##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-Q

|  |  |                                                                                            
|- |  | -------------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended
September 30, 2004

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

306-933-8500

(Registrants telephone number, including
area code)


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days.

YES x  NO o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Exchange Act
Rule 12b-2).

YES x  NO o

APPLICABLE ONLY TO CORPORATE
ISSUERS:

Indicate the number
of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.

As at
October 31, 2004, Potash Corporation of Saskatchewan Inc.
had 109,541,346 Common Shares outstanding.





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TABLE OF CONTENTS



|                                                                        |                                                |  |  |  |  |  |  | 
|----------------------------------------------------------------------- | ---------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                                          
|                                                                        | ITEM 1. FINANCIAL STATEMENTS                  
|                                                                        | Notes to the Consolidated Financial Statements
|PART II. OTHER INFORMATION                                             
|                                                                        | ITEM 1. LEGAL PROCEEDINGS                     
|                                                                        | ITEM 6. EXHIBITS                              
|SIGNATURES                                                             
|Statement re Computation of Per Share Earnings                         
|Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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##### Table of Contents






PART I.     FINANCIAL
INFORMATION






ITEM 1.FINANCIAL
STATEMENTS


Potash Corporation of Saskatchewan
Inc.

Consolidated Statements of Financial
Position

(in millions of US dollars except share
amounts)


|                                                                 |                                                                                                                                                                                      |               |         |              |  |   |         |       | 
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------- | ------- | ------------ |  | - | ------- | ----- | 
|                                                                 |                                                                                                                                                                                      | September 30, |         | December 31,
|                                                                 |                                                                                                                                                                                      | 2004          |         | 2003        
|                                                                
|                                                                
|                                                                 |                                                                                                                                                                                      | (unaudited)   |         |             
|Assets                                                           |                                                                                                                                                                                      |               |         |              |  |   |         |      
|Current assets                                                   |                                                                                                                                                                                      |               |         |              |  |   |         |      
|                                                                 | Cash and cash equivalents                                                                                                                                                            |               | $       | 380.7        |  |   | $       | 4.7   | 
|                                                                 | Accounts receivable                                                                                                                                                                  |               |         | 312.5        |  |   |         | 305.0 | 
|                                                                 | Inventories (Note 3)                                                                                                                                                                 |               |         | 369.8        |  |   |         | 395.2 | 
|                                                                 | Prepaid expenses                                                                                                                                                                     |               |         | 40.6         |  |   |         | 29.0  | 
|                                                                
|                                                                 |                                                                                                                                                                                      |               | 1,103.6 |              |  |   | 733.9   |      
|                                                                
|Property, plant and equipment                                    |                                                                                                                                                                                      |               | 3,053.2 |              |  |   | 3,108.1 |      
|Other assets                                                     |                                                                                                                                                                                      |               | 611.8   |              |  |   | 628.3   |      
|Goodwill                                                         |                                                                                                                                                                                      |               | 97.0    |              |  |   | 97.0    |      
|                                                                
|                                                                 |                                                                                                                                                                                      | $             | 4,865.6 |              |  | $ | 4,567.3 |      
|                                                                
|Liabilities                                                      |                                                                                                                                                                                      |               |         |              |  |   |         |      
|Current liabilities                                              |                                                                                                                                                                                      |               |         |              |  |   |         |      
|                                                                 | Short-term debt                                                                                                                                                                      |               | $       | 94.9         |  |   | $       | 176.2 | 
|                                                                 | Accounts payable and accrued charges                                                                                                                                                 |               |         | 476.4        |  |   |         | 380.3 | 
|                                                                 | Current portion of long-term debt                                                                                                                                                    |               |         | 1.3          |  |   |         | 1.3   | 
|                                                                
|                                                                 |                                                                                                                                                                                      |               | 572.6   |              |  |   | 557.8   |      
|                                                                
|Long-term debt                                                   |                                                                                                                                                                                      |               | 1,267.9 |              |  |   | 1,268.6 |      
|Future income tax liability                                      |                                                                                                                                                                                      |               | 503.4   |              |  |   | 484.2   |      
|Accrued post-retirement/post-employment benefits                 |                                                                                                                                                                                      |               | 195.4   |              |  |   | 194.5   |      
|Accrued environmental costs and asset retirement
    obligations |                                                                                                                                                                                      |               | 84.0    |              |  |   | 81.3    |      
|Other non-current liabilities and deferred credits               |                                                                                                                                                                                      |               | 5.2     |              |  |   | 7.1     |      
|                                                                
|                                                                 |                                                                                                                                                                                      |               | 2,628.5 |              |  |   | 2,593.5 |      
|                                                                
|Shareholders Equity                                             |                                                                                                                                                                                      |               |         |              |  |   |         |      
|Share capital (Note 5)                                           |                                                                                                                                                                                      |               | 1,345.4 |              |  |   | 1,245.8 |      
|                                                                 | Unlimited authorization of common shares without
    par value;
    Issued and outstanding 109,065,096 and 106,224,432 at
    September 30, 2004 and December 31, 2003, respectively |               |         |              |  |   |         |       | 
|Contributed surplus                                              |                                                                                                                                                                                      |               | 273.6   |              |  |   | 265.2   |      
|Retained earnings                                                |                                                                                                                                                                                      |               | 618.1   |              |  |   | 462.8   |      
|                                                                
|                                                                 |                                                                                                                                                                                      |               | 2,237.1 |              |  |   | 1,973.8 |      
|                                                                
|                                                                 |                                                                                                                                                                                      | $             | 4,865.6 |              |  | $ | 4,567.3 |      
|                                                                

(See Notes to the Consolidated Financial
Statements)

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##### Table of Contents



Potash Corporation of Saskatchewan
Inc.

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     
|                                                |         | 2004               |       | 2003              |  | 2004 |        | 2003 
|                                               
|                                               
|Sales                                           |         | $                  | 815.7 |                   |  | $    | 674.6  |       |   | $ | 2,377.8 |      |  | $ | 2,081.4 |      
|Less: Freight                                   |         |                    | 51.2  |                   |  |      | 55.9   |       |   |   | 178.2   |      |  |   | 180.8   |      
|Transportation
    and distribution             |         |                    | 23.6  |                   |  |      | 28.3   |       |   |   | 77.9    |      |  |   | 78.8    |      
|Cost
    of goods sold                          |         |                    | 551.5 |                   |  |      | 505.9  |       |   |   | 1,637.6 |      |  |   | 1,533.9 |      
|                                               
|Gross Margin                                    |         |                    | 189.4 |                   |  |      | 84.5   |       |   |   | 484.1   |      |  |   | 287.9   |      
|                                               
|Selling and administrative                      |         |                    | 32.2  |                   |  |      | 24.2   |       |   |   | 83.8    |      |  |   | 71.8    |      
|Provincial mining and other taxes               |         |                    | 23.1  |                   |  |      | 12.2   |       |   |   | 67.5    |      |  |   | 45.1    |      
|Provision for plant shutdowns (Note 6)          |         |                    |      |                   |  |      | 121.5  |       |   |   |        |      |  |   | 123.7   |      
|Provision for PCS Yumbes S.C.M. (Note 7)        |         |                    |      |                   |  |      | 140.5  |       |   |   | 5.9     |      |  |   | 140.5   |      
|Foreign exchange loss                           |         |                    | 20.1  |                   |  |      | 2.2    |       |   |   | 2.0     |      |  |   | 41.5    |      
|Other income                                    |         |                    | (19.1 | )                 |  |      | (5.2   | )     |   |   | (35.2   | )    |  |   | (21.6   | )    
|                                               
|                                                |         |                    | 56.3  |                   |  |      | 295.4  |       |   |   | 124.0   |      |  |   | 401.0   |      
|                                               
|Operating Income (Loss)                         |         |                    | 133.1 |                   |  |      | (210.9 | )     |   |   | 360.1   |      |  |   | (113.1  | )    
|Interest Expense                                |         |                    | 20.8  |                   |  |      | 24.6   |       |   |   | 63.8    |      |  |   | 67.2    |      
|                                               
|Income (Loss) Before Income Taxes               |         |                    | 112.3 |                   |  |      | (235.5 | )     |   |   | 296.3   |      |  |   | (180.3  | )    
|Income Taxes (Note 8)                           |         |                    | 37.1  |                   |  |      | (49.6  | )     |   |   | 97.8    |      |  |   | (27.5   | )    
|                                               
|Net Income (Loss)                               |         | $                  | 75.2  |                   |  | $    | (185.9 | )     |   |   | 198.5   |      |  |   | (152.8  | )    
|                                                |         |                    |       |                   |  |      |        |       |   |  
|Retained Earnings, Beginning of
    Period      |         |                    |       |                   |  |      |        |       |   |   | 462.8   |      |  |   | 641.4   |      
|Dividends                                       |         |                    |       |                   |  |      |        |       |   |   | (43.2   | )    |  |   | (39.1   | )    
|                                               
|Retained Earnings, End of Period                |         |                    |       |                   |  |      |        |       |   | $ | 618.1   |      |  | $ | 449.5   |      
|                                               
|Net Income (Loss) Per Share (Notes 5 and
    9) |         |                    |       |                   |  |      |        |       |   |   |         |      |  |   |         |      
|                                                | Basic   |                    | $     | 0.69              |  |      | $      | (1.78 | ) |   | $       | 1.85 |  |   | $       | (1.47 | )
|                                                | Diluted |                    | $     | 0.68              |  |      | $      | (1.78 | ) |   | $       | 1.82 |  |   | $       | (1.47 | )
|                                               
|Dividends Per Share                             |         | $                  | 0.15  |                   |  | $    | 0.13   |       |   | $ | 0.40    |      |  | $ | 0.38    |      
|                                               

(See Notes to the Consolidated Financial
Statements)

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Potash Corporation of Saskatchewan
Inc.

Consolidated Statements of Cash Flow

(in millions of US dollars)


(unaudited)


|                                                            |                                                                  |                    |       |                   |   |      |        |       |   |   |       |       |   |   |        |       |  
|----------------------------------------------------------- | ---------------------------------------------------------------- | ------------------ | ----- | ----------------- | - | ---- | ------ | ----- | - | - | ----- | ----- | - | - | ------ | ----- | -
|                                                            |                                                                  |                    |       |                  
|                                                            |                                                                  | Three Months Ended |       | Nine Months Ended
|                                                            |                                                                  | September 30       |       | September 30     
|                                                            |                                                                  | 2004               |       | 2003              |   | 2004 |        | 2003 
|                                                           
|                                                           
|Operating Activities                                        |                                                                  |                    |       |                   |   |      |        |       |   |   |       |       |   |   |        |      
|Net income (loss)                                           |                                                                  | $                  | 75.2  |                   |   | $    | (185.9 | )     |   | $ | 198.5 |       |   | $ | (152.8 | )    
|                                                           
|Items not affecting cash                                    |                                                                  |                    |       |                   |   |      |        |       |   |   |       |       |   |   |        |      
|                                                            | Depreciation and amortization                                    |                    |       | 55.6              |   |      |        | 53.9  |   |   |       | 179.2 |   |   |        | 172.9 |  
|                                                            | Stock-based compensation                                         |                    |       | 2.8               |   |      |        |      |   |   |       | 8.4   |   |   |        |      |  
|                                                            | (Gain) loss on disposal of property, plant and
    equipment     |                    |       | (0.3              | ) |      |        |      |   |   |       | (0.6  | ) |   |        | 0.3   |  
|                                                            | Foreign exchange on future income tax                            |                    |       | 13.6              |   |      |        | 1.2   |   |   |       | 5.8   |   |   |        | 26.3  |  
|                                                            | Provision for future income tax                                  |                    |       | 9.9               |   |      |        | (49.6 | ) |   |       | 34.2  |   |   |        | (27.5 | )
|                                                            | Share of earnings of equity investees                            |                    |       | (12.0             | ) |      |        | (2.3  | ) |   |       | (19.7 | ) |   |        | (7.2  | )
|                                                            | Provision for plant shutdowns                                    |                    |       |                  |   |      |        | 118.3 |   |   |       |      |   |   |        | 118.3 |  
|                                                            | Provision for PCS Yumbes S.C.M.                                  |                    |       |                  |   |      |        | 127.6 |   |   |       | 5.9   |   |   |        | 127.6 |  
|                                                            | Provision for post-retirement/post-employment
    benefits       |                    |       | (5.7              | ) |      |        | 2.2   |   |   |       | 0.9   |   |   |        | 11.3  |  
|                                                            | Accrued environmental costs and asset retirement
    obligations |                    |       | 0.8               |   |      |        |      |   |   |       | 2.7   |   |   |        | 1.1   |  
|                                                            | Other non-current liabilities and deferred credits               |                    |       | 0.7               |   |      |        | 0.2   |   |   |       | (1.9  | ) |   |        | 0.7   |  
|                                                           
|                                                            | Subtotal of items not affecting cash                             |                    |       | 65.4              |   |      |        | 251.5 |   |   |       | 214.9 |   |   |        | 423.8 |  
|                                                           
|Changes in non-cash operating working
    capital           |                                                                  |                    |       |                   |   |      |        |       |   |   |       |       |   |   |        |      
|                                                            | Accounts receivable                                              |                    |       | (18.7             | ) |      |        | 10.4  |   |   |       | (9.1  | ) |   |        | (25.1 | )
|                                                            | Inventories                                                      |                    |       | 13.4              |   |      |        | 20.7  |   |   |       | 16.5  |   |   |        | (31.2 | )
|                                                            | Prepaid expenses                                                 |                    |       | (18.5             | ) |      |        | 8.3   |   |   |       | (11.6 | ) |   |        | 9.5   |  
|                                                            | Accounts payable and accrued charges                             |                    |       | 39.0              |   |      |        | 22.6  |   |   |       | 30.9  |   |   |        | 27.8  |  
|                                                            | Current income taxes                                             |                    |       | 12.8              |   |      |        | 0.8   |   |   |       | 41.0  |   |   |        | (12.6 | )
|                                                           
|                                                            | Subtotal of changes in non-cash operating
    working capital    |                    |       | 28.0              |   |      |        | 62.8  |   |   |       | 67.7  |   |   |        | (31.6 | )
|                                                           
|Cash provided by operating
    activities                   |                                                                  |                    | 168.6 |                   |   |      | 128.4  |       |   |   | 481.1 |       |   |   | 239.4  |      
|                                                           
|Investing Activities                                        |                                                                  |                    |       |                   |   |      |        |       |   |   |       |       |   |   |        |      
|Additions to property, plant and equipment                  |                                                                  |                    | (43.9 | )                 |   |      | (33.4  | )     |   |   | (93.3 | )     |   |   | (81.3  | )    
|Proceeds from disposal of property, plant and
    equipment |                                                                  |                    | 0.5   |                   |   |      |       |       |   |   | 1.2   |       |   |   |       |      
|Dividends received from equity investees                    |                                                                  |                    |      |                   |   |      |       |       |   |   | 4.6   |       |   |   | 4.0    |      
|Other assets                                                |                                                                  |                    | 0.3   |                   |   |      | (3.9   | )     |   |   | 4.6   |       |   |   | (14.7  | )    
|                                                           
|Cash used in investing activities                           |                                                                  |                    | (43.1 | )                 |   |      | (37.3  | )     |   |   | (82.9 | )     |   |   | (92.0  | )    
|                                                           
|Cash before financing activities                            |                                                                  |                    | 125.5 |                   |   |      | 91.1   |       |   |   | 398.2 |       |   |   | 147.4  |      
|                                                           
|Financing Activities                                        |                                                                  |                    |       |                   |   |      |        |       |   |   |       |       |   |   |        |      
|Proceeds from long-term debt                                |                                                                  |                    |      |                   |   |      |       |       |   |   |      |       |   |   | 250.0  |      
|Repayment of long-term debt                                 |                                                                  |                    | (0.2  | )                 |   |      | (0.3   | )     |   |   | (0.7  | )     |   |   | (0.8   | )    
|Proceeds from (repayment of) short-term debt                |                                                                  |                    | 3.5   |                   |   |      | (88.0  | )     |   |   | (81.3 | )     |   |   | (329.6 | )    
|Dividends                                                   |                                                                  |                    | (12.8 | )                 |   |      | (13.0  | )     |   |   | (39.8 | )     |   |   | (39.1  | )    
|Issuance of shares                                          |                                                                  |                    | 58.2  |                   |   |      | 4.6    |       |   |   | 99.6  |       |   |   | 5.5    |      
|                                                           
|Cash provided by (used in) financing
    activities         |                                                                  |                    | 48.7  |                   |   |      | (96.7  | )     |   |   | (22.2 | )     |   |   | (114.0 | )    
|                                                           
|Increase (Decrease) in Cash and Cash
    Equivalents        |                                                                  |                    | 174.2 |                   |   |      | (5.6   | )     |   |   | 376.0 |       |   |   | 33.4   |      
|Cash and Cash Equivalents, Beginning of
    Period          |                                                                  |                    | 206.5 |                   |   |      | 63.5   |       |   |   | 4.7   |       |   |   | 24.5   |      
|                                                           
|Cash and Cash Equivalents, End of
    Period                |                                                                  | $                  | 380.7 |                   |   | $    | 57.9   |       |   | $ | 380.7 |       |   | $ | 57.9   |      
|                                                           
|Supplemental cash flow disclosure                           |                                                                  |                    |       |                   |   |      |        |       |   |   |       |       |   |   |        |      
|                                                            | Interest paid                                                    |                    | $     | 11.4              |   |      | $      | 6.9   |   |   | $     | 55.0  |   |   | $      | 46.3  |  
|                                                            | Income taxes paid                                                |                    | $     | 6.8               |   |      | $      | 3.5   |   |   | $     | 22.1  |   |   | $      | 23.6  |  
|                                                           

