted by higher
    cost of goods sold. Plant shutdowns raised unit costs while
    increased depreciation due to completion of our expansion
    projects, higher natural gas prices earlier in the year and
    escalating prices for supplies and services throughout the year
    further increased cost of goods sold. The impact of a stronger
    Canadian dollar also negatively impacted cost of goods sold.                                                                                                                                                                                                                                                                                                                                                                               

Nitrogen


|                                |                                                   |                                 |       |                    |  |                            |       |       |  |      |     |          |   |      |       |      |  |          |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |     |     |  
|------------------------------- | ------------------------------------------------- | ------------------------------- | ----- | ------------------ |  | -------------------------- | ----- | ----- |  | ---- | --- | -------- | - | ---- | ----- | ---- |  | -------- | ----- | --- |  |  | -- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | --- | --- | -
|                                |                                                   | Three Months Ended September 30
|                               
|                                |                                                   | Dollars (millions)              |       | Tonnes (thousands) |  | Average Price per Tonne(1)
|                               
|                                |                                                   | 2006                            |       | 2005               |  | % Change                   |       | 2006  |  | 2005 |     | % Change |   | 2006 |       | 2005 |  | % Change
|                               
|Sales                           |                                                   | $                               | 292.6 |                    |  | $                          | 332.7 |       |  |      | (12 | )        |   |      |       |      |  |          |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |     |    
|Freight                         |                                                   |                                 | 9.4   |                    |  |                            | 8.9   |       |  |      | 6   |          |   |      |       |      |  |          |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |     |    
|Transportation and distribution |                                                   |                                 | 13.4  |                    |  |                            | 11.0  |       |  |      | 22  |          |   |      |       |      |  |          |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |     |    
|                               
|                                |                                                   | $                               | 269.8 |                    |  | $                          | 312.8 |       |  |      | (14 | )        |   |      |       |      |  |          |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |     |    
|                               
|Net Sales                       |                                                   |                                 |       |                    |  |                            |       |       |  |      |     |          |   |      |       |      |  |          |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |     |    
|                                | Ammonia                                           |                                 | $     | 111.1              |  |                            | $     | 104.6 |  |      |     | 6        |   |      |       | 438  |  |          |       | 375 |  |  |    | 17  |   |   | $      | 253.58 |  |   | $      | 278.60 |  |  |     | (9  | )
|                                | Urea                                              |                                 |       | 70.8               |  |                            |       | 100.8 |  |      |     | (30      | ) |      |       | 290  |  |          |       | 356 |  |  |    | (19 | ) |   | $      | 244.35 |  |   | $      | 283.04 |  |  |     | (14 | )
|                                | Nitrogen solutions/ Nitric acid/ Ammonium nitrate |                                 |       | 75.1               |  |                            |       | 66.0  |  |      |     | 14       |   |      |       | 503  |  |          |       | 441 |  |  |    | 14  |   |   | $      | 149.41 |  |   | $      | 149.61 |  |  |     |    |  
|                                | Purchased                                         |                                 |       | 5.9                |  |                            |       | 34.4  |  |      |     | (83      | ) |      |       | 20   |  |          |       | 118 |  |  |    | (83 | ) |   | $      | 284.18 |  |   | $      | 291.95 |  |  |     | (3  | )
|                               
|                                |                                                   |                                 | 262.9 |                    |  |                            | 305.8 |       |  |      | (14 | )        |   |      | 1,251 |      |  |          | 1,290 |     |  |  | (3 | )   |   | $ | 210.15 |        |  | $ | 237.05 |        |  |  | (11 | )  
|                                | Miscellaneous                                     |                                 |       | 6.9                |  |                            |       | 7.0   |  |      |     | (1       | ) |      |       |     |  |          |       |    |  |  |    |    |   |   |        |       |  |   |        |       |  |  |     |    |  
|                               
|                                |                                                   |                                 | 269.8 |                    |  |                            | 312.8 |       |  |      | (14 | )        |   |      | 1,251 |      |  |          | 1,290 |     |  |  | (3 | )   |   | $ | 215.59 |        |  | $ | 242.43 |        |  |  | (11 | )  
|Cost of goods sold              |                                                   |                                 | 207.4 |                    |  |                            | 233.1 |       |  |      | (11 | )        |   |      |       |      |  |          |       |     |  |  |    |     |   | $ | 165.71 |        |  | $ | 180.65 |        |  |  | (8  | )  
|                               
|Gross margin                    |                                                   | $                               | 62.4  |                    |  | $                          | 79.7  |       |  |      | (22 | )        |   |      |       |      |  |          |       |     |  |  |    |     |   | $ | 49.88  |        |  | $ | 61.78  |        |  |  | (19 | )  
|                               

30



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|                                |                                                   |                                |       |                    |  |                            |         |       |  |      |    |          |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |   |    |  
|------------------------------- | ------------------------------------------------- | ------------------------------ | ----- | ------------------ |  | -------------------------- | ------- | ----- |  | ---- | -- | -------- | - | ---- | ----- | ----- |  | -------- | ----- | ----- |  |  | --- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | - | -- | -
|                                |                                                   | Nine Months Ended September 30
|                               
|                                |                                                   | Dollars (millions)             |       | Tonnes (thousands) |  | Average Price per Tonne(1)
|                               
|                                |                                                   | 2006                           |       | 2005               |  | % Change                   |         | 2006  |  | 2005 |    | % Change |   | 2006 |       | 2005  |  | % Change
|                               
|Sales                           |                                                   | $                              | 966.9 |                    |  | $                          | 1,001.9 |       |  |      | (3 | )        |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |   |   
|Freight                         |                                                   |                                | 28.1  |                    |  |                            | 29.0    |       |  |      | (3 | )        |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |   |   
|Transportation and distribution |                                                   |                                | 40.3  |                    |  |                            | 36.5    |       |  |      | 10 |          |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |   |   
|                               
|                                |                                                   | $                              | 898.5 |                    |  | $                          | 936.4   |       |  |      | (4 | )        |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |   |   
|                               
|Net Sales                       |                                                   |                                |       |                    |  |                            |         |       |  |      |    |          |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |   |   
|                                | Ammonia                                           |                                | $     | 369.8              |  |                            | $       | 343.2 |  |      |    | 8        |   |      |       | 1,244 |  |          |       | 1,263 |  |  |     | (2  | ) |   | $      | 297.26 |  |   | $      | 271.65 |  |  |   | 9  |  
|                                | Urea                                              |                                |       | 239.7              |  |                            |         | 283.6 |  |      |    | (15      | ) |      |       | 899   |  |          |       | 1,046 |  |  |     | (14 | ) |   | $      | 266.58 |  |   | $      | 270.93 |  |  |   | (2 | )
|                                | Nitrogen solutions/ Nitric acid/ Ammonium nitrate |                                |       | 240.0              |  |                            |         | 204.0 |  |      |    | 18       |   |      |       | 1,354 |  |          |       | 1,370 |  |  |     | (1  | ) |   | $      | 177.31 |  |   | $      | 148.91 |  |  |   | 19 |  
|                                | Purchased                                         |                                |       | 27.5               |  |                            |         | 86.4  |  |      |    | (68      | ) |      |       | 89    |  |          |       | 314   |  |  |     | (72 | ) |   | $      | 308.59 |  |   | $      | 275.30 |  |  |   | 12 |  
|                               
|                                |                                                   |                                | 877.0 |                    |  |                            | 917.2   |       |  |      | (4 | )        |   |      | 3,586 |       |  |          | 3,993 |       |  |  | (10 | )   |   | $ | 244.56 |        |  | $ | 229.70 |        |  |  | 6 |   
|                                | Miscellaneous                                     |                                |       | 21.5               |  |                            |         | 19.2  |  |      |    | 12       |   |      |       |      |  |          |       |      |  |  |     |    |   |   |        |       |  |   |        |       |  |  |   |   |  
|                               
|                                |                                                   |                                | 898.5 |                    |  |                            | 936.4   |       |  |      | (4 | )        |   |      | 3,586 |       |  |          | 3,993 |       |  |  | (10 | )   |   | $ | 250.58 |        |  | $ | 234.47 |        |  |  | 7 |   
|                               
|Cost of goods sold              |                                                   |                                | 665.0 |                    |  |                            | 692.0   |       |  |      | (4 | )        |   |      |       |       |  |          |       |       |  |  |     |     |   | $ | 185.47 |        |  | $ | 173.26 |        |  |  | 7 |   
|                               
|Gross margin                    |                                                   | $                              | 233.5 |                    |  | $                          | 244.4   |       |  |      | (4 | )        |   |      |       |       |  |          |       |       |  |  |     |     |   | $ | 65.11  |        |  | $ | 61.21  |        |  |  | 6 |   
|                               



|    |                                                                                              
|--- | ---------------------------------------------------------------------------------------------
|(1) | Rounding differences may occur due to the use of whole dollars
    in per-tonne calculations.

Highlights




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Nitrogen fertilizer supply/demand fundamentals remained sound in
    the United States but prices fell, following their typical
    seasonal pattern and in relation to declining US natural gas
    costs. However, ammonia prices rose late in the quarter as tight
    global supply conditions led to a decoupling from gas costs.
    Gross margin declined quarter over quarter primarily as a result
    of lower natural gas prices compared to the corresponding period
    in 2005, and year over year primarily as a result of higher
    input costs and lower urea demand.
|
| |  | Our Trinidad facility, which benefits from long-term lower-cost
    natural gas price contracts, delivered $39.4 million (or
    63 percent) of nitrogen gross margin for the quarter and
    $134.4 million (or 58 percent) for the first nine
    months of 2006. Our US operations contributed $7.3 million
    in gross margin for the quarter and $43.3 million in the
    first nine months of 2006, and we gained $15.7 million and
    $55.8 million from our natural gas hedges during these
    periods, respectively.                                                       
|
| |  | The companys average natural gas cost for the quarter,
    which includes the benefit of our hedge and our lower-cost
    Trinidad gas contracts, was $3.50 per MMBtu, 20 percent
    lower than the same quarter last year and 9 percent lower
    than in the second quarter of 2006. Compared to the nine months
    ended September 30, 2005, our natural gas cost decreased
    3 percent.                                                                                                                                                                                       
|
| |  | In September 2006, PotashCorp elected to permanently discontinue
    ammonia and urea production at our Memphis, Tennessee facility.
    The plant had been put into indefinite shutdown mode in June
    2003 due to high natural gas costs eroding nitrogen fertilizer
    margins. There was no material financial statement impact in the
    quarter resulting from these changes.                                                                                                                                                                                                

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Nitrogen gross margin variance attributable to:


|                   |  |                                 |       |       |                                |             |       |          |              |   |         |   |             |   |            |   |          |  |   |       |   |  |   |      |   |  |   |       |   |  |   |       |  
|------------------ |  | ------------------------------- | ----- | ----- | ------------------------------ | ----------- | ----- | -------- | ------------ | - | ------- | - | ----------- | - | ---------- | - | -------- |  | - | ----- | - |  | - | ---- | - |  | - | ----- | - |  | - | ----- | -
|                   |  |                                 |      
|Dollars (millions) |  |                                 |       |       |                               
|                   |  | Three Months Ended September 30 |       |       | Nine Months Ended September 30
|                   |  | 2006 vs. 2005                   |       |       | 2006 vs. 2005                 
|                   |  |                                 |      
|                   |  | Change in                       |       |       |                                |             |       |          | Change in    |   |        
|                   |  | Prices/Costs                    |       |       |                                |             |       |          | Prices/Costs |   |        
|                   |  | Change in                       |       |       |                                | Total Gross |       |          | Change in    |   |         |   | Total Gross
|                   |  | Sales                           |       | Net   |                                | Cost of     |       | Margin   |              |   | Sales   |   | Net         |   | Cost of    |   | Margin  
|                   |  | Volumes                         |       | Sales |                                | Goods Sold  |       | Variance |              |   | Volumes |   | Sales       |   | Goods Sold |   | Variance
|                   |  |                                 |      
|Ammonia            |  | $                               | 9.9   |       |                                | $           | (11.2 | )        |              | $ | (2.3    | ) |             | $ | (3.6       | ) |          |  | $ | 0.5   |   |  | $ | 29.2 |   |  | $ | (32.1 | ) |  | $ | (2.4  | )
|Urea               |  |                                 | (10.4 | )     |                                |             | (11.8 | )        |              |   | 6.0     |   |             |   | (16.2      | ) |          |  |   | (18.4 | ) |  |   | (3.6 | ) |  |   | (8.8  | ) |  |   | (30.8 | )
|Solutions, NA, AN  |  |                                 | 3.6   |       |                                |             | (1.6  | )        |              |   | 1.0     |   |             |   | 3.0        |   |          |  |   | 0.7   |   |  |   | 34.0 |   |  |   | (20.3 | ) |  |   | 14.4  |  
|Purchased          |  |                                 | (3.1  | )     |                                |             | (0.2  | )        |              |   | 0.1     |   |             |   | (3.2       | ) |          |  |   | (13.6 | ) |  |   | 6.3  |   |  |   | (0.5  | ) |  |   | (7.8  | )
|Hedge gains        |  |                                 |      |       |                                |             |      |          |              |   | 2.5     |   |             |   | 2.5        |   |          |  |   |      |   |  |   |     |   |  |   | 19.7  |   |  |   | 19.7  |  
|Other              |  |                                 | (2.4  | )     |                                |             | 2.7   |          |              |   | (0.1    | ) |             |   | 0.2        |   |          |  |   | (4.9  | ) |  |   | 8.4  |   |  |   | (7.5  | ) |  |   | (4.0  | )
|                   |  |                                 |      
|Total              |  | $                               | (2.4  | )     |                                | $           | (22.1 | )        |              | $ | 7.2     |   |             | $ | (17.3      | ) |          |  | $ | (35.7 | ) |  | $ | 74.3 |   |  | $ | (49.5 | ) |  | $ | (10.9 | )
|                   |  |                                 |      

Sales and Cost of Goods Sold






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Realized prices for urea and ammonia were down 14 percent
    and 9 percent, respectively, compared to third-quarter 2005 and
    8 percent and 17 percent, respectively, compared to
    second-quarter 2006. An annual seasonal price adjustment is
    expected in the third quarter, but the 2006 decline appears more
    dramatic when compared to the exceptional circumstances of last
    years third quarter when Hurricane Katrina drove up gas
    prices and tightened ammonia supply. Including our Trinidad
    facilities, gross natural gas prices were 18 percent lower
    than third-quarter 2005 and 8 percent lower than
    second-quarter 2006. These fluctuations were not necessarily
    proportional to our changes in realized prices for ammonia and
    urea due to the time lag effect of natural gas prices on ammonia
    and urea pricing in the market, and the fact that last
    years third-quarter prices were significantly higher due
    to the impact of Hurricane Katrina during that period.
|
| |  | Ammonia sales volumes increased by 17 percent, as demand
    was strong, and 65,000 additional tonnes were available after
    the final stage of Trinidad debottlenecking was completed in the
    second quarter. Urea sales volumes declined as a result of
    mechanical problems at our Lima facility and timing of a vessel
    shipment from Trinidad. As well, total fertilizer sales tonnes
    were down 24 percent, including a 22 percent drop in
    urea fertilizer volumes, reflecting higher sales last year
    caused by concerns over product availability following Hurricane
    Katrina. Industrial demand remained strong, rising
    12 percent from the same period last year and representing
    68 percent of nitrogen sales volumes in the quarter.                                                                                                                                                                                                                                                           
|
| |  | The cost of goods sold price variance positively impacted gross
    margin. This was due primarily to lower natural gas costs which
    more than offset the impacts of higher depreciation related to
    the Trinidad expansion and debottlenecking projects commencing
    in 2006, and costs of higher volumes of ammonia purchased for
    internal consumption while certain of the companys
    operations were not producing. Further, the companys US
    natural gas hedging activities contributed $15.7 million to
    the gross margin compared to $13.2 million in the
    corresponding period last year.                                                                                                                                                                                                                                                                                                                                                                                                                  





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Hurricanes that struck the US Gulf region during 2005 and cold
    weather in the US late in the year led to high natural gas
    prices that were sustained at more than $13 per MMBtu during the
    fourth quarter. This caused ammonia prices to climb rapidly in
    late 2005 and led North American producers to curtail half of
    their ammonia operating capacity by year-end, tightening market
    supply. Though North American natural gas spot prices dropped
    significantly during the first half of 2006, high ammonia prices
    continued until the third-quarter and, as a result, we realized
    ammonia prices 9 percent higher than in the first nine
    months of 2005. Realized prices for nitric acid and ammonium
    nitrate generally followed the rise in ammonia prices, with
    higher ammonium nitrate realized prices contributing
    $29.1 million to the

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | increased gross margin as a result of our customer contracts
    tied to either natural gas prices or the NOLA ammonia price on a
    time lag basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Total nitrogen sales volumes declined 10 percent. Nitrogen
    fertilizer sales represented the significant portion of this
    drop, down 26 percent primarily due to US farmers
    purchasing less in the first nine months of 2006 as we believe
    they were hoping for lower prices. Therefore, approximately
    68 percent of total nitrogen volumes, including both North
    American and Trinidad production, were sold to our more stable
    industrial customer base outside the fertilizer cycles.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Cost of goods sold increased 7 percent on a per tonne
    basis, the price variance negatively affecting gross margin by
    $49.5 million. This was due to higher natural gas costs
    earlier in 2006, resulting in production curtailments at our
    Augusta and Lima facilities. In addition, reduced production
    resulting from additional plant turnarounds related to
    debottlenecking projects at our 01 and 02 plants in Trinidad and
    mechanical problems at our Lima, Ohio facility (limiting its
    production in both the second and third quarters of 2006)
    contributed to the increase. Natural gas costs continue to be
    the single most important contributor to cost of goods sold,
    typically representing between 80 and 95 percent of the
    cash cost of producing one tonne of ammonia. The companys
    total average natural gas cost, including the benefit of the
    companys hedge and lower-cost Trinidad gas contracts, was
    $3.92 per MMBtu, 3 percent lower than the same period in
    2005. The companys US natural gas hedging activities
    contributed $55.8 million to the gross margin compared to
    $36.1 million in the corresponding period last year.