(See Notes to the Consolidated Financial
Statements)

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##### Table of Contents



Potash Corporation of Saskatchewan
Inc.






Notes to the Consolidated Financial
Statements

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


(unaudited)


1.   Significant Accounting
Policies

Basis of Presentation

With its subsidiaries, Potash Corporation of
Saskatchewan Inc. (PCS)  together known
as PotashCorp or the company except to
the extent the context otherwise requires  forms an
integrated fertilizer and related industrial and feed products
company. The companys accounting policies are in
accordance with accounting principles generally accepted in
Canada (Canadian GAAP). These policies are
consistent with accounting principles generally accepted in the
United States (US GAAP) except as outlined in
Note 16. The accounting policies used in preparing these
interim consolidated financial statements are consistent with
those used in the preparation of the 2003 annual consolidated
financial statements, except as disclosed in Note 2.

These interim consolidated financial statements
do not include all disclosures normally provided in annual
consolidated financial statements and should be read in
conjunction with the most recent annual consolidated financial
statements. In managements opinion, the unaudited
consolidated financial information includes all adjustments
(consisting solely of normal recurring adjustments) necessary to
present fairly such information. Interim results are not
necessarily indicative of the results expected for the fiscal
year.

In 2003, the company approved plans to
restructure certain operations. Those plans required significant
estimates to be made of: (i) the recoverability of the
carrying value of certain assets based on their capacity to
generate future cash flows, and (ii) employee termination,
contract termination and other exit costs. Because restructuring
activities are complex processes that can take several months to
complete, they involve periodically reassessing estimates. As a
result, the company may have to change originally reported
estimates as actual payments are made or activities are
completed. Please refer to Note 6 and Note 7.

Principles of Consolidation

The consolidated financial statements include the
accounts of the company and its principal operating subsidiaries:

 PCS
Sales (Canada) Inc.

 PCS
Joint Venture, L.P.


 PCS
Sales (USA), Inc.


 PCS
Phosphate Company, Inc.


 PCS
Purified Phosphates


 White
Springs Agricultural Chemicals, Inc.


 PCS
Nitrogen, Inc.


 PCS
Nitrogen Fertilizer, L.P.


 PCS
Nitrogen Ohio, L.P.


 PCS
Nitrogen Trinidad Limited


 PCS
Cassidy Lake Company


 PCS
Yumbes S.C.M. (PCS Yumbes)


 PCS
Fosfatos do Brasil Ltda.


Recent Accounting
Pronouncements

In June 2003, the Canadian Institute of Chartered
Accountants (CICA) issued Accounting
Guideline 15 (AcG-15), Consolidation of
Variable Interest Entities. AcG-15 is harmonized with US
GAAP and provides guidance for applying the principles in CICA
Section 1590, Subsidiaries to those entities

5



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##### Table of Contents



(defined as Variable Interest Entities
(VIEs)) in which either the equity at risk is not
sufficient to permit that entity to finance its activities
without additional subordinated financial support from other
parties, or equity investors lack voting control, an obligation
to absorb expected losses or the right to receive expected
residual returns. AcG-15 requires consolidation by a business of
VIEs in which it is the primary beneficiary. The primary
beneficiary is defined as the party that has exposure to the
majority of the expected losses and/or expected residual returns
of the VIE. The CICA has recently amended AcG-15 in an effort to
clarify certain issues. The amended guideline is effective for
all annual and interim periods beginning on or after
November 1, 2004. The company does not expect application
of the guideline to have a material impact on its consolidated
financial statements.


In July 2004, the CICA proposed, subject to
comments received following exposure, to amend
Section 3500, Earnings per Share, to conform to
recent corresponding amendments proposed by the US Financial
Accounting Standards Board (FASB) and to those
adopted by the International Accounting Standards Board. The
CICA expects to issue its proposals in the fourth quarter of
2004 with an effective date for interim and annual periods
relating to fiscal years beginning on or after January 1,
2005.

In October 2004, the CICA decided to defer the
mandatory effective date of proposed Section 1530,
Comprehensive Income, proposed Section 3855,
Financial Instruments  Recognition and
Measurement and proposed Section 3865,
Hedges, by one year, in order to allow adequate time
for implementation. The guidance will now apply for interim and
annual financial statements relating to fiscal years beginning
on or after October 1, 2006. Earlier adoption will be
permitted only as of the beginning of a fiscal year. The CICA
expects to issue the new pronouncements in the first quarter
of 2005.

2.   Changes in Accounting
Policy

Sources of GAAP

Effective January 1, 2004, the company
prospectively adopted new accounting requirements of the CICA as
issued in Section 1100, Generally Accepted Accounting
Principles. This section establishes standards for
financial reporting in accordance with GAAP and provides
guidance on sources to consult when selecting accounting
policies and determining appropriate disclosures when a matter
is not dealt with explicitly in the primary sources of GAAP. In
light of the new Section 1100 provisions, the company
reviewed the application of its accounting policies and changed
the consolidated financial statement presentation of sales
revenue, freight costs and transportation and distribution
expenses, without any effect on gross margin or net income. All
comparative information has been appropriately reclassified.

In prior years, the company reported sales
revenues (net of discounts, and including amounts recoverable
from customers for freight, transportation and distribution) net
of related freight, transportation and distribution expenses.
The company now reports sales revenues (net of discounts, and
including amounts recoverable from customers for freight,
transportation and distribution), freight costs, and
transportation and distribution expenses as separate line items
on the Consolidated Statements of Operations and Retained
Earnings.

Asset Retirement Obligations

On January 1, 2004, the company adopted CICA
Section 3110, Accounting for Asset Retirement
Obligations, which requires the company to record an asset
and related liability for the costs associated with the
retirement of long-lived tangible assets when a legal liability
to retire such assets exists. This includes obligations incurred
as a result of acquisition, construction, or normal operation of
a long-lived asset. The provisions of Section 3110 require
the asset retirement obligation to be recorded at fair value at
the time the liability is incurred. Accretion expense is
recognized as an operating expense using the credit-adjusted
risk-free interest rate in effect when the liability was
recognized. The associated asset retirement obligations are
capitalized as part of the carrying amount of the long-lived
asset and depreciated over the estimated remaining useful life
of the asset. The company has recorded asset retirement
obligations primarily associated with certain closure,
reclamation, and restoration costs for its potash and phosphate
operations.

6



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The adoption of Section 3110 did not have a
significant effect on the results of operations or financial
position of the company. Had the provisions of Section 3110
been applied as of January 1, 2003, the pro forma effects
for the year ended December 31, 2003 on net loss would not
have been material. As required under the standard, the company
will make periodic assessments as to the reasonableness of its
asset retirement obligation estimates and revise those estimates
accordingly. The respective asset and liability balances will be
adjusted, which will correspondingly increase or decrease the
amounts expensed in future periods.

Hedging Relationships

Effective January 1, 2004, the company
adopted CICA Accounting Guideline 13, Hedging
Relationships. This guideline sets out the criteria that
must be met in order to apply hedge accounting for derivatives
and is based on many of the principles outlined in the US
standards relating to derivative instruments and hedging
activities. The guideline provides detailed guidance on the
identification, designation, documentation and effectiveness of
hedging relationships, for purposes of applying hedge
accounting, and the discontinuance of hedge accounting. Income
and expenses on derivative instruments designated and qualifying
as hedges under this guideline are recognized in earnings in the
same period as the related hedged item. Ineffective hedging
relationships and hedges not designated in a hedging
relationship are carried at fair value on the Consolidated
Statement of Financial Position, and subsequent changes in their
fair value are recorded in earnings. The adoption of this
accounting guideline did not have a material impact on the
consolidated financial statements.

3.   Inventories

|                       |  |               |       |              |  |   |       | 
|---------------------- |  | ------------- | ----- | ------------ |  | - | ----- | 
|                       |  | September 30, |       | December 31,
|                       |  | 2004          |       | 2003        
|                      
|                      
|                       |  | (unaudited)   |       |             
|Finished product       |  | $             | 157.9 |              |  | $ | 160.7 | 
|Materials and supplies |  |               | 106.9 |              |  |   | 108.0 | 
|Raw materials          |  |               | 39.8  |              |  |   | 54.1  | 
|Work in process        |  |               | 65.2  |              |  |   | 72.4  | 
|                      
|                       |  | $             | 369.8 |              |  | $ | 395.2 | 
|                      

4.   Long-term Debt

In January and February 2004, the company entered
into interest rate swap contracts designated as fair value
hedges that effectively converted a notional amount of $300.0 of
fixed rate debt (due 2011) into floating rate debt based on
six-month US dollar LIBOR rates. Net settlements on the swap
instruments are recorded as adjustments to interest expense. The
company did not enter into any interest rate swap contracts
in 2003.

In October 2004, the company terminated the
interest rate swap contracts referred to above for cash proceeds
of $3.0 and a gain of $0.8. Hedge accounting has been
discontinued prospectively and the associated gain will be
recognized in income over the remaining term of the debt in the
same periods as the corresponding interest expense.

5.   Share Capital

On July 21, 2004, the Board of Directors of
PCS approved a split of the companys outstanding common
shares on a two-for-one basis. The stock split was effected in
the form of a stock dividend of one additional common share for
each share owned by shareholders of record at the close of
business on August 11, 2004. The companys common
shares commenced trading on a split basis on August 9, 2004
on the Toronto Stock Exchange and August 18, 2004 on the
New York Stock Exchange. All equity-based benefit plans have
been adjusted to reflect the stock split. All share and
per-share data have been adjusted to reflect the stock split

7



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effective with third quarter 2004 reporting.
Information on an adjusted basis, showing the impact of this
split for the first two quarters of 2004, and by quarter and
total year for 2003 and 2002 follows.


|                                    |  |         |      |         |  |         |      |         |  |      |       |   |  |   |      |  |  |   |       |  
|----------------------------------- |  | ------- | ---- | ------- |  | ------- | ---- | ------- |  | ---- | ----- | - |  | - | ---- |  |  | - | ----- | -
|                                    |  | First   |      | Second  |  | Third   |      | Fourth  |  |     
|Quarterly Data (Post Split Basis)   |  | Quarter |      | Quarter |  | Quarter |      | Quarter |  | Year
|                                   
|                                   
|Basic net income (loss) per share   |  |         |      |         |  |         |      |         |  |      |       |   |  |   |      |  |  |   |       |  
|2004                                |  | $       | 0.48 |         |  | $       | 0.68 |         |  |      |       |   |  |   |      |  |  |   |       |  
|2003                                |  | $       | 0.03 |         |  | $       | 0.29 |         |  | $    | (1.78 | ) |  | $ | 0.25 |  |  | $ | (1.21 | )
|2002                                |  | $       | 0.12 |         |  | $       | 0.11 |         |  | $    | 0.14  |   |  | $ | 0.14 |  |  | $ | 0.52  |  
|Diluted net income (loss) per share |  |         |      |         |  |         |      |         |  |      |       |   |  |   |      |  |  |   |       |  
|2004                                |  | $       | 0.47 |         |  | $       | 0.67 |         |  |      |       |   |  |   |      |  |  |   |       |  
|2003                                |  | $       | 0.03 |         |  | $       | 0.29 |         |  | $    | (1.78 | ) |  | $ | 0.25 |  |  | $ | (1.21 | )
|2002                                |  | $       | 0.12 |         |  | $       | 0.11 |         |  | $    | 0.14  |   |  | $ | 0.14 |  |  | $ | 0.51  |  

Net income (loss) per share for each quarter has
been computed based on the weighted average number of shares
issued and outstanding during the respective quarter; therefore,
quarterly amounts may not add to the annual total.

6.   Provision for Plant
Shutdowns

Memphis and Geismar Nitrogen
Operations  2003

In June 2003, the company indefinitely shut down
its Memphis, Tennessee plant and suspended production of ammonia
and nitrogen solutions at its Geismar, Louisiana facilities due
to high US natural gas costs and low product margins. The plants
have not been re-started since that time.

The company determined that all employee
positions pertaining to the affected operations would be
eliminated and recorded $4.8 in connection with costs of special
termination benefits in the third quarter of 2003. The number of
employees terminated as a result of the shutdowns was 187, of
which 186 had left the company as of September 30, 2004.
The company has made payments relating to the terminations
totaling $4.2. All remaining workforce reduction costs
pertaining to the 187 employees are expected to be paid by
December 31, 2004.