Phosphate


|                                |                      |                                 |       |                    |  |                            |       |      |  |      |    |          |   |      |       |      |  |          |       |     |  |  |   |     |   |   |        |        |  |   |        |        |  |  |     |    | 
|------------------------------- | -------------------- | ------------------------------- | ----- | ------------------ |  | -------------------------- | ----- | ---- |  | ---- | -- | -------- | - | ---- | ----- | ---- |  | -------- | ----- | --- |  |  | - | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | --- | -- | 
|                                |                      | Three Months Ended September 30
|                               
|                                |                      | Dollars (millions)              |       | Tonnes (thousands) |  | Average Price per Tonne(1)
|                               
|                                |                      | 2006                            |       | 2005               |  | % Change                   |       | 2006 |  | 2005 |    | % Change |   | 2006 |       | 2005 |  | % Change
|                               
|Sales                           |                      | $                               | 326.6 |                    |  | $                          | 291.9 |      |  |      | 12 |          |   |      |       |      |  |          |       |     |  |  |   |     |   |   |        |        |  |   |        |        |  |  |     |   
|Freight                         |                      |                                 | 22.6  |                    |  |                            | 20.4  |      |  |      | 11 |          |   |      |       |      |  |          |       |     |  |  |   |     |   |   |        |        |  |   |        |        |  |  |     |   
|Transportation and distribution |                      |                                 | 13.7  |                    |  |                            | 10.3  |      |  |      | 33 |          |   |      |       |      |  |          |       |     |  |  |   |     |   |   |        |        |  |   |        |        |  |  |     |   
|                               
|                                |                      | $                               | 290.3 |                    |  | $                          | 261.2 |      |  |      | 11 |          |   |      |       |      |  |          |       |     |  |  |   |     |   |   |        |        |  |   |        |        |  |  |     |   
|                               
|Net Sales                       |                      |                                 |       |                    |  |                            |       |      |  |      |    |          |   |      |       |      |  |          |       |     |  |  |   |     |   |   |        |        |  |   |        |        |  |  |     |   
|                                | Fertilizer  liquids |                                 | $     | 61.1               |  |                            | $     | 58.0 |  |      |    | 5        |   |      |       | 259  |  |          |       | 266 |  |  |   | (3  | ) |   | $      | 235.66 |  |   | $      | 217.93 |  |  |     | 8  | 
|                                | Fertilizer  solids  |                                 |       | 101.2              |  |                            |       | 86.3 |  |      |    | 17       |   |      |       | 428  |  |          |       | 369 |  |  |   | 16  |   |   | $      | 235.90 |  |   | $      | 233.77 |  |  |     | 1  | 
|                                | Feed                 |                                 |       | 66.7               |  |                            |       | 52.9 |  |      |    | 26       |   |      |       | 223  |  |          |       | 198 |  |  |   | 13  |   |   | $      | 299.07 |  |   | $      | 266.82 |  |  |     | 12 | 
|                                | Industrial           |                                 |       | 58.2               |  |                            |       | 60.4 |  |      |    | (4       | ) |      |       | 156  |  |          |       | 174 |  |  |   | (10 | ) |   | $      | 374.60 |  |   | $      | 347.51 |  |  |     | 8  | 
|                               
|                                |                      |                                 | 287.2 |                    |  |                            | 257.6 |      |  |      | 11 |          |   |      | 1,066 |      |  |          | 1,007 |     |  |  | 6 |     |   | $ | 269.28 |        |  | $ | 255.81 |        |  |  | 5   |   
|                                | Miscellaneous        |                                 |       | 3.1                |  |                            |       | 3.6  |  |      |    | (14      | ) |      |       |     |  |          |       |    |  |  |   |    |   |   |        |       |  |   |        |       |  |  |     |   | 
|                               
|                                |                      |                                 | 290.3 |                    |  |                            | 261.2 |      |  |      | 11 |          |   |      | 1,066 |      |  |          | 1,007 |     |  |  | 6 |     |   | $ | 272.22 |        |  | $ | 259.35 |        |  |  | 5   |   
|Cost of goods sold              |                      |                                 | 260.5 |                    |  |                            | 229.0 |      |  |      | 14 |          |   |      |       |      |  |          |       |     |  |  |   |     |   | $ | 244.27 |        |  | $ | 227.37 |        |  |  | 7   |   
|                               
|Gross margin                    |                      | $                               | 29.8  |                    |  | $                          | 32.2  |      |  |      | (7 | )        |   |      |       |      |  |          |       |     |  |  |   |     |   | $ | 27.95  |        |  | $ | 31.98  |        |  |  | (13 | ) 
|                               

33



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##### Table of Contents



|                                |                      |                                |       |                    |  |                            |       |       |  |      |    |          |   |      |       |       |  |          |       |       |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |    | 
|------------------------------- | -------------------- | ------------------------------ | ----- | ------------------ |  | -------------------------- | ----- | ----- |  | ---- | -- | -------- | - | ---- | ----- | ----- |  | -------- | ----- | ----- |  |  | -- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | -- | -- | 
|                                |                      | Nine Months Ended September 30
|                               
|                                |                      | Dollars (millions)             |       | Tonnes (thousands) |  | Average Price per Tonne(1)
|                               
|                                |                      | 2006                           |       | 2005               |  | % Change                   |       | 2006  |  | 2005 |    | % Change |   | 2006 |       | 2005  |  | % Change
|                               
|Sales                           |                      | $                              | 920.4 |                    |  | $                          | 847.7 |       |  |      | 9  |          |   |      |       |       |  |          |       |       |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|Freight                         |                      |                                | 63.3  |                    |  |                            | 60.2  |       |  |      | 5  |          |   |      |       |       |  |          |       |       |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|Transportation and distribution |                      |                                | 35.4  |                    |  |                            | 27.2  |       |  |      | 30 |          |   |      |       |       |  |          |       |       |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|                               
|                                |                      | $                              | 821.7 |                    |  | $                          | 760.3 |       |  |      | 8  |          |   |      |       |       |  |          |       |       |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|                               
|Net Sales                       |                      |                                |       |                    |  |                            |       |       |  |      |    |          |   |      |       |       |  |          |       |       |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|                                | Fertilizer  liquids |                                | $     | 165.6              |  |                            | $     | 151.0 |  |      |    | 10       |   |      |       | 704   |  |          |       | 687   |  |  |    | 2   |   |   | $      | 235.17 |  |   | $      | 219.73 |  |  |    | 7  | 
|                                | Fertilizer  solids  |                                |       | 288.1              |  |                            |       | 260.3 |  |      |    | 11       |   |      |       | 1,190 |  |          |       | 1,163 |  |  |    | 2   |   |   | $      | 242.03 |  |   | $      | 223.74 |  |  |    | 8  | 
|                                | Feed                 |                                |       | 179.0              |  |                            |       | 163.6 |  |      |    | 9        |   |      |       | 585   |  |          |       | 651   |  |  |    | (10 | ) |   | $      | 306.34 |  |   | $      | 251.36 |  |  |    | 22 | 
|                                | Industrial           |                                |       | 180.1              |  |                            |       | 175.1 |  |      |    | 3        |   |      |       | 485   |  |          |       | 505   |  |  |    | (4  | ) |   | $      | 371.42 |  |   | $      | 346.91 |  |  |    | 7  | 
|                               
|                                |                      |                                | 812.8 |                    |  |                            | 750.0 |       |  |      | 8  |          |   |      | 2,964 |       |  |          | 3,006 |       |  |  | (1 | )   |   | $ | 274.25 |        |  | $ | 249.50 |        |  |  | 10 |   
|                                | Miscellaneous        |                                |       | 8.9                |  |                            |       | 10.3  |  |      |    | (14      | ) |      |       |      |  |          |       |      |  |  |    |    |   |   |        |       |  |   |        |       |  |  |    |   | 
|                               
|                                |                      |                                | 821.7 |                    |  |                            | 760.3 |       |  |      | 8  |          |   |      | 2,964 |       |  |          | 3,006 |       |  |  | (1 | )   |   | $ | 277.26 |        |  | $ | 252.93 |        |  |  | 10 |   
|Cost of goods sold              |                      |                                | 729.7 |                    |  |                            | 689.0 |       |  |      | 6  |          |   |      |       |       |  |          |       |       |  |  |    |     |   | $ | 246.22 |        |  | $ | 229.21 |        |  |  | 7  |   
|                               
|Gross margin                    |                      | $                              | 92.0  |                    |  | $                          | 71.3  |       |  |      | 29 |          |   |      |       |       |  |          |       |       |  |  |    |     |   | $ | 31.04  |        |  | $ | 23.72  |        |  |  | 31 |   
|                               



|    |                                                                                              
|--- | ---------------------------------------------------------------------------------------------
|(1) | Rounding differences may occur due to the use of whole dollars
    in per-tonne calculations.

Highlights




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A $6.3-million write down of assets at our Geismar, LA facility
    resulted in phosphate gross margin falling to $29.8 million
    this quarter from $32.2 million in the same period last
    year. In the first nine months of 2006, phosphate has generated
    $92.0 million gross margin, 29 percent higher than the
    $71.3 million from the first nine months of 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Price increases were realized in all major product categories on
    both a quarter over quarter and year over year basis, in
    response to continuing high input costs and reasonably tight
    supply/demand fundamentals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | The feed and industrial segments once again proved their value
    as stable, higher-margin phosphate businesses. Feed and
    industrial products contributed $15.8 million and
    $10.4 million of third-quarter gross margin, respectively,
    while liquid fertilizer, which was directly impacted by the
    abovementioned writedown, added $1.0 million for the
    quarter after the writedown. For the first nine months of 2006,
    feed phosphate products contributed $46.7 million of gross
    margin while industrial products contributed $39.1 million.
    Within industrial, purified phosphoric acid was again the most
    profitable product, generating quarterly gross margin of
    $11.7 million and $39.7 million of gross margin for
    the first nine months of the year, representing 27 percent
    and 30 percent of net sales in each period, respectively.