In connection with the shutdowns, management had
determined that the carrying amounts of the long-lived assets at
the Memphis and Geismar nitrogen facilities were not fully
recoverable, and an impairment loss of $101.6, equal to the
amount by which the carrying amount of the facilities
asset groups exceeded their respective fair values, was
recognized. Of the total impairment charge, $100.6 related to
property, plant and equipment and $1.0 related to other assets.
As part of its review, management also wrote-down certain parts
inventories at these plants in the amount of $12.4.

In addition to the costs described above,
management expects to incur other shutdown-related costs of
approximately $11.1 and nominal annual expenditures for site
security and other maintenance costs. The other shutdown-related
costs have not been recorded in the consolidated financial
statements as of September 30, 2004. Such costs will be
recognized and recorded in the period in which they are incurred.

Kinston Phosphate Feed Plant 
2003

The phosphate feed plant at Kinston, North
Carolina ceased operations in the first quarter of 2003. In that
quarter, the company recorded $0.6 for costs of special
termination benefits for Kinston employees, $0.3 for parts
inventory writedowns, and $1.3 for long-lived asset impairment
charges. In lieu of full plant closure, the company continued to
operate the facility as a warehouse. In the third quarter of
2003, company management determined that the cost of operating
Kinston as a stand-alone warehouse was uneconomical. This
decision triggered a further review by management of the
carrying amounts of the plants long-lived assets. As a
result of this review, management determined that the carrying
amounts of the long-lived assets were not recoverable, and an
additional impairment charge of $2.7, equal to the amount by
which the carrying amount of the plants long-lived assets
exceeded their fair value, was recognized.

8



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The Kinston property was sold in the third
quarter of 2004 for nominal proceeds. There was no significant
gain or loss on sale. No additional costs were incurred in
connection with the plant shutdowns in the first half of 2004.
The following table summarizes, by reportable segment, the total
amount of costs incurred to date and the total costs expected to
be incurred in connection with the plant shutdowns described
above:

|                                          |  |             |       |             |  |   |       | 
|----------------------------------------- |  | ----------- | ----- | ----------- |  | - | ----- | 
|                                          |  | Cumulative  |       | Total Costs
|                                          |  | Costs       |       | Expected   
|                                          |  | Incurred to |       | to be      
|                                          |  | Date        |       | Incurred   
|                                         
|                                         
|Nitrogen Segment                          |  |             |       |             |  |   |       | 
|Employee termination and related benefits |  | $           | 4.8   |             |  | $ | 4.8   | 
|Writedown of parts inventory              |  |             | 12.4  |             |  |   | 12.4  | 
|Asset impairment charges                  |  |             | 101.6 |             |  |   | 101.6 | 
|Other related exit costs                  |  |             |      |             |  |   | 11.1  | 
|                                         
|                                          |  |             | 118.8 |             |  |   | 129.9 | 
|                                         
|Phosphate Segment                         |  |             |       |             |  |   |       | 
|Employee termination and related benefits |  |             | 0.6   |             |  |   | 0.6   | 
|Writedown of parts inventory              |  |             | 0.3   |             |  |   | 0.3   | 
|Asset impairment charges                  |  |             | 4.0   |             |  |   | 4.0   | 
|                                         
|                                          |  |             | 4.9   |             |  |   | 4.9   | 
|                                         
|                                          |  | $           | 123.7 |             |  | $ | 134.8 | 
|                                         

The following table summarizes, by reportable
segment, the costs accrued as of September 30, 2004 in
connection with the plant shutdowns described above:

|                                          |  |              |     |          |  |               |      |   |  |   |     | 
|----------------------------------------- |  | ------------ | --- | -------- |  | ------------- | ---- | - |  | - | --- | 
|                                          |  | Accrued      |     |          |  | Accrued      
|                                          |  | Balance      |     |          |  | Balance      
|                                          |  | December 31, |     | Cash     |  | September 30,
|                                          |  | 2003         |     | Payments |  | 2004         
|                                         
|                                         
|Nitrogen Segment                          |  |              |     |          |  |               |      |   |  |   |     | 
|Employee termination and related benefits |  | $            | 2.1 |          |  | $             | (1.5 | ) |  | $ | 0.6 | 
|                                         
|Phosphate Segment                         |  |              |     |          |  |               |      |   |  |   |     | 
|Employee termination and related benefits |  |              | 0.5 |          |  |               | (0.2 | ) |  |   | 0.3 | 
|                                         
|                                          |  | $            | 2.6 |          |  | $             | (1.7 | ) |  | $ | 0.9 | 
|                                         

The accrued balance is included in accounts
payable and accrued charges in the Consolidated Statement of
Financial Position as of September 30, 2004.

7.   Provision for PCS Yumbes
S.C.M.

2003

In November 2003, the company entered into a
share purchase agreement with Sociedad Quimica y Minera de Chile
S.A. (SQM), whereby SQM is to acquire the shares of
PCS Yumbes for an aggregate purchase price of $35.0, subject to
adjustments. Under the terms of the share purchase agreement,
and prior to the sale closing, PCS Yumbes will continue to
operate the facility and expeditiously liquidate the inventory
of nitrates. All other working capital is to be fully realized
or discharged (as applicable) by the company prior to the
closing. It is expected that closing will occur no later than
the end of 2004.

In 2003, management conducted an assessment of
the recoverability of the long-lived assets of the PCS Yumbes
operations. As a result of its review, management determined
that the carrying amounts of PCS Yumbes long-lived assets
were not recoverable and recorded an impairment charge of $77.4,
equal to the amount by which the carrying amount of the asset
group exceeded fair value. Of the total impairment charge,

9



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$13.0 related to property, plant and equipment,
$63.9 related to deferred pre-production costs, and $0.5 related
to deferred acquisition costs. As part of the review, management
also wrote-down certain non-parts inventory by $50.2 due to the
need to liquidate all inventories that would not be transferred
to SQM under the agreement.


The company plans to eliminate all employee
positions at PCS Yumbes by December 31, 2004 and has
recorded a provision of $1.8 pertaining to contractual
termination benefits to be paid, primarily under Chilean law. As
of September 30, 2004, 148 of the employees had left the
company. The remaining 76 employees are expected to leave
the company by December 31, 2004, and all remaining
workforce reduction costs are expected to be paid by
that date.

The company had incurred early termination
penalties in respect of certain PCS Yumbes contractual
arrangements. The company recorded a provision of $11.1 in the
third quarter of 2003 for these contract termination costs and
$0.1 remained to be paid at September 30, 2004.

2004

During the second quarter of 2004, the company
recorded an additional writedown of $5.9, relating primarily to
certain mining machinery and equipment that will not be
transferred to SQM under the terms of the agreement and that
management plans to sell prior to the end of the year. As of
September 30, 2004, the fair value and carrying amount of
the machinery and equipment that remains to be sold was $1.1.
For measurement purposes, fair value was determined in reference
to market prices for similar assets.

The following table summarizes the total amount
of costs incurred for the nine month period ended
September 30, 2004, the total amount of costs incurred to
date and the total costs expected to be incurred in connection
with PCS Yumbes:

|                                          |  |                  |       |               |  |             |     |             |  |   |       |  |  |   |       | 
|----------------------------------------- |  | ---------------- | ----- | ------------- |  | ----------- | --- | ----------- |  | - | ----- |  |  | - | ----- | 
|                                          |  | Cumulative Costs |       | Costs         |  | Cumulative  |     | Total Costs
|                                          |  | Incurred to      |       | Incurred to   |  | Costs       |     | Expected   
|                                          |  | December 31,     |       | September 30, |  | Incurred to |     | to be      
|                                          |  | 2003             |       | 2004          |  | Date        |     | Incurred   
|                                         
|                                         
|Potash Segment                            |  |                  |       |               |  |             |     |             |  |   |       |  |  |   |       | 
|Contract termination costs                |  | $                | 11.1  |               |  | $           |    |             |  | $ | 11.1  |  |  | $ | 11.1  | 
|Employee termination and related benefits |  |                  | 1.8   |               |  |             |    |             |  |   | 1.8   |  |  |   | 1.8   | 
|Writedown of non-parts inventory          |  |                  | 50.2  |               |  |             |    |             |  |   | 50.2  |  |  |   | 50.2  | 
|Asset impairment charges                  |  |                  | 77.4  |               |  |             | 5.9 |             |  |   | 83.3  |  |  |   | 83.3  | 
|                                         
|                                          |  | $                | 140.5 |               |  | $           | 5.9 |             |  | $ | 146.4 |  |  | $ | 146.4 | 
|                                         

The following table summarizes the costs accrued
as of September 30, 2004 in connection with PCS Yumbes as
described above:

|                                          |  |              |     |               |  |             |     |             |  |               |      |   |  |   |      |   |  |   |     | 
|----------------------------------------- |  | ------------ | --- | ------------- |  | ----------- | --- | ----------- |  | ------------- | ---- | - |  | - | ---- | - |  | - | --- | 
|                                          |  | Accrued      |     | Costs         |  | Cash        |     |             |  | Accrued      
|                                          |  | Balance      |     | Incurred to   |  | Payments    |     |             |  | Balance      
|                                          |  | December 31, |     | September 30, |  | and         |     | Non-cash    |  | September 30,
|                                          |  | 2003         |     | 2004          |  | Adjustments |     | Settlements |  | 2004         
|                                         
|                                         
|Potash Segment                            |  |              |     |               |  |             |     |             |  |               |      |   |  |   |      |   |  |   |     | 
|Contract termination costs                |  | $            | 0.6 |               |  | $           |    |             |  | $             | (0.5 | ) |  | $ |     |   |  | $ | 0.1 | 
|Employee termination and related benefits |  |              | 1.2 |               |  |             |    |             |  |               | (0.5 | ) |  |   |     |   |  |   | 0.7 | 
|Asset impairment charges                  |  |              |    |               |  |             | 5.9 |             |  |               |     |   |  |   | (5.9 | ) |  |   |    | 
|                                         
|                                          |  | $            | 1.8 |               |  | $           | 5.9 |             |  | $             | (1.0 | ) |  | $ | (5.9 | ) |  | $ | 0.8 | 
|                                         

The accrued balance is included in accounts
payable and accrued charges in the Consolidated Statement of
Financial Position as of September 30, 2004.

10



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##### Table of Contents



8.   Income Taxes

The companys consolidated income tax rate
for the three month and nine month periods ended
September 30, 2004 approximates 33 percent
(2003  40 percent, exclusive of the charges
relating to PCS Yumbes as described in Note 7). The
decrease in rate is due primarily to the impact of Saskatchewan
resource tax incentives, changes to the Canadian federal
resource allowance, and the scheduled Canadian federal statutory
rate reduction.

9.   Net Income (Loss) Per
Share

Basic net income (loss) per share for the quarter
is calculated on the weighted average shares issued and
outstanding for the three months ended September 30, 2004
of 108,232,000 (2003  104,258,000). Basic net income
(loss) per share for the year to date is calculated on the
weighted average shares issued and outstanding for the nine
months ended September 30, 2004 of 107,325,000
(2003  104,212,000).

Diluted net income (loss) per share is calculated
based on the weighted average shares issued and outstanding
during the period, adjusted by the total of the additional
common shares that would have been issued assuming exercise of
all stock options with exercise prices at or below the average
market price for the period. For periods in which there was a
loss attributable to common shares, stock options with exercise
prices at or below the average market price for the period were
excluded for the calculations of diluted net loss per share, as
inclusion of these securities would have been anti-dilutive to
the net loss per share. Weighted average shares outstanding for
the diluted net income (loss) per share calculation for the
quarter were 111,174,000 (2003  104,258,000) and for
the year to date were 109,340,000 (2003  104,212,000).

10. Segment Information

The company has three reportable business
segments: potash, phosphate and nitrogen. These business
segments are differentiated by the chemical nutrient contained
in the product that each produces. Inter-segment sales are made
under terms that approximate market prices.

|                                |  |                                       |       |           |  |          |       |            |  |              |       |  |  |   |     |  |  |   |       | 
|------------------------------- |  | ------------------------------------- | ----- | --------- |  | -------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ----- | 
|                                |  |                                      
|                                |  | Three Months Ended September 30, 2004
|                               
|                               
|                                |  | Potash                                |       | Phosphate |  | Nitrogen |       | All Others |  | Consolidated
|                               
|                               
|Sales                           |  | $                                     | 251.8 |           |  | $        | 257.7 |            |  | $            | 306.2 |  |  | $ |    |  |  | $ | 815.7 | 
|Freight                         |  |                                       | 23.0  |           |  |          | 19.7  |            |  |              | 8.5   |  |  |   |    |  |  |   | 51.2  | 
|Transportation and distribution |  |                                       | 5.6   |           |  |          | 8.8   |            |  |              | 9.2   |  |  |   |    |  |  |   | 23.6  | 
|Net sales  third party         |  |                                       | 223.2 |           |  |          | 229.2 |            |  |              | 288.5 |  |  |   |    |  |  |   |       | 
|Cost of goods sold              |  |                                       | 102.4 |           |  |          | 228.6 |            |  |              | 220.5 |  |  |   |    |  |  |   | 551.5 | 
|Gross Margin                    |  |                                       | 120.8 |           |  |          | 0.6   |            |  |              | 68.0  |  |  |   |    |  |  |   | 189.4 | 
|Depreciation and amortization   |  |                                       | 13.4  |           |  |          | 21.3  |            |  |              | 18.5  |  |  |   | 2.4 |  |  |   | 55.6  | 
|Inter-segment sales             |  |                                       | 1.0   |           |  |          | 3.3   |            |  |              | 20.8  |  |  |   |    |  |  |   |      | 

|                                |  |                                       |       |           |  |          |       |            |  |              |       |  |  |   |     |  |  |   |       | 
|------------------------------- |  | ------------------------------------- | ----- | --------- |  | -------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ----- | 
|                                |  |                                      
|                                |  | Three Months Ended September 30, 2003
|                               
|                               
|                                |  | Potash                                |       | Phosphate |  | Nitrogen |       | All Others |  | Consolidated
|                               
|                               
|Sales                           |  | $                                     | 180.2 |           |  | $        | 229.7 |            |  | $            | 264.7 |  |  | $ |    |  |  | $ | 674.6 | 
|Freight                         |  |                                       | 28.0  |           |  |          | 17.6  |            |  |              | 10.3  |  |  |   |    |  |  |   | 55.9  | 
|Transportation and distribution |  |                                       | 8.2   |           |  |          | 7.8   |            |  |              | 12.3  |  |  |   |    |  |  |   | 28.3  | 
|Net sales  third party         |  |                                       | 144.0 |           |  |          | 204.3 |            |  |              | 242.1 |  |  |   |    |  |  |   |       | 
|Cost of goods sold              |  |                                       | 91.7  |           |  |          | 214.0 |            |  |              | 200.2 |  |  |   |    |  |  |   | 505.9 | 
|Gross Margin                    |  |                                       | 52.3  |           |  |          | (9.7  | )          |  |              | 41.9  |  |  |   |    |  |  |   | 84.5  | 
|Depreciation and amortization   |  |                                       | 9.1   |           |  |          | 18.0  |            |  |              | 23.4  |  |  |   | 3.4 |  |  |   | 53.9  | 
|Inter-segment sales             |  |                                       | 1.2   |           |  |          | 1.5   |            |  |              | 18.6  |  |  |   |    |  |  |   |      | 

11



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##### Table of Contents



|                                |  |                                      |       |           |  |          |       |            |  |              |       |  |  |   |     |  |  |   |         | 
|------------------------------- |  | ------------------------------------ | ----- | --------- |  | -------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ------- | 
|                                |  |                                     
|                                |  | Nine Months Ended September 30, 2004
|                               
|                               
|                                |  | Potash                               |       | Phosphate |  | Nitrogen |       | All Others |  | Consolidated
|                               
|                               
|Sales                           |  | $                                    | 791.9 |           |  | $        | 712.2 |            |  | $            | 873.7 |  |  | $ |    |  |  | $ | 2,377.8 | 
|Freight                         |  |                                      | 97.7  |           |  |          | 51.5  |            |  |              | 29.0  |  |  |   |    |  |  |   | 178.2   | 
|Transportation and distribution |  |                                      | 26.8  |           |  |          | 21.5  |            |  |              | 29.6  |  |  |   |    |  |  |   | 77.9    | 
|Net sales  third party         |  |                                      | 667.4 |           |  |          | 639.2 |            |  |              | 815.1 |  |  |   |    |  |  |   |         | 
|Cost of goods sold              |  |                                      | 358.5 |           |  |          | 633.8 |            |  |              | 645.3 |  |  |   |    |  |  |   | 1,637.6 | 
|Gross Margin                    |  |                                      | 308.9 |           |  |          | 5.4   |            |  |              | 169.8 |  |  |   |    |  |  |   | 484.1   | 
|Depreciation and amortization   |  |                                      | 50.2  |           |  |          | 63.2  |            |  |              | 58.7  |  |  |   | 7.1 |  |  |   | 179.2   | 
|Inter-segment sales             |  |                                      | 4.6   |           |  |          | 9.8   |            |  |              | 64.9  |  |  |   |    |  |  |   |        | 

|                                |  |                                      |       |           |  |          |       |            |  |              |       |  |  |   |     |  |  |   |         | 
|------------------------------- |  | ------------------------------------ | ----- | --------- |  | -------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ------- | 
|                                |  |                                     
|                                |  | Nine Months Ended September 30, 2003
|                               
|                               
|                                |  | Potash                               |       | Phosphate |  | Nitrogen |       | All Others |  | Consolidated
|                               
|                               
|Sales                           |  | $                                    | 601.1 |           |  | $        | 635.1 |            |  | $            | 845.2 |  |  | $ |    |  |  | $ | 2,081.4 | 
|Freight                         |  |                                      | 91.0  |           |  |          | 53.0  |            |  |              | 36.8  |  |  |   |    |  |  |   | 180.8   | 
|Transportation and distribution |  |                                      | 24.5  |           |  |          | 19.7  |            |  |              | 34.6  |  |  |   |    |  |  |   | 78.8    | 
|Net sales  third party         |  |                                      | 485.6 |           |  |          | 562.4 |            |  |              | 773.8 |  |  |   |    |  |  |   |         | 
|Cost of goods sold              |  |                                      | 323.2 |           |  |          | 571.2 |            |  |              | 639.5 |  |  |   |    |  |  |   | 1,533.9 | 
|Gross Margin                    |  |                                      | 162.4 |           |  |          | (8.8  | )          |  |              | 134.3 |  |  |   |    |  |  |   | 287.9   | 
|Depreciation and amortization   |  |                                      | 40.0  |           |  |          | 56.2  |            |  |              | 69.5  |  |  |   | 7.2 |  |  |   | 172.9   | 
|Inter-segment sales             |  |                                      | 4.8   |           |  |          | 7.0   |            |  |              | 47.4  |  |  |   |    |  |  |   |        | 

11. Stock-Based Compensation

The company has two stock option plans. Prior to
2003, the company applied the intrinsic value based method of
accounting for the plans.

Effective December 15, 2003, the company
adopted the fair value based method of accounting for stock
options prospectively to all employee awards granted, modified,
or settled after January 1, 2003. Prospective application
of the fair value method did not have an impact on the first
three fiscal quarters of 2003 since the company did not grant
any options during those periods. Since the companys stock
option awards vest over two years, the compensation cost
included in the determination of net income (loss) for the three
month and nine month periods ended September 30, 2004 and
2003 is less than that which would have been recognized if the
fair value based method had been applied to all awards since the
original effective date of CICA Section 3870,
Stock-based Compensation and Other Stock-based
Payments. The following table illustrates the effect on
net income (loss) and net income (loss) per share if the fair
value based method had been applied to all outstanding and
unvested awards in each period.

|                                     |  |                                                                                                                                                    |      |                    |      |                    |        |      |      |      |       |  |      |   |        |   |       |  
|------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------------------ | ---- | ------------------ | ------ | ---- | ---- | ---- | ----- |  | ---- | - | ------ | - | ----- | -
|                                     |  |                                                                                                                                                    |      |                    |      |                   
|                                     |  |                                                                                                                                                    |      | Three Months       |      | Nine Months       
|                                     |  |                                                                                                                                                    |      | Ended September 30 |      | Ended September 30
|                                     |  |                                                                                                                                                    |      | 2004               |      | 2003               |        | 2004 |      | 2003
|                                    
|                                    
|Net income (loss)  as reported      |  | $                                                                                                                                                  | 75.2 |                    |      | $                  | (185.9 | )    |      | $    | 198.5 |  |      | $ | (152.8 | )
|Add:                                 |  | Stock-based employee compensation expense
    included in reported net income (loss), net of related tax
    effects                               |      |                    | 2.2  |                    |        |      |     |      |       |  | 6.6  |   |        |   |      |  
|Less:                                |  | Total stock-based employee compensation expense
    determined under fair value based method for all option awards,
    net of related tax effects |      |                    | (3.2 | )                  |        |      | (3.7 | )    |       |  | (9.6 | ) |        |   | (11.1 | )
|                                    
|Net income (loss)  pro
    forma(1) |  | $                                                                                                                                                  | 74.2 |                    |      | $                  | (189.6 | )    |      | $    | 195.5 |  |      | $ | (163.9 | )
|                                    

|    |                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Compensation expense under the fair value method
    is recognized over the vesting period of the related stock
    options. Accordingly, the pro forma results of applying this
    method may not be indicative of future results.

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|                                    |             |                    |   |                    |  |      |   |       |   |  |   |      |  |  |   |       |  
|----------------------------------- | ----------- | ------------------ | - | ------------------ |  | ---- | - | ----- | - |  | - | ---- |  |  | - | ----- | -
|                                    |             |                    |   |                   
|                                    |             | Three Months       |   | Nine Months       
|                                    |             | Ended September 30 |   | Ended September 30
|                                    |             | 2004               |   | 2003               |  | 2004 |   | 2003 
|                                   
|                                   
|Basic net income (loss) per share   |             |                    |   |                    |  |      |   |       |   |  |   |      |  |  |   |      
|                                    | As reported |                    | $ | 0.69               |  |      | $ | (1.78 | ) |  | $ | 1.85 |  |  | $ | (1.47 | )
|                                    | Pro forma   |                    | $ | 0.69               |  |      | $ | (1.82 | ) |  | $ | 1.82 |  |  | $ | (1.57 | )
|                                   
|Diluted net income (loss) per share |             |                    |   |                    |  |      |   |       |   |  |   |      |  |  |   |      
|                                    | As reported |                    | $ | 0.68               |  |      | $ | (1.78 | ) |  | $ | 1.82 |  |  | $ | (1.47 | )
|                                    | Pro forma   |                    | $ | 0.67               |  |      | $ | (1.82 | ) |  | $ | 1.79 |  |  | $ | (1.57 | )

In calculating the foregoing pro forma amounts,
the fair value of each option grant was estimated as of the date
of grant using the Modified Black-Scholes option-pricing model
with the following weighted average assumptions:

|                         |  |      |          |      |  |      |          |  |  |   |          | 
|------------------------ |  | ---- | -------- | ---- |  | ---- | -------- |  |  | - | -------- | 
|                         |  | 2003 |          | 2002 |  | 2001
|                        
|                        
|Expected dividend        |  | $    | 0.50     |      |  | $    | 0.50     |  |  | $ | 0.50     | 
|Expected volatility      |  |      | 27%      |      |  |      | 32%      |  |  |   | 32%      | 
|Risk-free interest rate  |  |      | 4.06%    |      |  |      | 4.13%    |  |  |   | 4.54%    | 
|Expected life of options |  |      | 8  years |      |  |      | 8  years |  |  |   | 8  years | 
|Expected forfeitures     |  |      | 16%      |      |  |      | 10%      |  |  |   | 10%      | 

The fair value of options granted in the fourth
quarter of 2003 was $15.7 (2002  $20.1).

12. Post-Retirement/Post-Employment
Expenses

|                               |  |                    |      |                   |  |      |      |      |  |   |       |   |  |   |       |  
|------------------------------ |  | ------------------ | ---- | ----------------- |  | ---- | ---- | ---- |  | - | ----- | - |  | - | ----- | -
|                               |  |                    |      |                  
|                               |  | Three Months Ended |      | Nine Months Ended
|                               |  | September 30       |      | September 30     
|Pension Plans                  |  | 2004               |      | 2003              |  | 2004 |      | 2003
|                              
|                              
|Service cost                   |  | $                  | 3.5  |                   |  | $    | 3.0  |      |  | $ | 10.5  |   |  | $ | 9.0   |  
|Interest cost                  |  |                    | 7.5  |                   |  |      | 7.4  |      |  |   | 22.5  |   |  |   | 22.2  |  
|Expected return on plan assets |  |                    | (8.4 | )                 |  |      | (7.6 | )    |  |   | (25.2 | ) |  |   | (22.8 | )
|Net amortization               |  |                    | 1.1  |                   |  |      | 1.3  |      |  |   | 3.3   |   |  |   | 3.9   |  
|                              
|Net expense                    |  | $                  | 3.7  |                   |  | $    | 4.1  |      |  | $ | 11.1  |   |  | $ | 12.3  |  
|                              

|                            |  |                    |      |                   |  |      |     |      |  |   |      |  |  |   |      | 
|--------------------------- |  | ------------------ | ---- | ----------------- |  | ---- | --- | ---- |  | - | ---- |  |  | - | ---- | 
|                            |  |                    |      |                  
|                            |  | Three Months Ended |      | Nine Months Ended
|                            |  | September 30       |      | September 30     
|Other Post-Retirement Plans |  | 2004               |      | 2003              |  | 2004 |     | 2003
|                           
|                           
|Service cost                |  | $                  | 1.1  |                   |  | $    | 1.4 |      |  | $ | 3.9  |  |  | $ | 4.2  | 
|Interest cost               |  |                    | 3.0  |                   |  |      | 3.2 |      |  |   | 10.0 |  |  |   | 9.6  | 
|Net amortization            |  |                    | (0.3 | )                 |  |      | 0.5 |      |  |   | 0.5  |  |  |   | 1.5  | 
|                           
|Net expense                 |  | $                  | 3.8  |                   |  | $    | 5.1 |      |  | $ | 14.4 |  |  | $ | 15.3 | 
|                           

For the nine months ended September 30,
2004, we contributed $19.1 to our pension plans. Total pension
plan contributions for the year are expected to approximate
$19.7.

As referenced in Note 16, the company is a
sponsor of certain US post-retirement health care plans that
were impacted by the US Medicare Prescription Drug, Improvement
and Modernization Act of 2003. This legislation expanded
Medicare to include (for the first time) coverage for
prescription drugs and introduced a prescription drug benefit
and federal subsidy to sponsors of retiree health care benefit
plans that provide benefits at least actuarially
equivalent to Medicare Part D. Detailed regulations
necessary to implement the legislation have recently been
issued, including those that specify the manner in which
actuarial equivalency must be determined, the evidence required
to demonstrate actuarial equivalency, and the documentation
requirements necessary to be entitled to the subsidy. The
company has accounted for the impact of the

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legislation prospectively as of July 1,
2004. The federal subsidy had the effect of reducing the
companys accumulated post-retirement benefit obligation by
$26.9 and did not have a significant impact on the measurement
of the net periodic post-retirement benefit cost for the period.


13. Seasonality

The companys sales of fertilizer are
seasonal. Typically, the second quarter of the year is when
fertilizer sales will be highest, due to the North American
spring planting season. However, planting conditions and the
timing of customer purchases will vary each year and sales can
be expected to shift from one quarter to another.

14. Contingencies

Canpotex

PotashCorp is a shareholder in Canpotex, which
markets potash offshore. Should any operating losses or other
liabilities be incurred by Canpotex, the shareholders have
contractually agreed to reimburse Canpotex for such losses or
liabilities in proportion to their productive capacity. There
were no such operating losses or other liabilities during the
first nine months of 2004.

Mining Risk

In common with other companies in the industry,
the company is unable to acquire insurance for underground
assets.

Investment in APC

The terms of a shareholders agreement with Jordan
Investment Company (JIC) provide that, from
October 17, 2006 to October 16, 2009, JIC may seek to
exercise a put option (the Put) to require the
company to purchase JICs remaining common shares in Arab
Potash Company (APC). If the Put were exercised, the
companys purchase price would be calculated in accordance
with a specified formula based, in part, on future earnings of
APC. The amount, if any, which the company may have to pay for
JICs remaining common shares if there was to be a valid
exercise of the Put is not presently determinable.

Legal Matters

In 1998, the company, along with other parties,
was notified by EPA of potential liability under CERCLA with
respect to certain soil and groundwater conditions at a PCS
Joint Venture blending facility in Lakeland, Florida and certain
adjoining property. In 1999, PCS Joint Venture signed an
Administrative Order on Consent with EPA pursuant to which PCS
Joint Venture agreed to conduct a Remedial Investigation and
Feasibility Study (RI/FS) of these conditions. PCS
Joint Venture and another party are sharing the costs of the
RI/FS. PCS Joint Venture continues to assess and evaluate the
nature and extent of the impacts at the site. No final
determination has yet been made of the nature, timing or cost of
remedial action that may be needed nor to what extent costs
incurred may be recoverable from third parties.

Various other claims and lawsuits are pending
against the company. While it is not possible to determine the
ultimate outcome of such actions at this time, it is
managements opinion that the ultimate resolution of such
actions, including those pertaining to environmental matters,
will not have a material adverse effect on the companys
financial condition or results of operations.

15. Guarantees

The company enters into agreements in the normal
course of business that may contain features which meet the
definition of a guarantee. Various debt obligations (such as
overdrafts, lines of credit with counterparties for derivatives,
and back-to-back loan arrangements) related to certain
subsidiaries have been directly guaranteed by the company under
agreements with third parties. The company would be required to
perform on these guarantees in the event of default by the
guaranteed parties. No material loss is anticipated

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by reason of such agreements and guarantees. At
September 30, 2004, the maximum potential amount of future
(undiscounted) payments under significant guarantees provided to
third parties approximated $113.4, representing the maximum risk
of loss if there were a total default by the guaranteed parties,
without consideration of possible recoveries under recourse
provisions or from collateral held or pledged. At
September 30, 2004, no subsidiary balances subject to
guarantees were outstanding in connection with the
companys cash management facilities, and the company had
no liabilities recorded for other obligations other than
subsidiary bank borrowings of approximately $5.9, which are
reflected in other long-term debt and cash margin requirements
of approximately $33.4 to maintain derivatives, which are
included in accounts payable and accrued charges.