|                                                 |  |                                 |      |       |                                |             |      |          |              |   |         |   |             |   |            |   |          |  |   |      |   |  |   |      |   |  |   |       |   |  |   |       |  
|------------------------------------------------ |  | ------------------------------- | ---- | ----- | ------------------------------ | ----------- | ---- | -------- | ------------ | - | ------- | - | ----------- | - | ---------- | - | -------- |  | - | ---- | - |  | - | ---- | - |  | - | ----- | - |  | - | ----- | -
|Phosphate gross margin variance attributable to:
|                                                 |  |                                 |     
|Dollars (millions)                               |  |                                 |      |       |                               
|                                                 |  | Three Months Ended September 30 |      |       | Nine Months Ended September 30
|                                                 |  | 2006 vs. 2005                   |      |       | 2006 vs. 2005                 
|                                                 |  |                                 |     
|                                                 |  | Change in                       |      |       |                                |             |      |          | Change in    |   |        
|                                                 |  | Prices/Costs                    |      |       |                                |             |      |          | Prices/Costs |   |        
|                                                 |  | Change in                       |      |       |                                | Total Gross |      |          | Change in    |   |         |   | Total Gross
|                                                 |  | Sales                           |      | Net   |                                | Cost of     |      | Margin   |              |   | Sales   |   | Net         |   | Cost of    |   | Margin  
|                                                 |  | Volumes                         |      | Sales |                                | Goods Sold  |      | Variance |              |   | Volumes |   | Sales       |   | Goods Sold |   | Variance
|                                                 |  |                                 |     
|Fertilizer  liquids                             |  | $                               | (0.2 | )     |                                | $           | 3.8  |          |              | $ | (7.2    | ) |             | $ | (3.6       | ) |          |  | $ | 5.4  |   |  | $ | 12.4 |   |  | $ | (13.1 | ) |  | $ | 4.7   |  
|Fertilizer  solids                              |  |                                 | 6.3  |       |                                |             | 2.4  |          |              |   | (10.7   | ) |             |   | (2.0       | ) |          |  |   | 4.5  |   |  |   | 21.8 |   |  |   | (30.5 | ) |  |   | (4.2  | )
|Feed                                             |  |                                 | 3.7  |       |                                |             | 9.7  |          |              |   | (4.5    | ) |             |   | 8.9        |   |          |  |   | (4.8 | ) |  |   | 33.8 |   |  |   | 4.4   |   |  |   | 33.4  |  
|Industrial                                       |  |                                 | (2.9 | )     |                                |             | 3.2  |          |              |   | (4.6    | ) |             |   | (4.3       | ) |          |  |   | (4.8 | ) |  |   | 11.3 |   |  |   | (8.5  | ) |  |   | (2.0  | )
|Other                                            |  |                                 | (0.4 | )     |                                |             | (0.1 | )        |              |   | (0.9    | ) |             |   | (1.4       | ) |          |  |   | (1.0 | ) |  |   | (0.3 | ) |  |   | (9.9  | ) |  |   | (11.2 | )
|                                                 |  |                                 |     
|Total                                            |  | $                               | 6.5  |       |                                | $           | 19.0 |          |              | $ | (27.9   | ) |             | $ | (2.4       | ) |          |  | $ | (0.7 | ) |  | $ | 79.0 |   |  | $ | (57.6 | ) |  | $ | 20.7  |  
|                                                 |  |                                 |     

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##### Table of Contents



Sales and Cost of Goods Sold






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Overall sales volumes were up 6 percent, positively
    impacting gross margin by $6.5 million. There was a change
    in product mix as the company chose to participate in higher
    priced sales in certain markets at the expense of sales volumes.
    Our strategy to focus on non-fertilizer products paid dividends
    as prices for feed products rose 12 percent, while
    industrial and liquid fertilizer prices were each up
    8 percent. Higher feed prices implemented by the company,
    as a result of a strong pricing stance over volumes, contributed
    $9.7 million to the gross margin increase. Of this
    increase, Monocal represented $6.2 million due to a higher
    proportion of sales being into offshore markets (primarily Latin
    America), to which transportation and distribution costs are
    lower.                                                                                                                                                                                                                                               
|
| |  | Industrial sales volumes were 10 percent lower than the
    same quarter last year due to a decline in market demand, and
    were flat compared to second-quarter 2006. Feed phosphate
    volumes were up 13 percent, as a 49-percent increase in
    offshore demand, primarily in Mexico, more than offset an
    11-percent decline in other North American volumes as the
    company focused on higher-margin offshore markets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | The unfavorable price variance in cost of goods sold was
    $27.9 million. In July 2006, the company indefinitely
    suspended production of Super Phosphoric Acid and Poly-N
    phosphate products at its Geismar, Louisiana facilities due to
    higher input costs and lower product margins for those products
    at that facility, compared to the companys other
    facilities. In connection with the shutdowns, management
    determined that the carrying amounts of the long-lived assets
    related to the production facilities were not fully recoverable
    and an impairment loss of $6.3 million was recognized.
    Sulfur prices 7 percent higher reduced gross margin by
    $2.7 million. Phosphate rock costs were up 7 percent
    as a result of higher costs for purchased rock at Geismar and
    higher electrical and chemical processing costs at both of our
    Aurora, North Carolina and White Springs, Florida mines. A
    change in product mix, higher depreciation charges and increased
    prices for supplies and services further increased costs.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Higher prices realized in the feed and fertilizer markets, due
    to tight industry fundamentals, were supplemented by industrial
    price increases implemented during 2005 that held through 2006.
    Additionally, higher cost rock at our Geismar facility was a
    factor for certain customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Sales volumes were relatively flat, though there was a change in
    product mix. Fertilizer sales volumes improved slightly,
    contributing $9.9 million to the change in gross margin as
    supply/demand fundamentals were strong. This was partially
    offset by a 10-percent decline in feed sales volumes resulting
    from the companys decision to remain firm on pricing, and
    a 4-percent decline in industrial sales volumes due to reduced
    market demand.                                                                                                                                                                                                                                                                                       
|
| |  | The price variance in cost of goods sold negatively impacted the
    change in gross margin by $57.6 million. Higher raw
    material input costs more than offset the positive effect of
    operating rate efficiencies and change in product mix. The
    company benefited from operating rate efficiencies as our
    phosphoric acid operating rate increased 6 percent;
    however, 3 percent higher ammonia prices and
    15 percent higher sulfur prices combined to reduce gross
    margin by $2.8 million and $15.4 million,
    respectively, while the impairment charge, a change in product
    mix, higher depreciation charges, escalating prices for supplies
    and services throughout the year and higher rock costs further
    increased costs.

35



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##### Table of Contents



Expenses and Other Income


|                                  |  |                                 |      |                                |  |        |      |        |  |      |       |      |  |        |      |        |  |   |       |  |  |   |       |  |  |   |        |   |  |  |     |  
|--------------------------------- |  | ------------------------------- | ---- | ------------------------------ |  | ------ | ---- | ------ |  | ---- | ----- | ---- |  | ------ | ---- | ------ |  | - | ----- |  |  | - | ----- |  |  | - | ------ | - |  |  | --- | -
|                                  |  | Three Months Ended September 30 |      | Nine Months Ended September 30
|                                 
|                                  |  | Dollar                          |      | %                              |  |        |      | Dollar |  | %   
|Dollars (millions)                |  | 2006                            |      | 2005                           |  | Change |      | Change |  | 2006 |       | 2005 |  | Change |      | Change
|                                 
|Selling and administrative        |  | $                               | 35.9 |                                |  | $      | 31.8 |        |  | $    | 4.1   |      |  |        | 13   |        |  | $ | 114.6 |  |  | $ | 116.0 |  |  | $ | (1.4   | ) |  |  | (1  | )
|Provincial mining and other taxes |  |                                 | 12.5 |                                |  |        | 28.8 |        |  |      | (16.3 | )    |  |        | (57  | )      |  |   | 41.2  |  |  |   | 111.4 |  |  |   | (70.2  | ) |  |  | (63 | )
|Foreign exchange (gain) loss      |  |                                 | (4.7 | )                              |  |        | 24.4 |        |  |      | (29.1 | )    |  |        | (119 | )      |  |   | 9.2   |  |  |   | 12.4  |  |  |   | (3.2   | ) |  |  | (26 | )
|Other income                      |  |                                 | 21.1 |                                |  |        | 20.4 |        |  |      | 0.7   |      |  |        | 3    |        |  |   | 72.3  |  |  |   | 54.3  |  |  |   | 18.0   |   |  |  | 33  |  
|Interest expense                  |  |                                 | 25.2 |                                |  |        | 20.4 |        |  |      | 4.8   |      |  |        | 24   |        |  |   | 69.1  |  |  |   | 61.7  |  |  |   | 7.4    |   |  |  | 12  |  
|Income taxes                      |  |                                 | 52.8 |                                |  |        | 64.2 |        |  |      | (11.4 | )    |  |        | (18  | )      |  |   | 95.1  |  |  |   | 209.8 |  |  |   | (114.7 | ) |  |  | (55 | )











36



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##### Table of Contents









| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the second quarter of 2006, we reduced our consolidated
    effective income tax rate from 33 percent to
    30 percent for the 2006 year. The impact of this change on
    prior periods, as applicable, was reflected during the quarter.
    The change was primarily attributable to two factors that
    occurred during that quarter. First, the Province of
    Saskatchewan enacted changes to the corporate income tax,
    reducing the rate from 17 percent to 12 percent over
    the next three years. Second, we revised our estimated
    allocation of annual income before income taxes by jurisdiction
    as a result of a decrease in expected potash operating income in
    Canada.
|
| |  | During the second quarter of 2006, the Government of Canada
    enacted changes to the federal corporate income tax and the
    corporate surtax. The federal corporate income tax rate will be
    reduced from 21 percent to 19 percent over the next
    four years and the federal corporate surtax will be reduced from
    1.12 percent to nil in 2008. The impact of this change on
    the companys future income tax liability was recognized
    during the second quarter.                                                                                                                                                                                                                          
|
| |  | Income tax refunds totaling $22.4 million were recorded,
    $6.6 million of which was recognized during third-quarter
    2006, relating to a recent Canadian appeal court decision
    (pertaining to a uranium producer) which affirmed the
    deductibility of the Saskatchewan capital tax resource surcharge.                                                                                                                                                                                                                                                                                                                                                                                            