In the normal course of operations, the company
provides indemnifications that are often standard contractual
terms to counterparties in transactions such as purchase and
sale contracts, service agreements, director/ officer contracts
and leasing transactions. These indemnification agreements may
require the company to compensate the counterparties for costs
incurred as a result of various events, including environmental
liabilities, changes in (or in the interpretation of) laws and
regulations, or as a result of litigation claims or statutory
sanctions that may be suffered by the counterparty as a
consequence of the transaction. The terms of these
indemnification agreements will vary based upon the contract,
the nature of which prevents the company from making a
reasonable estimate of the maximum potential amount that could
be required to pay to counterparties. Historically, the company
has not made any significant payments under such
indemnifications and no amounts have been accrued in the
accompanying interim consolidated financial statements with
respect to these indemnification guarantees.

The company has guaranteed the gypsum stack
capping, closure and post-closure obligations of White Springs
and PCS Nitrogen, in Florida and Louisiana, respectively,
pursuant to the financial assurance regulatory requirements in
those states. The State of Florida continues to review, and is
expected to revise, its financial assurance requirements to
ensure that responsible parties have sufficient resources to
cover all closure and post-closure costs and liabilities
associated with gypsum stacks. This review may result in the
imposition of more stringent requirements to demonstrate
financial responsibility and/or inclusion of a greater scope of
closure and post-closure costs than under current law.

The environmental regulations of the Province of
Saskatchewan require each potash mine to have decommissioning
and reclamation (D&R) plans. In 2001, agreement
was reached with the provincial government on the financial
assurances for the D&R plan to cover an interim period to
July 1, 2005. In October 2004, this interim period was
extended to July 1, 2006. A government-industry task force
has been established to assess decommissioning options for all
Saskatchewan potash producers and to produce mutually acceptable
revisions to the plan schedules. The company has posted a
Cdn $2.0 letter of credit as collateral that will remain in
effect until the revised plans are accepted.

During the first nine months of 2004, the company
entered into various other commercial letters of credit in the
normal course of operations.

The company expects that it will be able to
satisfy all applicable credit support requirements without
disrupting normal business operations.

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

Canadian GAAP varies in certain significant
respects from US GAAP. As required by the United States
Securities and Exchange Commission (SEC), the effect
of these principal differences on the companys interim
consolidated financial statements is described and quantified
below. For a complete discussion of Canadian and US GAAP
differences, see Note 34 to the consolidated financial
statements for the year ended December 31, 2003 in our 2003
Annual Report.

Long-term investments:The companys investment in
Israel Chemicals Limited (ICL) is stated at cost. US
GAAP requires that this investment be classified as
available-for-sale and be stated at market value with the
difference between market value and cost reported as a component
of Other Comprehensive Income (OCI).

15



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Property, plant and equipment and goodwill:The net book value of property, plant
and equipment and goodwill under Canadian GAAP is higher than
under US GAAP, as past provisions for asset impairment under
Canadian GAAP were measured based on the undiscounted cash flow
from use together with the residual value of the assets. Under
US GAAP they were measured based on fair value, which was lower
than the undiscounted cash flow from use together with the
residual value of the assets.

Pre-operating costs:Operating costs incurred during the
start-up phase of new projects are deferred under Canadian GAAP
until commercial production levels are reached, at which time
they are amortized over the estimated life of the project.
US GAAP requires that these costs be expensed
as incurred.

Post-retirement and post-employment benefits:Under Canadian GAAP, when a defined
benefit plan gives rise to an accrued benefit asset, a company
must recognize a valuation allowance for the excess of the
adjusted benefit asset over the expected future benefit to be
realized from the plan asset. Changes in the pension valuation
allowance are recognized in income. US GAAP does not
specifically address pension valuation allowances, and the US
regulators have interpreted this to be a difference between
Canadian and US GAAP. In light of this, a difference
between Canadian and US GAAP has been recorded for the
effects of recognizing a pension valuation allowance and the
changes therein under Canadian GAAP.

The companys accumulated benefit obligation
for its US pension plans exceeds the fair value of plan assets.
US GAAP requires the recognition of an additional minimum
pension liability in the amount of the excess of the unfunded
accumulated benefit obligation over the recorded pension
benefits liability. An offsetting intangible asset is recorded
equal to the unrecognized prior service costs, with any
difference recorded as a reduction of accumulated OCI. No
similar requirement exists under Canadian GAAP.

Foreign currency translation adjustment:The company adopted the US dollar as
its functional and reporting currency on January 1, 1995.
At that time, the consolidated financial statements were
translated into US dollars at the December 31,
1994 year-end exchange rate using the translation of
convenience method under Canadian GAAP. This translation method
was not permitted under US GAAP. US GAAP required the
comparative Consolidated Statements of Operations and
Consolidated Statements of Cash Flow to be translated at
applicable weighted-average exchange rates; whereas, the
Consolidated Statements of Financial Position were permitted to
be translated at the December 31, 1994 year-end
exchange rate. The use of disparate exchange rates under
US GAAP gave rise to a foreign currency translation
adjustment. Under US GAAP, this adjustment is reported as a
component of accumulated OCI.

Derivative instruments and hedging activities:Under Canadian GAAP, income and
expenses on derivative instruments designated as and qualifying
as effective fair value hedges or cash flow hedges are
recognized in earnings in the same period as the related hedged
item. Gains or losses arising from settled natural gas hedging
transactions are deferred as a component of inventory until the
product containing the hedged item is sold, at which time both
the natural gas purchase cost and the related hedging deferral
are recorded as cost of goods sold. Derivatives associated with
ineffective hedging relationships and hedges not designated in a
hedging relationship are carried at fair value on the
Consolidated Statement of Financial Position, and subsequent
changes in their fair value are recorded in earnings. In
accordance with SFAS No. 133, Accounting for
Derivative Instrument and Hedging Activities and its
related interpretations and amendments under US GAAP, the
company records all derivatives as either assets or liabilities
on the Consolidated Statements of Financial Position and
measures those instruments at fair value. For derivatives that
are designated as and qualify as effective cash flow hedges, the
portion of gain or loss on the derivative instrument effective
at offsetting changes in the hedged item is reported as a
component of accumulated OCI and reclassified into earnings as
cost of goods sold when the hedged transaction affects earnings.
For derivative instruments that are designated as and qualify as
effective fair value hedges, the gain or loss on the derivative
instrument as well as the offsetting gain or loss on the hedged
item attributable to the hedged risk is recognized in earnings
as interest expense in the period the changes in fair value
occur. Ineffective portions of cash flow or fair value hedges
are recorded in earnings in the current period. Derivatives not
designated as hedging instruments are marked to market through
earnings in the period the changes in fair value occur.

Freight, transportation and distribution:The company has changed its accounting
policy regarding consolidated financial statement presentation
of freight costs and transportation and distribution expenses

16



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under US GAAP. In prior years, the company
included freight costs in cost of goods sold and transportation
and distribution expenses in operating expenses under US GAAP.
Effective January 1, 2004, the company discloses freight
costs and transportation and distribution expenses under
US GAAP as separate line items within gross margin on the
Consolidated Statements of Operations and Retained Earnings.
This presentation is consistent with the new Canadian GAAP
presentation described in Note 2. All comparative
information has been appropriately reclassified.


Depreciation and amortization:Depreciation and amortization under
Canadian GAAP is higher than under US GAAP, as a result of
differences in the carrying amounts of property, plant and
equipment under Canadian and US GAAP.

Comprehensive income:Comprehensive income is recognized and
measured under US GAAP pursuant to SFAS No. 130,
Reporting Comprehensive Income. This standard
defines comprehensive income as all changes in equity other than
those resulting from investments by owners and distributions to
owners. Comprehensive income is comprised of two components, net
income and OCI. OCI refers to amounts that are recorded as an
element of shareholders equity but are excluded from net
income because these transactions or events were attributed to
changes from non-owner sources. The concept of comprehensive
income does not yet exist under Canadian GAAP.

Income taxes:The
income tax adjustment reflects the impact on income taxes of the
US GAAP adjustments described above. Accounting for income
taxes under Canadian and US GAAP is similar, except that
income tax rates of enacted or substantively enacted tax law
must be used to calculate future income tax assets and
liabilities under Canadian GAAP; whereas only income tax rates
of enacted tax law can be used under US GAAP.

The application of US GAAP, as described
above, would have had the following effects on net income
(loss), net income (loss) per share, total assets and
shareholders equity. All share and per-share data have
been adjusted to reflect the stock split described in
Note 5.

|                                                              |                                           |                    |             |      |   |   |             |       |  
|------------------------------------------------------------- | ----------------------------------------- | ------------------ | ----------- | ---- | - | - | ----------- | ----- | -
|                                                              |                                           |                   
|                                                              |                                           | Three Months Ended
|                                                              |                                           | September 30      
|                                                              |                                           | 2004               |             | 2003
|                                                             
|                                                             
|                                                              |                                           |                   
|                                                              |                                           | (unaudited)       
|Net income (loss) as reported 
    Canadian GAAP             |                                           | $                  | 75.2        |      |   | $ | (185.9      | )    
|Items increasing or decreasing reported net
    income (loss) |                                           |                    |             |      |   |   |             |      
|                                                              | Pre-operating costs                       |                    |             |     |   |   |             | 59.9  |  
|                                                              | Depreciation and amortization             |                    |             | 2.1  |   |   |             | 2.1   |  
|                                                              | Accretion of asset retirement obligations |                    |             |     |   |   |             | (0.8  | )
|                                                              | Future income taxes                       |                    |             | (0.7 | ) |   |             | (24.5 | )
|                                                             
|Net income (loss)  US GAAP                                   |                                           | $                  | 76.6        |      |   | $ | (149.2      | )    
|                                                             
|Weighted average shares outstanding 
    US GAAP             |                                           |                    | 108,232,000 |      |   |   | 104,258,000 |      
|                                                             
|Basic net income (loss) per share 
    US GAAP               |                                           | $                  | 0.71        |      |   | $ | (1.43       | )    
|                                                             
|Diluted net income (loss) per share 
    US GAAP             |                                           | $                  | 0.69        |      |   | $ | (1.43       | )    
|                                                             

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|                                                              |                                           |                   |             |      |   |   |             |       |  
|------------------------------------------------------------- | ----------------------------------------- | ----------------- | ----------- | ---- | - | - | ----------- | ----- | -
|                                                              |                                           |                  
|                                                              |                                           | Nine Months Ended
|                                                              |                                           | September 30     
|                                                              |                                           | 2004              |             | 2003
|                                                             
|                                                             
|                                                              |                                           |                  
|                                                              |                                           | (unaudited)      
|Net income (loss) as reported 
    Canadian GAAP             |                                           | $                 | 198.5       |      |   | $ | (152.8      | )    
|Items increasing or decreasing reported net
    income (loss) |                                           |                   |             |      |   |   |             |      
|                                                              | Pre-operating costs                       |                   |             |     |   |   |             | 63.0  |  
|                                                              | Depreciation and amortization             |                   |             | 6.3  |   |   |             | 6.4   |  
|                                                              | Accretion of asset retirement obligations |                   |             | 3.3  |   |   |             | (2.5  | )
|                                                              | Future income taxes                       |                   |             | (3.4 | ) |   |             | (26.7 | )
|                                                             
|Net income (loss)  US GAAP                                   |                                           | $                 | 204.7       |      |   | $ | (112.6      | )    
|                                                             
|Weighted average shares outstanding 
    US GAAP             |                                           |                   | 107,325,000 |      |   |   | 104,212,000 |      
|                                                             
|Basic net income (loss) per share 
    US GAAP               |                                           | $                 | 1.91        |      |   | $ | (1.08       | )    
|                                                             
|Diluted net income (loss) per share 
    US GAAP             |                                           | $                 | 1.87        |      |   | $ | (1.08       | )    
|                                                             

|                                                        |                                                                       |               |         |              |   |   |         |        |  
|------------------------------------------------------- | --------------------------------------------------------------------- | ------------- | ------- | ------------ | - | - | ------- | ------ | -
|                                                        |                                                                       | September 30, |         | December 31,
|                                                        |                                                                       | 2004          |         | 2003        
|                                                       
|                                                       
|                                                        |                                                                       | (unaudited)   |         |             
|Total assets as reported  Canadian GAAP                |                                                                       | $             | 4,865.6 |              |   | $ | 4,567.3 |       
|Items increasing (decreasing) reported total
    assets |                                                                       |               |         |              |   |   |         |       
|                                                        | Inventory                                                             |               |         | (1.4         | ) |   |         | (2.7   | )
|                                                        | Available-for-sale securities unrealized holding
    gain             |               |         | 86.4         |   |   |         | 35.0   |  
|                                                        | Fair value of derivative instruments                                  |               |         | 89.1         |   |   |         | 59.8   |  
|                                                        | Property, plant and equipment                                         |               |         | (128.6       | ) |   |         | (134.9 | )
|                                                        | Post-retirement and post-employment benefits                          |               |         | 13.9         |   |   |         | 13.9   |  
|                                                        | Intangible asset relating to additional minimum
    pension liability |               |         | 2.7          |   |   |         | 2.7    |  
|                                                        | Goodwill                                                              |               |         | (46.7        | ) |   |         | (46.7  | )
|                                                       
|Total assets  US GAAP                                  |                                                                       | $             | 4,881.0 |              |   | $ | 4,494.4 |       
|                                                       

|                                                                |                                                                         |               |         |              |   |   |         |        |  
|--------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------- | ------- | ------------ | - | - | ------- | ------ | -
|                                                                |                                                                         | September 30, |         | December 31,
|                                                                |                                                                         | 2004          |         | 2003        
|                                                               
|                                                               
|                                                                |                                                                         | (unaudited)   |         |             
|Total shareholders equity as
    reported  Canadian GAAP      |                                                                         | $             | 2,237.1 |              |   | $ | 1,973.8 |       
|Items increasing (decreasing) reported
    shareholders equity |                                                                         |               |         |              |   |   |         |       
|                                                                | Accumulated other comprehensive income, net of
    related income taxes |               |         | 70.2         |   |   |         | 14.8   |  
|                                                                | Foreign currency translation adjustment                                 |               |         | 20.9         |   |   |         | 20.9   |  
|                                                                | Accretion of asset retirement obligations                               |               |         |             |   |   |         | (3.3   | )
|                                                                | Provision for asset impairment                                          |               |         | (218.0       | ) |   |         | (218.0 | )
|                                                                | Depreciation and amortization                                           |               |         | 42.7         |   |   |         | 36.4   |  
|                                                                | Post-retirement and post-employment benefits                            |               |         | 13.9         |   |   |         | 13.9   |  
|                                                                | Future income taxes                                                     |               |         | 31.3         |   |   |         | 34.7   |  
|                                                               
|Total shareholders equity 
    US GAAP                        |                                                                         | $             | 2,198.1 |              |   | $ | 1,873.2 |       
|                                                               

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|                                          |                                                                              |                   |       |       |   |   |        |       |  
|----------------------------------------- | ---------------------------------------------------------------------------- | ----------------- | ----- | ----- | - | - | ------ | ----- | -
|                                          |                                                                              |                  
|                                          |                                                                              | Nine Months Ended
|                                          |                                                                              | September 30     
|                                          |                                                                              | 2004              |       | 2003 
|                                         
|                                         
|                                          |                                                                              |                  
|                                          |                                                                              | (unaudited)      
|Net income (loss)  US GAAP               |                                                                              | $                 | 204.7 |       |   | $ | (112.6 | )    
|                                         
|Other comprehensive income                |                                                                              |                   |       |       |   |   |        |      
|                                          | Change in unrealized holding gain on
    available-for-sale securities       |                   |       | 51.4  |   |   |        | 31.4  |  
|                                          | Change in gains and losses on derivatives
    designated as cash flow hedges |                   |       | 65.5  |   |   |        | 79.5  |  
|                                          | Reclassification to income of gains and losses on
    cash flow hedges       |                   |       | (34.3 | ) |   |        | (73.1 | )
|                                          | Future income taxes related to other
    comprehensive income                |                   |       | (27.2 | ) |   |        | (15.1 | )
|                                         
|                                          | Other comprehensive income, net of related income
    taxes                  |                   |       | 55.4  |   |   |        | 22.7  |  
|                                         
|Comprehensive income (loss) 
    US GAAP |                                                                              | $                 | 260.1 |       |   | $ | (89.9  | )    
|                                         

The balances related to each component of
accumulated other comprehensive income, net of related income
taxes, are as follows:

|                                                                   |  |               |       |              |  |   |       |  
|------------------------------------------------------------------ |  | ------------- | ----- | ------------ |  | - | ----- | -
|                                                                   |  | September 30, |       | December 31,
|                                                                   |  | 2004          |       | 2003        
|                                                                  
|                                                                  
|                                                                   |  | (unaudited)   |       |             
|Unrealized gains and losses on available-for-sale
    securities   |  | $             | 57.0  |              |  | $ | 22.6  |  
|Gains and losses on derivatives designated as
    cash flow hedges |  |               | 64.1  |              |  |   | 43.1  |  
|Additional minimum pension liability                               |  |               | (30.0 | )            |  |   | (30.0 | )
|Foreign currency translation adjustment                            |  |               | (20.9 | )            |  |   | (20.9 | )
|                                                                  
|Accumulated other comprehensive
    income  US GAAP               |  | $             | 70.2  |              |  | $ | 14.8  |  
|                                                                  

Supplemental US GAAP
Disclosures

Recent Accounting Pronouncements

In December 2003, the FASB revised
FIN No. 46, Consolidation of Variable Interest
Entities, which clarifies the application of Accounting
Research Bulletin No. 51 Consolidated Financial
Statements to those entities (defined as VIEs) in which
either the equity at risk is not sufficient to permit that
entity to finance its activities without additional subordinated
financial support from other parties, or equity investors lack
voting control, an obligation to absorb expected losses or the
right to receive expected residual returns. FIN No. 46(R)
requires consolidation by a business of VIEs in which it is the
primary beneficiary. The primary beneficiary is defined as the
party that has exposure to the majority of the expected losses
and/or expected residual returns of the VIE. FIN No. 46(R)
was effective for the company in the first quarter, and there
was no material impact on its financial position, results of
operations or cash flows from adoption.

In December 2003, the Medicare Prescription Drug
Improvement and Modernization Act of 2003 (the Act)
was signed into law in the US. The Act introduced a prescription
drug benefit under Medicare (Medicare Part D) as well as a
federal subsidy to sponsors of retiree health care benefit plans
that provide a benefit that is at least actuarially equivalent
to Medicare Part D. In May 2004, FASB Staff Position
(FSP) No. 106-2, Accounting and
Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 was
issued. FSP No. 106-2 supersedes FSP No. 106-1 of
the same title, and provides guidance on the accounting,
disclosure and transition related to the Act. The company
applied the provisions of the FSP prospectively as of
July 1, 2004. The federal subsidy had the effect of
reducing the companys accumulated post-retirement benefit
obligation by $26.9 and did not have a significant impact on the
measurement of the net periodic post-retirement benefit cost for
the period.

In March 2004, the FASB ratified consensuses
reached by the Emerging Issues Task Force (EITF)
with respect to EITF Issue No. 03-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain
Investments. EITF Issue No. 03-1 addresses
recognition, measurement and disclosure of other-than-temporary
impairment evaluations for securities within the scope of
SFAS 115, Accounting for

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Certain Investments in Debt and Equity
Securities, and equity securities that are not subject to
the scope of SFAS No. 115 and are not accounted for under
the equity method according to Accounting Principles Board
Opinion No. 18, The Equity Method of Accounting for
Investments in Common Stock. The recognition and
measurement guidance is effective for reporting periods
beginning after June 15, 2004. Disclosures for cost method
investments are required to be included in annual financial
statements prepared for fiscal years ending after June 15,
2004. In September 2004, the FASB issued FSP EITF Issue 03-1-1,
which delayed the effective date of certain guidance on how to
evaluate and recognize an impairment loss that is other than
temporary, pending issuance of proposed FSP EITF Issue 03-1-a.
The company does not expect this consensus or FSP to have a
material impact on its consolidated financial statements.


In March 2004, the FASB issued an exposure draft,
Share-Based Payment  an amendment of Statements
No. 123 and 95 that addresses the accounting for
share-based payment transactions in which an enterprise receives
employee services in exchange for (a) equity instruments of
the enterprise or (b) liabilities that are based on the
fair value of the enterprises equity instruments or that
may be settled by the issuance of such equity instruments. The
proposal would eliminate the ability to account for share-based
compensation transactions using APB Opinion No. 25,
Accounting for Stock Issued to Employees, and
generally would require instead that such transactions be
accounted for using a fair-value-based method. In October 2004,
the FASB deferred the effective date of the proposal to interim
or annual periods beginning after June 15, 2005, meaning
that an entity would apply the guidance to all employee awards
of share-based payment granted, modified, or settled in any
interim or annual period beginning after June 15, 2005. The
company is reviewing the proposal to determine the potential
impact, if any, on its consolidated financial statements.

In June 2004, the FASB issued an exposure draft
of a proposed Statement, Fair Value Measurements to
provide guidance on how to measure the fair value of financial
and non-financial assets and liabilities when required by other
authoritative accounting pronouncements. The proposed statement
attempts to address concerns about the ability to develop
reliable estimates of fair value and inconsistencies in fair
value guidance provided by current US GAAP, by creating a
framework that clarifies the fair value objective and its
application in GAAP. In addition, the proposal expands
disclosures required about the use of fair value to remeasure
assets and liabilities. The standard would be effective for
financial statements issued for fiscal years beginning after
June 15, 2005.

In July 2004, the EITF discussed Issue
No. 04-6, Accounting for Post-Production Stripping
Costs in the Mining Industry. At its September meeting,
the EITF generally supported an approach that stripping costs
incurred during production are mine-development costs that
should be capitalized as an investment in the mine, and these
capitalized costs should be attributed to reserves in a
systematic and rational manner. The EITF clarified that an
enterprise would be expected to perform a detailed analysis of
its particular facts and circumstances to support its method of
attribution. Furthermore, an enterprise specifically must
attribute stripping costs incurred during production to reserves
that directly benefit from the stripping activities. The EITF
did not make this a final consensus because it wanted to explore
the impact of any consensus on mines with differing physical
patterns of ore location (which affects the overall timing of
attribution). Further discussion of this issue is expected at
the November EITF meeting.

In September 2004, the SEC staff provided
guidance on the use of the so-called residual method
to value acquired intangible assets other than goodwill in a
business combination. The SEC concluded that the residual method
does not comply with the requirements of FASB Statement
No. 141, Business Combinations, and,
accordingly, should no longer be used. Instead, a direct value
method should be used to determine the fair value of all
intangible assets required to be recognized. Similarly,
impairment testing of intangible assets should not rely on a
residual method, and should comply instead with the provisions
of FASB Statement No. 142, Goodwill and Other
Intangible Assets. The residual method should not be used
in accounting for intangible assets (other than goodwill)
acquired in business combinations completed after
September 29, 2004. Further, companies that have applied
the residual method to the valuation of intangible assets for
purposes of impairment testing will be required to perform an
impairment test (no later than the beginning of their first
fiscal year beginning after December 15, 2004) using a
direct method. The company does not expect this announcement to
have a material impact on its consolidated financial statements.

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In September 2004, the EITF discussed Issue
No. 03-13, Applying the Conditions in
Paragraph 42 of FASB Statement No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, in Determining
Whether to Report Discontinued Operations. The EITF
reached a tentative consensus that classification of a disposed
of or held-for-sale component as a discontinued operation is
only appropriate if the ongoing entity (i) expects to have
no continuing direct cash flows, and (ii) does
not retain or expect to retain an interest, contract, or other
arrangement sufficient to enable it to exert significant
influence over the disposed components operating and
financial policies after the disposal transaction. If ratified,
the effective date of this consensus would be for a component of
an entity that has been either disposed of, or classified as
held-for-sale, in periods beginning after December 15,
2004. Further discussion of this issue is expected at the
November EITF meeting.

Available-for-Sale Security

The companys investment in ICL is
classified as available-for-sale. The fair market value of this
investment at September 30, 2004 was $204.8 and the
unrealized holding gain was $112.0.

Stock-based Compensation

Prior to 2003, the company applied the intrinsic
value based method of accounting for its stock option plans
under US GAAP. Effective December 15, 2003, the
company adopted the fair value based method of accounting for
stock options prospectively to all employee awards granted,
modified or settled after January 1, 2003 pursuant to the
transitional provisions of SFAS No. 148,
Accounting for Stock-Based Compensation 
Transition and Disclosure. Prospective application of the
fair value method did not have an impact on the first three
fiscal quarters of 2003 since the company did not grant any
options during those periods. Since the companys stock
option awards vest over two years, the compensation cost
included in the determination of net income (loss) for the three
month and nine month periods ended September 30, 2004 and
2003 is less than that which would have been recognized if the
fair value based method had been applied to all awards since the
original effective date of SFAS No. 123,
Accounting for Stock-Based Compensation. The
following table illustrates the effect on net income (loss) and
net income (loss) per share under US GAAP if the fair value
based method had been applied to all outstanding and unvested
awards in each period.



|                                                   |  |                                                                                                                                                    |      |                    |      |                    |        |      |      |      |       |  |      |   |        |   |       |  
|-------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------------------ | ---- | ------------------ | ------ | ---- | ---- | ---- | ----- |  | ---- | - | ------ | - | ----- | -
|                                                   |  |                                                                                                                                                    |      |                    |      |                   
|                                                   |  |                                                                                                                                                    |      | Three Months Ended |      | Nine Months       
|                                                   |  |                                                                                                                                                    |      | September 30       |      | Ended September 30
|                                                   |  |                                                                                                                                                    |      | 2004               |      | 2003               |        | 2004 |      | 2003
|                                                  
|                                                  
|Net income (loss)  as reported under
    US GAAP  |  | $                                                                                                                                                  | 76.6 |                    |      | $                  | (149.2 | )    |      | $    | 204.7 |  |      | $ | (112.6 | )
|Add:                                               |  | Stock-based employee compensation expense
    included in reported net income (loss), net of related tax
    effects                               |      |                    | 2.2  |                    |        |      |     |      |       |  | 6.6  |   |        |   |      |  
|Less:                                              |  | Total stock-based employee compensation expense
    determined under fair value based method for all option awards,
    net of related tax effects |      |                    | (3.2 | )                  |        |      | (3.7 | )    |       |  | (9.6 | ) |        |   | (11.1 | )
|                                                  
|Net income (loss)  pro forma under
    US GAAP(1) |  | $                                                                                                                                                  | 75.6 |                    |      | $                  | (152.9 | )    |      | $    | 201.7 |  |      | $ | (123.7 | )
|                                                  

|    |                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Compensation expense under the fair value method
    is recognized over the vesting period of the related stock
    options. Accordingly, the pro forma results of applying this
    method may not be indicative of future results.

|                                                      |             |  |   |      |  |  |   |       |   |  |   |      |  |  |   |       |  
|----------------------------------------------------- | ----------- |  | - | ---- |  |  | - | ----- | - |  | - | ---- |  |  | - | ----- | -
|Basic net income (loss) per share under
    US GAAP   |             |  |   |      |  |  |   |       |   |  |   |      |  |  |   |      
|                                                      | As reported |  | $ | 0.71 |  |  | $ | (1.43 | ) |  | $ | 1.91 |  |  | $ | (1.08 | )
|                                                      | Pro forma   |  | $ | 0.70 |  |  | $ | (1.47 | ) |  | $ | 1.88 |  |  | $ | (1.19 | )
|                                                     
|Diluted net income (loss) per share under
    US GAAP |             |  |   |      |  |  |   |       |   |  |   |      |  |  |   |      
|                                                      | As reported |  | $ | 0.69 |  |  | $ | (1.43 | ) |  | $ | 1.87 |  |  | $ | (1.08 | )
|                                                      | Pro forma   |  | $ | 0.68 |  |  | $ | (1.47 | ) |  | $ | 1.84 |  |  | $ | (1.19 | )

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Derivative Instruments and Hedging
Activities

The company formally documents all relationships
between hedging instruments and hedged items, as well as its
risk-management objective and strategy for undertaking various
hedge transactions. This process includes attributing
derivatives that are designated as cash flow hedges to floating
rate assets or liabilities or forecasted transactions and
attributing derivatives that are designated as fair value hedges
to fixed rate assets or liabilities. The company also formally
assesses, both at the inception of the hedge and on an ongoing
basis, whether each derivative is highly effective in offsetting
changes in cash flows or fair value of the hedged item.
Fluctuations in the value of the derivative instruments are
generally offset by changes in the hedged item; however, if it
is determined that a derivative is not highly effective as a
hedge or if a derivative is sold, expires or ceases to be a
highly effective hedge, the company will discontinue hedge
accounting prospectively for the affected derivative.

Cash
Flow Hedges

The company has designated its natural gas
derivative instruments as cash flow hedges. The companys
natural gas purchase strategy is based on diversification of
price for its total gas requirements. The objective is to
acquire a reliable supply of natural gas feedstock and fuel on a
location-adjusted, cost-competitive basis in a manner that
minimizes volatility without undue risk. The company employs
derivative instruments including futures, swaps and option
agreements in order to manage the cost on a portion of its
natural gas requirements. These instruments are intended to
hedge the future cost of the committed and anticipated natural
gas purchases primarily for its US nitrogen plants. By
policy, except as specifically permitted by the companys
Gas Policy Advisory Committee, the maximum period for these
hedges cannot exceed five years. The company uses these
instruments to reduce price risk, not for speculative purposes.