37



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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES


Cash Requirements




Contractual Obligations and Other Commitments


|                                              |  |                        |         |               |  |              |       |              |  |              |       |  |  |   |         |  |  |   |         | 
|--------------------------------------------- |  | ---------------------- | ------- | ------------- |  | ------------ | ----- | ------------ |  | ------------ | ----- |  |  | - | ------- |  |  | - | ------- | 
|                                              |  | Payments Due By Period
|                                              |  | Dollars (millions)    
|                                             
|                                              |  | Total                  |         | Within 1 year |  | 1 to 3 years |       | 3 to 5 years |  | Over 5 years
|                                             
|Long-term debt                                |  | $                      | 1,257.8 |               |  | $            | 400.7 |              |  | $            | 0.5   |  |  | $ | 600.7   |  |  | $ | 255.9   | 
|Estimated interest payments on long-term debt |  |                        | 342.9   |               |  |              | 87.7  |              |  |              | 118.4 |  |  |   | 118.3   |  |  |   | 18.5    | 
|Operating leases                              |  |                        | 675.5   |               |  |              | 83.3  |              |  |              | 141.6 |  |  |   | 130.7   |  |  |   | 319.9   | 
|Purchase obligations                          |  |                        | 845.0   |               |  |              | 118.8 |              |  |              | 199.7 |  |  |   | 171.6   |  |  |   | 354.9   | 
|Other commitments                             |  |                        | 38.9    |               |  |              | 14.8  |              |  |              | 17.7  |  |  |   | 6.4     |  |  |   |        | 
|Other long-term liabilities                   |  |                        | 886.2   |               |  |              | 36.0  |              |  |              | 72.0  |  |  |   | 64.6    |  |  |   | 713.6   | 
|                                             
|Total                                         |  | $                      | 4,046.3 |               |  | $            | 741.3 |              |  | $            | 549.9 |  |  | $ | 1,092.3 |  |  | $ | 1,662.8 | 
|                                             

Long-term Debt








Operating Leases






38



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##### Table of Contents



Purchase Obligations








Other Commitments




Other Long-term Liabilities






Capital Expenditures






39



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##### Table of Contents



Sources and Uses of Cash




|                                                |  |                    |        |                   |  |        |        |      |  |      |     |        |  |   |        |   |  |   |        |   |  |  |     |  
|----------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ------ | ------ | ---- |  | ---- | --- | ------ |  | - | ------ | - |  | - | ------ | - |  |  | --- | -
|                                                |  | Three Months Ended |        | Nine Months Ended
|                                                |  | September 30       |        | September 30     
|                                               
|                                                |  | %                  |        |                   |  | %     
|Dollars (millions)                              |  | 2006               |        | 2005              |  | Change |        | 2006 |  | 2005 |     | Change
|                                               
|Cash provided by operating activities           |  | $                  | 224.9  |                   |  | $      | 304.5  |      |  |      | (26 | )      |  | $ | 353.6  |   |  | $ | 774.5  |   |  |  | (54 | )
|Cash used in investing activities               |  | $                  | (126.7 | )                 |  | $      | (201.1 | )    |  |      | (37 | )      |  | $ | (502.6 | ) |  | $ | (418.5 | ) |  |  | 20  |  
|Cash (used in) provided by financing activities |  | $                  | (36.5  | )                 |  | $      | (198.7 | )    |  |      | (82 | )      |  | $ | 246.5  |   |  | $ | (486.9 | ) |  |  | n/m |  





|                                        |  |               |          |              |  |        |          |   |  |  |     |  
|--------------------------------------- |  | ------------- | -------- | ------------ |  | ------ | -------- | - |  |  | --- | -
|                                        |  | September 30, |          | December 31, |  | %     
|Dollars (millions) except ratio amounts |  | 2006          |          | 2005         |  | Change
|                                       
|Current assets                          |  | $             | 1,201.6  |              |  | $      | 1,110.8  |   |  |  | 8   |  
|Current liabilities                     |  | $             | (1,421.2 | )            |  | $      | (1,096.1 | ) |  |  | 30  |  
|Working capital                         |  | $             | (219.6   | )            |  | $      | 14.7     |   |  |  | n/m |  
|Current ratio                           |  |               | 0.85     |              |  |        | 1.01     |   |  |  | (16 | )











| |   |                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In February 2006, we acquired an additional 10.01-percent
    interest in the ordinary shares of Sinofert for cash
    consideration of $126.3 million. The purchase price was
    financed by short-term debt. In the second quarter of 2005, we
    acquired 1 million additional shares in APC for
    $18.6 million and 21 million additional shares in ICL
    for $74.9 million.
|
| |  | Our spending on property, plant and equipment increased
    $24.8 million and $138.5 million as compared to the
    same three-month and nine-month periods last year, largely due
    to major capital expansion                                                                                                                                                                     

40



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| |  |                                                                                                                                                                                                        
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | projects in potash. These activities, totaling
    $133.8 million for the quarter and $384.9 million for
    the first nine months of 2006, were also financed by our
    short-term credit facilities.





Principal Debt Instruments


|                           |  |                    |         |             |  |           |         |           |  |   |       |  |  |   |       | 
|-------------------------- |  | ------------------ | ------- | ----------- |  | --------- | ------- | --------- |  | - | ----- |  |  | - | ----- | 
|                           |  | September 30, 2006
|                          
|                           |  | Total              |         | Amount      |  | Amount    |         | Amount   
|Dollars (millions)         |  | Amount             |         | Outstanding |  | Committed |         | Available
|                          
|Syndicated credit facility |  | $                  | 750.0   |             |  | $         |        |           |  | $ | 530.0 |  |  | $ | 220.0 | 
|Line of credit             |  |                    | 75.0    |             |  |           |        |           |  |   | 19.3  |  |  |   | 55.7  | 
|Commercial paper           |  |                    | 750.0   |             |  |           | 530.0   |           |  |   |      |  |  |   | 220.0 | 
|US shelf registration      |  |                    | 2,000.0 |             |  |           | 1,250.0 |           |  |   |      |  |  |   | 750.0 | 





41



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##### Table of Contents







Outstanding Share Data




Off-Balance Sheet Arrangements




Guarantee Contracts






42



---



##### Table of Contents











Derivative Instruments










43



---



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Long-term Fixed Price Contracts




QUARTERLY FINANCIAL HIGHLIGHTS


|                               |  |               |       |          |  |           |       |  |              |   |               |  |          |  |           |       |  |              |   |       |  |  |   |         |  |  |   |       |  |  |  |   |       | 
|------------------------------ |  | ------------- | ----- | -------- |  | --------- | ----- |  | ------------ | - | ------------- |  | -------- |  | --------- | ----- |  | ------------ | - | ----- |  |  | - | ------- |  |  | - | ----- |  |  |  | - | ----- | 
|                               |  |               |       |          |  |          
|Dollars (millions)             |  | September 30, |       | June 30, |  | March 31, |       |  | December 31, |   | September 30, |  | June 30, |  | March 31, |       |  | December 31,
|except per-share amounts       |  | 2006          |       | 2006     |  | 2006      |       |  | 2005         |   | 2005          |  | 2005     |  | 2005      |       |  | 2004        
|                               |  |               |       |          |  |           |       | 
|Sales                          |  | $             | 953.5 |          |  | $         | 928.7 |  |              | $ | 861.6         |  |          |  | $         | 930.5 |  |              | $ | 938.0 |  |  | $ | 1,057.3 |  |  | $ | 921.4 |  |  |  | $ | 866.6 | 
|                               |  |               |       |          |  |           |       | 
|Gross margin                   |  |               | 245.8 |          |  |           | 253.4 |  |              |   | 203.5         |  |          |  |           | 242.2 |  |              |   | 279.5 |  |  |   | 344.8   |  |  |   | 258.5 |  |  |  |   | 197.3 | 
|                               |  |               |       |          |  |           |       | 
|Net income                     |  |               | 145.2 |          |  |           | 175.1 |  |              |   | 125.5         |  |          |  |           | 117.1 |  |              |   | 130.3 |  |  |   | 164.2   |  |  |   | 131.3 |  |  |  |   | 100.1 | 
|                               |  |               |       |          |  |           |       | 
|Net income per share  basic   |  |               | 1.40  |          |  |           | 1.69  |  |              |   | 1.21          |  |          |  |           | 1.11  |  |              |   | 1.20  |  |  |   | 1.50    |  |  |   | 1.18  |  |  |  |   | 0.91  | 
|                               |  |               |       |          |  |           |       | 
|Net income per share  diluted |  |               | 1.37  |          |  |           | 1.65  |  |              |   | 1.19          |  |          |  |           | 1.09  |  |              |   | 1.17  |  |  |   | 1.46    |  |  |   | 1.15  |  |  |  |   | 0.88  | 
|                               |  |               |       |          |  |           |       | 





RELATED PARTY TRANSACTIONS




CRITICAL ACCOUNTING ESTIMATES


10-Q.






RECENT ACCOUNTING CHANGES


Changes in Accounting Policies




44



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Recent Accounting Pronouncements


Canada


Comprehensive Income, Equity, Financial Instruments and
Hedges






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Financial assets will be classified as either held-to-maturity,
    held-for-trading or available-for-sale. Held-to-maturity
    classification will be restricted to fixed maturity instruments
    that the company intends and is able to hold to maturity and
    will be accounted for at amortized cost. Held-for-trading
    instruments will be recorded at fair value with realized and
    unrealized gains and losses reported in net income. The
    remaining financial assets will be classified as
    available-for-sale. These will be recorded at fair value with
    unrealized gains and losses reported in a new category of the
    Consolidated Statements of Financial Position under
    shareholders equity called other comprehensive income
    (OCI);                                                                                                                                                                                                                                                           
|
| |  | Financial liabilities will be classified as either
    held-for-trading or other. Held-for-trading instruments will be
    recorded at fair value with realized and unrealized gains and
    losses reported in net income. Other instruments will be
    accounted for at amortized cost with gains and losses reported
    in net income in the period that the liability is derecognized;
    and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Derivatives will be classified as held-for-trading unless
    designated as hedging instruments. All derivatives, including
    embedded derivatives that must be separately accounted for, will
    be recorded at fair value on the Consolidated Statements of
    Financial Position. For derivatives that hedge the changes in
    fair value of an asset or liability, changes in the
    derivatives fair value will be reported in net income and
    be substantially offset by changes in the fair value of the
    hedged asset or liability attributable to the risk being hedged.
    For derivatives that hedge variability in cash flows, the
    effective portion of the changes in the derivatives fair
    value will be initially recognized in OCI and the ineffective
    portion will be recorded in net income. The amounts temporarily
    recorded in OCI will subsequently be reclassified to net income
    in the periods when net income is affected by the variability in
    the cash flows of the hedged item.



Stripping Costs Incurred in the Production Phase of a
Mining Operation




45



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##### Table of Contents





Accounting Changes




Stock-Based Compensation for Employees Eligible to Retire
Before the Vesting Date




Determining the Variability to be Considered in Applying
the Variable Interest Entity Standards




United States


Inventory Costs




Stripping Costs Incurred in the Production Phase of a
Mining Operation


04-6,


46



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##### Table of Contents





Uncertainty in Income Taxes




Planned Major Maintenance Activities




Quantifying Misstatements in the Financial
Statements




Pension and Other Post-retirement Benefit Plans




Stock-Based Compensation


123(R)-5, 123(R)-1.


47



---



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RISK MANAGEMENT










OUTLOOK








48



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##### Table of Contents













FORWARD-LOOKING STATEMENTS


10-Q, 10-Q,


ITEM
3.       QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK




49



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Commodity Risk








Interest Rate Risk








Foreign Exchange Risk






ITEM 4.       CONTROLS
AND PROCEDURES




50



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##### Table of Contents







PART II.       OTHER
INFORMATION


ITEM 1.       LEGAL
PROCEEDINGS


Ward Transformer




ITEM
6.       EXHIBITS


(a)       EXHIBITS


|        |  |                                                                                                                                                                                                                                                                                                                                
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                
|Number  |  | Description of Document                                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                
|3(a)    |  | Articles of Continuance of the registrant dated May 15,
    2002, incorporated by reference to Exhibit 3(a) to the
    registrants report on Form 10-Q for the quarterly
    period ended June 30, 2002 (the Second Quarter 2002
    Form 10-Q).                                                                            
|3(b)    |  | Bylaws of the registrant effective May 15, 2002,
    incorporated by reference to Exhibit 3(b) to the Second
    Quarter 2002 Form 10-Q.                                                                                                                                                                                       
|4(a)    |  | Term Credit Agreement between The Bank of Nova Scotia and other
    financial institutions and the registrant dated
    September 25, 2001, incorporated by reference to
    Exhibit 4(a) to the registrants report on
    Form 10-Q for the quarterly period ended September 30,
    2001.                                   
|4(b)    |  | Syndicated Term Credit Facility Amending Agreement between The
    Bank of Nova Scotia and other financial institutions and the
    registrant dated as of September 23, 2003, incorporated by
    reference to Exhibit 4(b) to the registrants report
    on Form 10-Q for the quarterly period ended
    September 30, 2003.
|4(c)    |  | Syndicated Term Credit Facility Second Amending Agreement
    between The Bank of Nova Scotia and other financial institutions
    and the registrant dated as of September 21, 2004,
    incorporated by reference to Exhibit 4(c) to the
    registrants report on Form 8-K dated
    September 21, 2004.                   
|4(d)    |  | Syndicated Term Credit Facility Third Amending Agreement between
    The Bank of Nova Scotia and other financial institutions and the
    registrant dated as of September 20, 2005, incorporated by
    reference to Exhibit 4(a) to the registrants report
    on Form 8-K dated September 22, 2005.                        
|4(e)    |  | Syndicated Term Credit Facility Fourth Amending Agreement
    between The Bank of Nova Scotia and other financial institutions
    and the registrant dated as of September 27, 2006.                                                                                                                                          
|4(f)    |  | Indenture dated as of June 16, 1997, between the registrant
    and The Bank of Nova Scotia Trust Company of New York,
    incorporated by reference to Exhibit 4(a) to the
    registrants report on Form 8-K dated June 18,
    1997 (the 1997 Form 8-K).                                                                 

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|        |  |                                                                                                                                                                                                                                                                                      
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                      
|Number  |  | Description of Document                                                                                                                                                                                                                                                              
|        |  |                                                                                                                                                                                                                                                                                      
|4(g)    |  | Indenture dated as of February 27, 2003, between the
    registrant and The Bank of Nova Scotia Trust Company of New
    York, incorporated by reference to Exhibit 4(c) to the
    registrants report on Form 10-K for the year ended
    December 31, 2002 (the 2002 Form 10-K).
|4(h)    |  | Form of Notes relating to the registrants offering of
    $400,000,000 principal amount of 7.125% Notes due June 15,
    2007, incorporated by reference to Exhibit 4(b) to the 1997
    Form 8-K.                                                                                  
|4(i)    |  | Form of Notes relating to the registrants offering of
    $600,000,000 principal amount of 7.75% Notes due May 31,
    2011, incorporated by reference to Exhibit 4 to the
    registrants report on Form 8-K dated May 17,
    2001.                                              
|4(j)    |  | Form of Note relating to the registrants offering of
    $250,000,000 principal amount of 4.875% Notes due March 1,
    2013, incorporated by reference to Exhibit 4 to the
    registrants report on Form 8-K dated
    February 28, 2003.                                        



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Number  |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10(a)   |  | Sixth Voting Agreement dated April 22, 1978, between
    Central Canada Potash, Division of Noranda, Inc., Cominco Ltd.,
    International Minerals and Chemical Corporation (Canada)
    Limited, PCS Sales and Texasgulf Inc., incorporated by reference
    to Exhibit 10(f) to the registrants registration
    statement on Form F-1 (File No. 33-31303) (the
    F-1 Registration Statement).                                                         
|10(b)   |  | Canpotex Limited Shareholders Seventh Memorandum of Agreement
    effective April 21, 1978, between Central Canada Potash,
    Division of Noranda Inc., Cominco Ltd., International Minerals
    and Chemical Corporation (Canada) Limited, PCS Sales, Texasgulf
    Inc. and Canpotex Limited as amended by Canpotex S&P
    amending agreement dated November 4, 1987, incorporated by
    reference to Exhibit 10(g) to the F-1 Registration
    Statement.
|10(c)   |  | Producer Agreement dated April 21, 1978, between Canpotex
    Limited and PCS Sales, incorporated by reference to
    Exhibit 10(h) to the F-1 Registration Statement.                                                                                                                                                                                                                                                                                         
|10(d)   |  | Canpotex/PCS Amending Agreement, dated as of October 1,
    1992, incorporated by reference to Exhibit 10(f) to the
    registrants report on Form 10-K for the year ended
    December 31, 1995 (the 1995 Form 10-K).                                                                                                                                                                                                                                      
|10(e)   |  | Canpotex PCA Collateral Withdrawing/PCS Amending Agreement,
    dated as of October 7, 1993, incorporated by reference to
    Exhibit 10(g) to the 1995 Form 10-K.                                                                                                                                                                                                                                                                                             
|10(f)   |  | Canpotex Producer Agreement amending agreement dated as of
    January 1, 1999, incorporated by reference to
    Exhibit 10(f) to the registrants report on
    Form 10-K for the year ended December 31, 2000 (the
    2000 Form 10-K).                                                                                                                                                                                                                    
|10(g)   |  | Canpotex Producer Agreement amending agreement dated as of
    July 1, 2002, incorporated by reference to
    Exhibit 10(g) to the registrants report on
    Form 10-Q for the quarterly period ended June 30, 2004
    (the Second Quarter 2004 Form 10-Q).                                                                                                                                                                                                
|10(h)   |  | Esterhazy Restated Mining and Processing Agreement dated
    January 31, 1978, between International Minerals &
    Chemical Corporation (Canada) Limited and the registrants
    predecessor, incorporated by reference to Exhibit 10(e) to
    the F-1 Registration Statement.                                                                                                                                                                              
|10(i)   |  | Agreement dated December 21, 1990, between International
    Minerals & Chemical Corporation (Canada) Limited and the
    registrant, amending the Esterhazy Restated Mining and
    Processing Agreement dated January 31, 1978, incorporated
    by reference to Exhibit 10(p) to the registrants
    report on Form 10-K for the year ended December 31,
    1990.                                                                                         