The portion of gain or loss on derivative
instruments designated as cash flow hedges that are effective at
offsetting changes in the hedged item is reported as a component
of accumulated OCI and then is reclassified into cost of goods
sold when the product containing the hedged item is sold. Any
hedge ineffectiveness is recorded in cost of goods sold in the
current period. During the quarter, a gain of $8.4 was
recognized in cost of goods sold ($34.3 gain on a year to
date basis). Of the deferred gains at quarter-end, approximately
$49.0 will be reclassified to cost of goods sold within the next
12 months. The fair value of the companys gas hedging
contracts at September 30, 2004 was $89.8. The
ineffectiveness of hedges on existing derivative instruments for
the quarter and year to date was not material to the
consolidated financial statements.



Fair
Value Hedges

The company primarily uses interest rate swaps to
manage the interest rate mix of the total debt portfolio and
related overall cost of borrowing. In January and February 2004,
the company entered into interest rate swap agreements with
total notional amounts of $300.0, whereby the company, over the
remaining terms of the underlying notes, receives a fixed rate
payment equivalent to the fixed interest rate of the underlying
note and pays a floating rate of interest that is based on
six-month US dollar LIBOR. The fair value of the swaps
outstanding at September 30, 2004 was a liability of $0.7.
All interest rate swaps qualify for the shortcut method of hedge
accounting, thus there is no ineffectiveness related to these
hedges. Changes in the fair value of derivatives that hedge
interest rate risk are recorded in interest expense each period.
The offsetting changes in the fair values of the related debt
are also recorded in interest expense. The company does not
maintain any other fair value hedges.

In October 2004, the company terminated the
interest rate swap contracts referred to above and discontinued
hedge accounting on a prospective basis.

17. Comparative Figures

Certain of the prior periods figures have
been reclassified to conform with the current periods
presentation.

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

The following discussion and analysis is the
responsibility of management. The Board of Directors carries out
its responsibility for review of this disclosure principally
through its audit committee, comprised exclusively of
independent directors. The audit committee reviews and, prior to
its publication, approves, pursuant to the authority delegated
to it by the Board of Directors, this disclosure. The term
PCS refers to Potash Corporation of Saskatchewan
Inc. and the terms we, us,
our, PotashCorp and the
company refer to PCS and, as applicable, PCS and its
direct and indirect subsidiaries as a group. Additional
information relating to the company, including our Annual Report
on Form 10-K, can be found on SEDAR at www.sedar.com and on
EDGAR at www.sec.gov/edgar.shtml.

POTASHCORP AND OUR BUSINESS
ENVIRONMENT

PotashCorp has built a global business on the
natural nutrients potash, phosphate and nitrogen, which are used
primarily in fertilizer. We sell to North American retailers,
cooperatives and distributors that provide storage and
application services to farmers, the end users. Our offshore
customers are governments and private importers that tend to buy
under contract, while spot sales are more prevalent in North
America. Fertilizers are sold primarily for spring and fall
application in both northern and southern hemispheres.

Since transportation is an important part of the
final selling price, producers usually sell to the closest
customers. In North America, we sell mainly on a delivered basis
and use rail, barge, truck and pipeline. Offshore customers
purchase product either at the port or with freight included.

Potash, phosphate and nitrogen are also used as
inputs for the production of animal feed and industrial
products. Currently, both are produced primarily in North
America and Europe but other regions are increasing both
production and consumption. Feed and industrial sales are more
evenly distributed throughout the year than fertilizer sales and
are primarily by contract.

POTASHCORP VISION

We see PotashCorp as a long-term business
enterprise and we aim to be the sustainable gross margin leader
in the products we sell and the markets we serve. Through our
strategy, we attempt to minimize the natural volatility of our
business. We also strive for increased earnings, and to
outperform our peer group and other basic materials companies in
total shareholder return, a key measure in any companys
value.

POTASHCORP STRATEGY

PotashCorps strategy is based on our
commitment to seek earnings growth and quality. The company
intends to be the industrys low-cost global potash
supplier on a delivered basis and to complement that by
leveraging the strengths of our low-cost gas in Trinidad and our
specialty phosphate products.

Day to day, we aim to maximize gross margin by
focusing on the right blend of price, volumes and asset
utilization, growing our business by becoming the supplier of
choice. At the same time, we strive to build on our strengths by
acquiring and maintaining low-cost, high-quality capacity that
complements our existing assets and adds strategic value. We
make decisions based on our determination to have our returns on
cash flow materially exceed our cost of capital.

KEY PERFORMANCE DRIVERS

While being a supplier of choice and
strengthening and increasing stakeholder engagement are key to
our long-term performance, our immediate profitability is driven
by lower production costs and higher realized prices, which
contribute to increased gross margin. We achieve lower per-unit
production costs through higher operating rates, which are
generated by tightened supply.

We do not view PotashCorp as a typical commodity
company that merely endures low prices and waits for them to
rise. We have a decommoditizing strategy designed to moderate
the highs and lows and

23



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##### Table of Contents



outperform at both ends of the cycle. Our success
is influenced by many variables that are beyond our control.
While some factors like our levels of production and sales
volumes are within our control, all must be balanced with one
another to optimize our asset base.


In our 2003 Annual Report, we identified four key
performance drivers for the company: (i) value and
valuation, (ii) gross margin, (iii) supplier of
choice, and (iv) stakeholder engagement. Each key
performance driver has an associated annual measurement
objective. Our interim performance relating to key financial
measures, including gross margin and earnings growth, is
provided in the section titled Financial Overview
below.

FINANCIAL OVERVIEW

This discussion and analysis is based on the
companys unaudited interim consolidated financial
statements reported under generally accepted accounting
principles in Canada (Canadian GAAP). These
principles differ in certain significant respects from
accounting principles generally accepted in the United States.
These differences are described and quantified in Note 16
to the unaudited interim consolidated financial statements
included in Item 1 of this Quarterly Report on
Form 10-Q. All references to per-share amounts pertain to
diluted net income or loss per share. Diluted net income per
share is calculated based on the weighted average shares issued
and outstanding during the period, adjusted by the total of the
additional common shares that would have been issued assuming
exercise of all stock options with exercise prices at or below
the average market price for the period. For periods in which
there was a loss attributable to common shares, stock options
with exercise prices at or below the average market price for
the period were excluded for the calculations of diluted net
loss per share, as inclusion of these securities would have been
anti-dilutive to the net loss per share. Note that as discussed
below in the section titled, Stock Split Effected in Form
of Stock Dividend, the Board of Directors of PCS approved
a split of the companys outstanding common shares in the
form of a stock dividend during the third quarter of 2004. As
such, all share and per-share data have been adjusted to reflect
the stock split. All amounts in dollars are expressed as US
dollars unless otherwise indicated.

Effective January 1, 2004, the company
prospectively adopted new accounting requirements of the
Canadian Institute of Chartered Accountants (CICA)
as issued in Section 1100, Generally Accepted
Accounting Principles, as described in Note 2 to the
unaudited interim consolidated financial statements. In light of
the new provisions, the company changed the consolidated
financial statement presentation of sales revenue, freight costs
and transportation and distribution expenses, without any effect
on gross margin or net income. All comparative information has
been appropriately reclassified. In prior years, the company
reported sales revenues (net of discounts, and including amounts
recoverable from customers for freight, transportation and
distribution) net of related freight, transportation and
distribution expenses. The company now reports sales revenues
(net of discounts, and including amounts recoverable from
customers for freight, transportation and distribution), freight
costs, and transportation and distribution expenses as separate
line items on the Consolidated Statements of Operations and
Retained Earnings.

Stock Split Effected in Form of Stock
Dividend

On July 21, 2004, the Board of Directors of
PCS approved a split of the companys outstanding common
shares on a two-for-one basis. The stock split was effected in
the form of a stock dividend of one additional common share for
each share owned by shareholders of record at the close of
business on August 11, 2004. The companys common shares
commenced trading on a split basis on August 9, 2004 on the
Toronto Stock Exchange and August 18, 2004 on the New York
Stock Exchange. All equity-based benefit plans have been
adjusted to reflect the stock split. In this Quarterly Report on
Form 10-Q, all share and per-share data have

24



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##### Table of Contents



been adjusted to reflect the stock split.
Information on an adjusted basis, showing the impact of this
split for the first two quarters of 2004, and by quarter and
total year for 2003 and 2002 is presented in the table below.


|                                    |  |         |      |         |  |         |      |         |  |      |       |   |  |   |      |  |  |   |       |  
|----------------------------------- |  | ------- | ---- | ------- |  | ------- | ---- | ------- |  | ---- | ----- | - |  | - | ---- |  |  | - | ----- | -
|                                    |  | First   |      | Second  |  | Third   |      | Fourth  |  |     
|Quarterly Data (Post Split Basis)   |  | Quarter |      | Quarter |  | Quarter |      | Quarter |  | Year
|                                   
|                                   
|Basic net income (loss) per share   |  |         |      |         |  |         |      |         |  |      |       |   |  |   |      |  |  |   |       |  
|2004                                |  | $       | 0.48 |         |  | $       | 0.68 |         |  |      |       |   |  |   |      |  |  |   |       |  
|2003                                |  | $       | 0.03 |         |  | $       | 0.29 |         |  | $    | (1.78 | ) |  | $ | 0.25 |  |  | $ | (1.21 | )
|2002                                |  | $       | 0.12 |         |  | $       | 0.11 |         |  | $    | 0.14  |   |  | $ | 0.14 |  |  | $ | 0.52  |  
|Diluted net income (loss) per share |  |         |      |         |  |         |      |         |  |      |       |   |  |   |      |  |  |   |       |  
|2004                                |  | $       | 0.47 |         |  | $       | 0.67 |         |  |      |       |   |  |   |      |  |  |   |       |  
|2003                                |  | $       | 0.03 |         |  | $       | 0.29 |         |  | $    | (1.78 | ) |  | $ | 0.25 |  |  | $ | (1.21 | )
|2002                                |  | $       | 0.12 |         |  | $       | 0.11 |         |  | $    | 0.14  |   |  | $ | 0.14 |  |  | $ | 0.51  |  

Net income (loss) per share for each quarter
has been computed based on the weighted average number of shares
issued and outstanding during the respective quarter; therefore,
quarterly amounts may not add to the annual total.

Earnings Guidance Review

The companys guidance for earnings per
share for third-quarter 2004 was originally in the range of
$0.50 to $0.60. This guidance was updated in September to a
range of $0.65 to $0.75 to reflect expectations of higher
earnings due to particularly strong offshore potash markets and
higher than anticipated nitrogen prices. The final result for
the quarter was net income of $75.2 million, or $0.68 per
share. Our earnings guidance anticipated a rate of exchange of
the Canadian dollar relative to the US dollar of 1.2924
during the third quarter; however, the average exchange rate
impacting Canadian dollar operating costs for the quarter was
1.3305, and the quarter-end exchange rate strengthened
significantly to 1.2639.

Overview of Actual Results

|                                              |  |                                 |       |                                |  |        |        |        |  |      |       |      |  |        |     |        |  |   |         |  |  |   |         |   |  |   |       |   |  |  |     |  
|--------------------------------------------- |  | ------------------------------- | ----- | ------------------------------ |  | ------ | ------ | ------ |  | ---- | ----- | ---- |  | ------ | --- | ------ |  | - | ------- |  |  | - | ------- | - |  | - | ----- | - |  |  | --- | -
|                                              |  |                                 |       |                               
|                                              |  | Three Months Ended September 30 |       | Nine Months Ended September 30
|                                             
|                                             
|                                              |  | Dollar                          |       | %                              |  |        |        | Dollar |  | %   
|(Dollars millions  except per-share amounts) |  | 2004                            |       | 2003                           |  | Change |        | Change |  | 2004 |       | 2003 |  | Change |     | Change
|                                             
|                                             
|Sales                                         |  | $                               | 815.7 |                                |  | $      | 674.6  |        |  | $    | 141.1 |      |  |        | 21  |        |  | $ | 2,377.8 |  |  | $ | 2,081.4 |   |  | $ | 296.4 |   |  |  | 14  |  
|Freight                                       |  |                                 | 51.2  |                                |  |        | 55.9   |        |  |      | (4.7  | )    |  |        | (8  | )      |  |   | 178.2   |  |  |   | 180.8   |   |  |   | (2.6  | ) |  |  | (1  | )
|Transportation and Distribution               |  |                                 | 23.6  |                                |  |        | 28.3   |        |  |      | (4.7  | )    |  |        | (17 | )      |  |   | 77.9    |  |  |   | 78.8    |   |  |   | (0.9  | ) |  |  | (1  | )
|Cost of Goods Sold                            |  |                                 | 551.5 |                                |  |        | 505.9  |        |  |      | 45.6  |      |  |        | 9   |        |  |   | 1,637.6 |  |  |   | 1,533.9 |   |  |   | 103.7 |   |  |  | 7   |  
|                                             
|Gross Margin                                  |  | $                               | 189.4 |                                |  | $      | 84.5   |        |  | $    | 104.9 |      |  |        | 124 |        |  | $ | 484.1   |  |  | $ | 287.9   |   |  | $ | 196.2 |   |  |  | 68  |  
|                                             
|Operating Income (Loss)                       |  | $                               | 133.1 |                                |  | $      | (210.9 | )      |  | $    | 344.0 |      |  |        | n/m |        |  | $ | 360.1   |  |  | $ | (113.1  | ) |  | $ | 473.2 |   |  |  | n/m |  
|                                             
|Net Income (Loss)                             |  | $                               | 75.2  |                                |  | $      | (185.9 | )      |  | $    | 261.1 |      |  |        | n/m |        |  | $ | 198.5   |  |  | $ | (152.8  | ) |  | $ | 351.3 |   |  |  | n/m |  
|                                             
|Net Income (Loss) Per Share  Basic           |  | $                               | 0.69  |                                |  | $      | (1.78  | )      |  | $    | 2.47  |      |  |        | n/m |        |  | $ | 1.85    |  |  | $ | (1.47   | ) |  | $ | 3.32  |   |  |  | n/m |  
|                                             
|Net Income (Loss) Per Share  Diluted         |  | $                               | 0.68  |                                |  | $      | (1.78  | )      |  | $    | 2.46  |      |  |        | n/m |        |  | $ | 1.82    |  |  | $ | (1.47   | ) |  | $ | 3.29  |   |  |  | n/m |  
|                                             
|n/m = not meaningful                         

While the third quarter is typically slower for
fertilizer movement, global demand, particularly for potash,
remained strong. Many countries in Asia and Latin America are
increasing potash consumption as higher GDP growth drives the
demand for more food and better diets. In phosphate, four
hurricanes effectively eliminated the production of excess
inventory and tightened supply for DAP. In nitrogen, continued
high natural gas prices in the US and tight global supply/demand
fundamentals kept markets firm and prices rising.