52



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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Number  |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10(j)   |  | Agreement effective August 27, 1998, between International
    Minerals & Chemical (Canada) Global Limited and the
    registrant, amending the Esterhazy Restated Mining and
    Processing Agreement dated January 31, 1978 (as amended),
    incorporated by reference to Exhibit 10(l) to the
    registrants report on Form 10-K for the year ended
    December 31, 1998 (the 1998 Form 10-K).                                                                                                                                            
|10(k)   |  | Agreement effective August 31, 1998, among International
    Minerals & Chemical (Canada) Global Limited, International
    Minerals & Chemical (Canada) Limited Partnership and the
    registrant assigning the interest in the Esterhazy Restated
    Mining and Processing Agreement dated January 31, 1978 (as
    amended) held by International Minerals & Chemical (Canada)
    Global Limited to International Minerals & Chemical (Canada)
    Limited Partnership, incorporated by reference to
    Exhibit 10(m) to the 1998 Form 10-K.
|10(l)   |  | Potash Corporation of Saskatchewan Inc. Stock Option
    Plan  Directors, as amended January 23, 2001,
    incorporated by reference to Exhibit 10(bb) to the
    registrants report on Form 10-Q for the quarterly
    period ended June 30, 2001.                                                                                                                                                                                                                                                                                              
|10(m)   |  | Potash Corporation of Saskatchewan Inc. Stock Option
    Plan  Officers and Employees, as amended
    January 23, 2001, incorporated by reference to
    Exhibit 10(aa) to the 2000 Form 10-K.                                                                                                                                                                                                                                                                                                                                                    
|10(n)   |  | Short-Term Incentive Plan of the registrant effective January
    2000, as amended March 10, 2005, incorporated by reference
    to Exhibit 10(x) to the registrants report on
    Form 10-K for the year ended December 31, 2004 (the
    2004 Form 10-K).                                                                                                                                                                                                                                                                                     
|10(o)   |  | Long-Term Incentive Plan of the registrant effective January
    2003, incorporated by reference to Exhibit 10(y) to the
    2002 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                       
|10(p)   |  | Resolution and Forms of Agreement for Supplemental Retirement
    Income Plan, for officers and key employees of the registrant,
    incorporated by reference to Exhibit 10(o) to the 1995
    Form 10-K.                                                                                                                                                                                                                                                                                                                                         
|10(q)   |  | Amending Resolution and revised forms of agreement regarding
    Supplemental Retirement Income Plan of the registrant,
    incorporated by reference to Exhibit 10(x) to the
    registrants report on Form 10-Q for the quarterly
    period ended June 30, 1996.                                                                                                                                                                                                                                                                               
|10(r)   |  | Amended and restated Supplemental Retirement Income Plan of the
    registrant and text of amendment to existing supplemental income
    plan agreements, incorporated by reference to
    Exhibit 10(mm) to the registrants report on
    Form 10-Q for the quarterly period ended September 30,
    2000.                                                                                                                                                                                                                                       
|10(s)   |  | Form of Letter of amendment to existing supplemental income plan
    agreements of the registrant dated November 4, 2002,
    incorporated by reference to Exhibit 10(cc) to the 2002
    Form 10-K.                                                                                                                                                                                                                                                                                                                                               
|10(t)   |  | Supplemental Retirement Benefits Plan for U.S. Executives
    dated effective January 1, 1999, incorporated by reference
    to Exhibit 10(aa) to the Second Quarter 2002 Form 10-Q.                                                                                                                                                                                                                                                                                                                                                               
|10(u)   |  | Forms of Agreement dated December 30, 1994, between the
    registrant and certain officers of the registrant, concerning a
    change in control of the registrant, incorporated by reference
    to Exhibit 10(p) to the 1995 Form 10-K.                                                                                                                                                                                                                                                                                                         
|10(v)   |  | Form of Agreement of Indemnification dated August 8, 1995,
    between the registrant and certain officers and directors of the
    registrant, incorporated by reference to Exhibit 10(q) to
    the 1995 Form 10-K.                                                                                                                                                                                                                                                                                                                              
|10(w)   |  | Resolution and Form of Agreement of Indemnification dated
    January 24, 2001, incorporated by reference to
    Exhibit 10(ii) to the 2000 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                             
|10(x)   |  | Resolution and Form of Agreement of Indemnification 
    July 21, 2004, incorporated by reference to
    Exhibit 10(ii) to the Second Quarter 2004 Form 10-Q.                                                                                                                                                                                                                                                                                                                                                                                     
|10(y)   |  | Chief Executive Officer Medical and Dental Benefits,
    incorporated by reference to Exhibit 10(jj) to the 2004
    Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                                    
|10(z)   |  | Second Amended and Restated Membership Agreement dated
    January 1, 1995, among Phosphate Chemicals Export
    Association, Inc. and members of such association, including
    Texasgulf Inc., incorporated by reference to Exhibit 10(t)
    to the 1995 Form 10-K.                                                                                                                                                                                                                                                                            

53



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|        |  |                                                                                                                                                                                                                                                                                                                              
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                              
|Number  |  | Description of Document                                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                              
|10(aa)  |  | International Agency Agreement dated January 1, 1995,
    between Phosphate Chemicals Export Association, Inc. and
    Texasgulf Inc. establishing Texasgulf Inc. as exclusive
    marketing agent for such associations wet phosphatic
    materials, incorporated by reference to Exhibit 10(u) to
    the 1995 Form 10-K.
|10(bb)  |  | Deferred Share Unit Plan for Non-Employee Directors,
    incorporated by reference to Exhibit 4.1 to the
    registrants Form S-8 (File No. 333-75742) filed
    December 21, 2001.                                                                                                                                         
|10(cc)  |  | Potash Corporation of Saskatchewan Inc. 2005 Performance Option
    Plan and Form of Option Agreement, incorporated by reference to
    Exhibit 10(nn) to the registrants report on
    Form 10-Q for the quarterly period ended March 31,
    2005.                                                                        
|10(dd)  |  | Potash Corporation of Saskatchewan Inc. 2006 Performance Option
    Plan and Form of Option Agreement, incorporated by reference to
    Exhibit 10(dd) to the registrants report on
    Form 10-Q for the quarterly period ended March 31,
    2006.                                                                        
|10(ee)  |  | Medium Term Incentive Plan of the registrant effective January
    2006, incorporated by reference to Exhibit 10(dd) to the
    registrants report on Form 10-K for the year ended
    December 31, 2005.                                                                                                                   
|11      |  | Statement re Computation of Per Share Earnings                                                                                                                                                                                                                                                                               
|31(a)   |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                 
|31(b)   |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                 
|32      |  | Certification pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                 

54



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SIGNATURES






| |                      
| | ---------------------
| | POTASH CORPORATION OF
| | SASKATCHEWAN INC.    





| |     |                   
| | --- | ------------------
| | By: | /s/ Joseph Podwika

| |                                                     
| | ----------------------------------------------------
| |                                                     
| | Joseph Podwika                                      
| | Senior Vice President, General Counsel and Secretary



| |     |                      
| | --- | ---------------------
| | By: | /s/ Wayne R. Brownlee

| |                                             
| | --------------------------------------------
| |                                             
| | Wayne R. Brownlee                           
| | Executive Vice President, Treasurer and     
| | Chief Financial Officer                     
| | (Principal Financial and Accounting Officer)

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EXHIBIT INDEX


|        |  |                                                                                                                                                                                                                                                                                                                                
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                
|Number  |  | Description of Document                                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                
|3(a)    |  | Articles of Continuance of the registrant dated May 15,
    2002, incorporated by reference to Exhibit 3(a) to the
    registrants report on Form 10-Q for the quarterly
    period ended June 30, 2002 (the Second Quarter 2002
    Form 10-Q).                                                                            
|3(b)    |  | Bylaws of the registrant effective May 15, 2002,
    incorporated by reference to Exhibit 3(b) to the Second
    Quarter 2002 Form 10-Q.                                                                                                                                                                                       
|4(a)    |  | Term Credit Agreement between The Bank of Nova Scotia and other
    financial institutions and the registrant dated
    September 25, 2001, incorporated by reference to
    Exhibit 4(a) to the registrants report on
    Form 10-Q for the quarterly period ended September 30,
    2001.                                   
|4(b)    |  | Syndicated Term Credit Facility Amending Agreement between The
    Bank of Nova Scotia and other financial institutions and the
    registrant dated as of September 23, 2003, incorporated by
    reference to Exhibit 4(b) to the registrants report
    on Form 10-Q for the quarterly period ended
    September 30, 2003.
|4(c)    |  | Syndicated Term Credit Facility Second Amending Agreement
    between The Bank of Nova Scotia and other financial institutions
    and the registrant dated as of September 21, 2004,
    incorporated by reference to Exhibit 4(c) to the
    registrants report on Form 8-K dated
    September 21, 2004.                   
|4(d)    |  | Syndicated Term Credit Facility Third Amending Agreement between
    The Bank of Nova Scotia and other financial institutions and the
    registrant dated as of September 20, 2005, incorporated by
    reference to Exhibit 4(a) to the registrants report
    on Form 8-K dated September 22, 2005.                        
|4(e)    |  | Syndicated Term Credit Facility Fourth Amending Agreement
    between The Bank of Nova Scotia and other financial institutions
    and the registrant dated as of September 27, 2006.                                                                                                                                          
|4(f)    |  | Indenture dated as of June 16, 1997, between the registrant
    and The Bank of Nova Scotia Trust Company of New York,
    incorporated by reference to Exhibit 4(a) to the
    registrants report on Form 8-K dated June 18,
    1997 (the 1997 Form 8-K).                                                                 
|4(g)    |  | Indenture dated as of February 27, 2003, between the
    registrant and The Bank of Nova Scotia Trust Company of New
    York, incorporated by reference to Exhibit 4(c) to the
    registrants report on Form 10-K for the year ended
    December 31, 2002 (the 2002 Form 10-K).                                          
|4(h)    |  | Form of Notes relating to the registrants offering of
    $400,000,000 principal amount of 7.125% Notes due June 15,
    2007, incorporated by reference to Exhibit 4(b) to the 1997
    Form 8-K.                                                                                                                            
|4(i)    |  | Form of Notes relating to the registrants offering of
    $600,000,000 principal amount of 7.75% Notes due May 31,
    2011, incorporated by reference to Exhibit 4 to the
    registrants report on Form 8-K dated May 17,
    2001.                                                                                        
|4(j)    |  | Form of Note relating to the registrants offering of
    $250,000,000 principal amount of 4.875% Notes due March 1,
    2013, incorporated by reference to Exhibit 4 to the
    registrants report on Form 8-K dated
    February 28, 2003.                                                                                  



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Number  |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10(a)   |  | Sixth Voting Agreement dated April 22, 1978, between
    Central Canada Potash, Division of Noranda, Inc., Cominco Ltd.,
    International Minerals and Chemical Corporation (Canada)
    Limited, PCS Sales and Texasgulf Inc., incorporated by reference
    to Exhibit 10(f) to the registrants registration
    statement on Form F-1 (File No. 33-31303) (the
    F-1 Registration Statement).                                                         
|10(b)   |  | Canpotex Limited Shareholders Seventh Memorandum of Agreement
    effective April 21, 1978, between Central Canada Potash,
    Division of Noranda Inc., Cominco Ltd., International Minerals
    and Chemical Corporation (Canada) Limited, PCS Sales, Texasgulf
    Inc. and Canpotex Limited as amended by Canpotex S&P
    amending agreement dated November 4, 1987, incorporated by
    reference to Exhibit 10(g) to the F-1 Registration
    Statement.
|10(c)   |  | Producer Agreement dated April 21, 1978, between Canpotex
    Limited and PCS Sales, incorporated by reference to
    Exhibit 10(h) to the F-1 Registration Statement.                                                                                                                                                                                                                                                                                         
|10(d)   |  | Canpotex/PCS Amending Agreement, dated as of October 1,
    1992, incorporated by reference to Exhibit 10(f) to the
    registrants report on Form 10-K for the year ended
    December 31, 1995 (the 1995 Form 10-K).                                                                                                                                                                                                                                      
|10(e)   |  | Canpotex PCA Collateral Withdrawing/PCS Amending Agreement,
    dated as of October 7, 1993, incorporated by reference to
    Exhibit 10(g) to the 1995 Form 10-K.                                                                                                                                                                                                                                                                                             
|10(f)   |  | Canpotex Producer Agreement amending agreement dated as of
    January 1, 1999, incorporated by reference to
    Exhibit 10(f) to the registrants report on
    Form 10-K for the year ended December 31, 2000 (the
    2000 Form 10-K).                                                                                                                                                                                                                    
|10(g)   |  | Canpotex Producer Agreement amending agreement dated as of
    July 1, 2002, incorporated by reference to
    Exhibit 10(g) to the registrants report on
    Form 10-Q for the quarterly period ended June 30, 2004
    (the Second Quarter 2004 Form 10-Q).                                                                                                                                                                                                
|10(h)   |  | Esterhazy Restated Mining and Processing Agreement dated
    January 31, 1978, between International Minerals &
    Chemical Corporation (Canada) Limited and the registrants
    predecessor, incorporated by reference to Exhibit 10(e) to
    the F-1 Registration Statement.                                                                                                                                                                              
|10(i)   |  | Agreement dated December 21, 1990, between International
    Minerals & Chemical Corporation (Canada) Limited and the
    registrant, amending the Esterhazy Restated Mining and
    Processing Agreement dated January 31, 1978, incorporated
    by reference to Exhibit 10(p) to the registrants
    report on Form 10-K for the year ended December 31,
    1990.                                                                                         





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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Number  |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10(j)   |  | Agreement effective August 27, 1998, between International
    Minerals & Chemical (Canada) Global Limited and the
    registrant, amending the Esterhazy Restated Mining and
    Processing Agreement dated January 31, 1978 (as amended),
    incorporated by reference to Exhibit 10(l) to the
    registrants report on Form 10-K for the year ended
    December 31, 1998 (the 1998 Form 10-K).                                                                                                                                            
|10(k)   |  | Agreement effective August 31, 1998, among International
    Minerals & Chemical (Canada) Global Limited, International
    Minerals & Chemical (Canada) Limited Partnership and the
    registrant assigning the interest in the Esterhazy Restated
    Mining and Processing Agreement dated January 31, 1978 (as
    amended) held by International Minerals & Chemical (Canada)
    Global Limited to International Minerals & Chemical (Canada)
    Limited Partnership, incorporated by reference to
    Exhibit 10(m) to the 1998 Form 10-K.
|10(l)   |  | Potash Corporation of Saskatchewan Inc. Stock Option
    Plan  Directors, as amended January 23, 2001,
    incorporated by reference to Exhibit 10(bb) to the
    registrants report on Form 10-Q for the quarterly
    period ended June 30, 2001.                                                                                                                                                                                                                                                                                              
|10(m)   |  | Potash Corporation of Saskatchewan Inc. Stock Option
    Plan  Officers and Employees, as amended
    January 23, 2001, incorporated by reference to
    Exhibit 10(aa) to the 2000 Form 10-K.                                                                                                                                                                                                                                                                                                                                                    
|10(n)   |  | Short-Term Incentive Plan of the registrant effective January
    2000, as amended March 10, 2005, incorporated by reference
    to Exhibit 10(x) to the registrants report on
    Form 10-K for the year ended December 31, 2004 (the
    2004 Form 10-K).                                                                                                                                                                                                                                                                                     
|10(o)   |  | Long-Term Incentive Plan of the registrant effective January
    2003, incorporated by reference to Exhibit 10(y) to the
    2002 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                       
|10(p)   |  | Resolution and Forms of Agreement for Supplemental Retirement
    Income Plan, for officers and key employees of the registrant,
    incorporated by reference to Exhibit 10(o) to the 1995
    Form 10-K.                                                                                                                                                                                                                                                                                                                                         
|10(q)   |  | Amending Resolution and revised forms of agreement regarding
    Supplemental Retirement Income Plan of the registrant,
    incorporated by reference to Exhibit 10(x) to the
    registrants report on Form 10-Q for the quarterly
    period ended June 30, 1996.                                                                                                                                                                                                                                                                               
|10(r)   |  | Amended and restated Supplemental Retirement Income Plan of the
    registrant and text of amendment to existing supplemental income
    plan agreements, incorporated by reference to
    Exhibit 10(mm) to the registrants report on
    Form 10-Q for the quarterly period ended September 30,
    2000.                                                                                                                                                                                                                                       
|10(s)   |  | Form of Letter of amendment to existing supplemental income plan
    agreements of the registrant dated November 4, 2002,
    incorporated by reference to Exhibit 10(cc) to the 2002
    Form 10-K.                                                                                                                                                                                                                                                                                                                                               
|10(t)   |  | Supplemental Retirement Benefits Plan for U.S. Executives
    dated effective January 1, 1999, incorporated by reference
    to Exhibit 10(aa) to the Second Quarter 2002 Form 10-Q.                                                                                                                                                                                                                                                                                                                                                               
|10(u)   |  | Forms of Agreement dated December 30, 1994, between the
    registrant and certain officers of the registrant, concerning a
    change in control of the registrant, incorporated by reference
    to Exhibit 10(p) to the 1995 Form 10-K.                                                                                                                                                                                                                                                                                                         
|10(v)   |  | Form of Agreement of Indemnification dated August 8, 1995,
    between the registrant and certain officers and directors of the
    registrant, incorporated by reference to Exhibit 10(q) to
    the 1995 Form 10-K.                                                                                                                                                                                                                                                                                                                              
|10(w)   |  | Resolution and Form of Agreement of Indemnification dated
    January 24, 2001, incorporated by reference to
    Exhibit 10(ii) to the 2000 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                             
|10(x)   |  | Resolution and Form of Agreement of Indemnification 
    July 21, 2004, incorporated by reference to
    Exhibit 10(ii) to the Second Quarter 2004 Form 10-Q.                                                                                                                                                                                                                                                                                                                                                                                     
|10(y)   |  | Chief Executive Officer Medical and Dental Benefits,
    incorporated by reference to Exhibit 10(jj) to the 2004
    Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                                    
|10(z)   |  | Second Amended and Restated Membership Agreement dated
    January 1, 1995, among Phosphate Chemicals Export
    Association, Inc. and members of such association, including
    Texasgulf Inc., incorporated by reference to Exhibit 10(t)
    to the 1995 Form 10-K.                                                                                                                                                                                                                                                                            





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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                              
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                              
|Number  |  | Description of Document                                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                              
|10(aa)  |  | International Agency Agreement dated January 1, 1995,
    between Phosphate Chemicals Export Association, Inc. and
    Texasgulf Inc. establishing Texasgulf Inc. as exclusive
    marketing agent for such associations wet phosphatic
    materials, incorporated by reference to Exhibit 10(u) to
    the 1995 Form 10-K.
|10(bb)  |  | Deferred Share Unit Plan for Non-Employee Directors,
    incorporated by reference to Exhibit 4.1 to the
    registrants Form S-8 (File No. 333-75742) filed
    December 21, 2001.                                                                                                                                         
|10(cc)  |  | Potash Corporation of Saskatchewan Inc. 2005 Performance Option
    Plan and Form of Option Agreement, incorporated by reference to
    Exhibit 10(nn) to the registrants report on
    Form 10-Q for the quarterly period ended March 31,
    2005.                                                                        
|10(dd)  |  | Potash Corporation of Saskatchewan Inc. 2006 Performance Option
    Plan and Form of Option Agreement, incorporated by reference to
    Exhibit 10(dd) to the registrants report on
    Form 10-Q for the quarterly period ended March 31,
    2006.                                                                        
|10(ee)  |  | Medium Term Incentive Plan of the registrant effective January
    2006, incorporated by reference to Exhibit 10(dd) to the
    registrants report on Form 10-K for the year ended
    December 31, 2005.                                                                                                                   
|11      |  | Statement re Computation of Per Share Earnings                                                                                                                                                                                                                                                                               
|31(a)   |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                 
|31(b)   |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                 
|32      |  | Certification pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002.