Third quarter net income was $75.2 million,
or $0.68 per share. This compares to a loss of
$185.9 million, or $1.78 per share in the same period in
2003. On a year-to-date basis, the company reported net income
of $198.5 million, or $1.82 per share, compared to a net loss of
$152.8 million, or $1.47 per share in 2003. The higher
quarterly and year-to-date earnings were primarily due to two
factors. Firstly, the company achieved

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record potash sales volumes at higher prices than
have been realized in more than 20 years. Increased
consumption is tightening supply/demand fundamentals after more
than two decades of oversupply in the potash market. With the
rest of the industry now operating at or near capacity, the
company is benefiting by increasing production and capturing a
significant share of global demand growth. Potash contributed
65 percent of the companys $104.9 million
consolidated gross margin growth quarter over quarter. Year over
year, $146.5 million (or 75 percent) of the companys
gross margin increase was attributable to this nutrient.
Secondly, last years third-quarter loss included
impairment charges and shutdown-related costs totaling
$201.8 million ($262.0 million before tax), or the
equivalent of $1.93 per share. These amounts pertained to asset
write-downs, workforce reductions and contract terminations at
the companys Yumbes, Geismar, Memphis and Kinston
properties. For the first nine months of 2003, the impairment
charges and shutdown-related costs were $203.1 million
($264.2 million before tax), or the equivalent of $1.95 per
share.


Overall potash sales volumes and average realized
prices increased 15 percent and 35 percent, respectively,
on a quarter-over-quarter basis; whereas volumes increased
14 percent and average realized prices rose 20 percent
year over year. Given higher operating rates, product costs
declined by 3 percent despite a stronger Canadian to US
dollar average exchange rate compared to third-quarter and
year-to-date 2003.

Conditions in phosphate recovered slightly from
2003, contributing $0.6 million gross margin for the quarter and
$5.4 million gross margin year to date, compared to
negative margins of $9.7 million and $8.8 million in
last years respective comparable periods. Sales volumes
and average realized prices on a delivered basis increased
5 percent and 7 percent, respectively, on a
quarter-over-quarter basis and by 7 percent and
6 percent, respectively, year over year. However, cost of
sales per tonne increased by 2 percent from last
years same quarter and by 3 percent for the nine
month period.

During the quarter, high natural gas prices
discouraged the startup of previously shutdown nitrogen capacity
in the US. Nitrogen gross margin rose 62 percent to
$68.0 million quarter over quarter, driven primarily by a
26-percent favorable change in average realized prices. The
companys US natural gas hedging activities contributed
$8.4 million to third-quarter gross margin compared to
$18.1 million in last years same quarter. Year over
year, nitrogen sales volumes declined 13 percent; however,
a 21-percent increase in average realized prices contributed to
the growth in gross margin from $134.3 million to
$169.8 million. US natural gas hedging activities
contributed $34.3 million to year-to-date gross margin
compared to $73.1 million in 2003.

Expenses declined by $239.1 million for the
quarter and $277.0 million for the first nine months as
compared to the prior year. As noted above, the decrease was
principally due to impairment charges and shutdown-related costs
recorded in 2003 relating to the companys Yumbes, Geismar,
Memphis and Kinston properties. Increases in selling and
administrative costs of $8.0 million quarter over quarter
and $12.0 million year over year were attributable
primarily to the companys performance-based compensation
plans. Provincial Mining and Other Taxes increased by
$10.9 million on a quarter-over-quarter basis and
$22.4 million year over year as a result of an increase in
potash sales volumes, prices and profits per tonne.

The substantial weakening of the US dollar
compared to the Canadian dollar resulted in a significant net
foreign exchange loss of $20.1 million for the quarter,
principally due to the month-end translation of the
companys Canadian dollar denominated net monetary
liability position. The Canadian dollar exchange rate compared
to the US dollar started the year at 1.2924, ended the
first quarter at 1.3105, the second quarter at 1.3404, and the
third quarter at 1.2639; last years exchange rates were
1.5796, 1.4693, 1.3553, and 1.3504 over comparable periods. On a
year-to-date basis, the company incurred a net foreign exchange
loss of $2.0 million compared to $41.5 million in the
prior year. The strengthening of the Canadian dollar by only
$0.03 over the first nine months of 2004 as compared to $0.23 in
2003 as noted above in the exchange rate trendline led to this
reduction in loss year over year.

Total assets were $4,865.6 million at
September 30, 2004, up $298.3 million, or
7 percent, from December 31, 2003. This increase is
principally due to the $376.0 million growth in cash
balances (mainly generated from operations), offset in part by
reductions in potash inventories and depreciation and
amortization of the companys long-lived assets.

26



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##### Table of Contents



Business Segment Review

Note 10 to the unaudited interim
consolidated financial statements provides information
pertaining to our business segments. Management includes net
sales in its segment disclosures in the notes to the
consolidated financial statements pursuant to CICA
Section 1701 Segment Disclosures. This standard
is founded on a management approach, which requires segmentation
based upon our internal organization and reporting of revenue
and profit measures derived from internal accounting methods.
Net sales (and the related per tonne amounts) are primary
revenue measures used and reviewed by the companys
management in making decisions about operating matters on a
business segment basis. These decisions include assessments
about potash, phosphate and nitrogen performance and the
resources to be allocated to these segments. Management also
uses net sales (and the related per tonne amounts) for business
planning and monthly forecasting purposes. Net sales are
calculated as sales revenues less freight, transportation and
distribution expenses. The discussion and analysis below is
based on the segment measures used and reviewed by management.

Potash

|                                |                |                                 |       |                    |  |                      |       |      |  |      |     |        |   |      |       |       |  |        |       |     |  |  |    |     |   |   |        |        |  |   |       |       |  |  |     |    | 
|------------------------------- | -------------- | ------------------------------- | ----- | ------------------ |  | -------------------- | ----- | ---- |  | ---- | --- | ------ | - | ---- | ----- | ----- |  | ------ | ----- | --- |  |  | -- | --- | - | - | ------ | ------ |  | - | ----- | ----- |  |  | --- | -- | 
|                                |                |                                
|                                |                | Three Months Ended September 30
|                               
|                               
|                                |                |                                 |       |                    |  |                     
|                                |                | Dollars (millions)              |       | Tonnes (thousands) |  | Average Price per MT
|                               
|                               
|                                |                | %                               |       |                    |  | %                    |       |      |  | %   
|                                |                | 2004                            |       | 2003               |  | Change               |       | 2004 |  | 2003 |     | Change |   | 2004 |       | 2003  |  | Change
|                               
|                               
|Sales                           |                | $                               | 251.8 |                    |  | $                    | 180.2 |      |  |      | 40  |        |   |      |       |       |  |        |       |     |  |  |    |     |   |   |        |        |  |   |       |       |  |  |     |   
|Freight                         |                |                                 | 23.0  |                    |  |                      | 28.0  |      |  |      | (18 | )      |   |      |       |       |  |        |       |     |  |  |    |     |   |   |        |        |  |   |       |       |  |  |     |   
|Transportation and distribution |                |                                 | 5.6   |                    |  |                      | 8.2   |      |  |      | (32 | )      |   |      |       |       |  |        |       |     |  |  |    |     |   |   |        |        |  |   |       |       |  |  |     |   
|                               
|                                |                | $                               | 223.2 |                    |  | $                    | 144.0 |      |  |      | 55  |        |   |      |       |       |  |        |       |     |  |  |    |     |   |   |        |        |  |   |       |       |  |  |     |   
|                               
|Net Sales                       |                |                                 |       |                    |  |                      |       |      |  |      |     |        |   |      |       |       |  |        |       |     |  |  |    |     |   |   |        |        |  |   |       |       |  |  |     |   
|                                | North American |                                 | $     | 62.8               |  |                      | $     | 61.5 |  |      |     | 2      |   |      |       | 557   |  |        |       | 768 |  |  |    | (27 | ) |   | $      | 112.83 |  |   | $     | 80.15 |  |  |     | 41 | 
|                                | Offshore       |                                 |       | 150.1              |  |                      |       | 69.4 |  |      |     | 116    |   |      |       | 1,346 |  |        |       | 889 |  |  |    | 51  |   |   | $      | 111.55 |  |   | $     | 77.98 |  |  |     | 43 | 
|                               
|                                |                |                                 | 212.9 |                    |  |                      | 130.9 |      |  |      | 63  |        |   |      | 1,903 |       |  |        | 1,657 |     |  |  | 15 |     |   | $ | 111.92 |        |  | $ | 78.98 |       |  |  | 42  |   
|                                | Miscellaneous  |                                 |       | 10.3               |  |                      |       | 13.1 |  |      |     | (21    | ) |      |       |      |  |        |       |    |  |  |    |    |   |   |        |       |  |   |       |      |  |  |     |   | 
|                               
|                                |                |                                 | 223.2 |                    |  |                      | 144.0 |      |  |      | 55  |        |   |      | 1,903 |       |  |        | 1,657 |     |  |  | 15 |     |   | $ | 117.29 |        |  | $ | 86.90 |       |  |  | 35  |   
|Cost of goods sold              |                |                                 | 102.4 |                    |  |                      | 91.7  |      |  |      | 12  |        |   |      |       |       |  |        |       |     |  |  |    |     |   | $ | 53.81  |        |  | $ | 55.34 |       |  |  | (3  | ) 
|                               
|Gross Margin                    |                | $                               | 120.8 |                    |  | $                    | 52.3  |      |  |      | 131 |        |   |      |       |       |  |        |       |     |  |  |    |     |   | $ | 63.48  |        |  | $ | 31.56 |       |  |  | 101 |   
|                               

|                                |                |                                |       |                    |  |                      |       |       |  |      |    |        |   |      |       |       |  |        |       |       |  |  |    |    |  |   |        |        |  |   |       |       |  |  |    |    | 
|------------------------------- | -------------- | ------------------------------ | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | -- | ------ | - | ---- | ----- | ----- |  | ------ | ----- | ----- |  |  | -- | -- |  | - | ------ | ------ |  | - | ----- | ----- |  |  | -- | -- | 
|                                |                |                               
|                                |                | Nine Months Ended September 30
|                               
|                               
|                                |                |                                |       |                    |  |                     
|                                |                | Dollars (millions)             |       | Tonnes (thousands) |  | Average Price per MT
|                               
|                               
|                                |                | %                              |       |                    |  | %                    |       |       |  | %   
|                                |                | 2004                           |       | 2003               |  | Change               |       | 2004  |  | 2003 |    | Change |   | 2004 |       | 2003  |  | Change
|                               
|                               
|Sales                           |                | $                              | 791.9 |                    |  | $                    | 601.1 |       |  |      | 32 |        |   |      |       |       |  |        |       |       |  |  |    |    |  |   |        |        |  |   |       |       |  |  |    |   
|Freight                         |                |                                | 97.7  |                    |  |                      | 91.0  |       |  |      | 7  |        |   |      |       |       |  |        |       |       |  |  |    |    |  |   |        |        |  |   |       |       |  |  |    |   
|Transportation and distribution |                |                                | 26.8  |                    |  |                      | 24.5  |       |  |      | 9  |        |   |      |       |       |  |        |       |       |  |  |    |    |  |   |        |        |  |   |       |       |  |  |    |   
|                               
|                                |                | $                              | 667.4 |                    |  | $                    | 485.6 |       |  |      | 37 |        |   |      |       |       |  |        |       |       |  |  |    |    |  |   |        |        |  |   |       |       |  |  |    |   
|                               
|Net Sales                       |                |                                |       |                    |  |                      |       |       |  |      |    |        |   |      |       |       |  |        |       |       |  |  |    |    |  |   |        |        |  |   |       |       |  |  |    |   
|                                | North American |                                | $     | 254.4              |  |                      | $     | 190.9 |  |      |    | 33     |   |      |       | 2,458 |  |        |       | 2,422 |  |  |    | 1  |  |   | $      | 103.51 |  |   | $     | 78.80 |  |  |    | 31 | 
|                                | Offshore       |                                |       | 379.6              |  |                      |       | 257.8 |  |      |    | 47     |   |      |       | 3,986 |  |        |       | 3,216 |  |  |    | 24 |  |   | $      | 95.25  |  |   | $     | 80.17 |  |  |    | 19 | 
|                               
|                                |                |                                | 634.0 |                    |  |                      | 448.7 |       |  |      | 41 |        |   |      | 6,444 |       |  |        | 5,638 |       |  |  | 14 |    |  | $ | 98.40  |        |  | $ | 79.58 |       |  |  | 24 |   
|                                | Miscellaneous  |                                |       | 33.4               |  |                      |       | 36.9  |  |      |    | (9     | ) |      |       |      |  |        |       |      |  |  |    |   |  |   |        |       |  |   |       |      |  |  |    |   | 
|                               
|                                |                |                                | 667.4 |                    |  |                      | 485.6 |       |  |      | 37 |        |   |      | 6,444 |       |  |        | 5,638 |       |  |  | 14 |    |  | $ | 103.57 |        |  | $ | 86.13 |       |  |  | 20 |   
|Cost of goods sold              |                |                                | 358.5 |                    |  |                      | 323.2 |       |  |      | 11 |        |   |      |       |       |  |        |       |       |  |  |    |    |  | $ | 55.63  |        |  | $ | 57.32 |       |  |  | (3 | ) 
|                               
|Gross Margin                    |                | $                              | 308.9 |                    |  | $                    | 162.4 |       |  |      | 90 |        |   |      |       |       |  |        |       |       |  |  |    |    |  | $ | 47.94  |        |  | $ | 28.81 |       |  |  | 66 |   
|                               

Certain of the prior periods figures have
been reclassified to conform with the current periods
presentation.


With higher average realized prices and record
offshore and total volumes, potash provided $120.8 million,
or 64 percent, of total gross margin for the quarter. This
was 131 percent higher than the $52.3 million gross

27



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##### Table of Contents



margin in the third quarter of 2003. The higher
prices also increased the gross margin percentage for potash to
54 percent of net sales from 36 percent, quarter over
quarter. Total sales increased $71.6 million and net sales
increased $79.2 million quarter over quarter. On a
year-over-year basis, the company experienced increases of
$190.8 million and $181.8 million in total sales and
net sales, respectively.


Canpotex Limited (Canpotex), the
offshore marketing agent for Saskatchewan potash producers, had
record volumes for the third quarter and year to date. As the
largest supplier to Canpotex, we also had record offshore sales
volumes for the third quarter and the first nine months of the
year. Total offshore sales volumes rose to 1.346 million
tonnes, an increase of 51 percent over the previous record
of 0.889 million tonnes in the third quarter last year.
Saskatchewan-sourced offshore volumes rose 56 percent,
while New Brunswick offshore volumes increased 19 percent.
Brazil remained our largest offshore customer with
26 percent of sales, while China represented
24 percent. Average prices realized on offshore net sales
rose 43 percent over last years third quarter.
Average price increases attributable to Saskatchewan-sourced
tonnes favorably impacted offshore net sales by
$39.1 million during the quarter while price increases
relating to New Brunswick tonnes contributed $11.2 million
to the increase in offshore net sales.

On a year-to-date basis, offshore volumes reached
3.986 million tonnes, up 24 percent from 2003.
Additionally, average realized prices climbed 19 percent
compared to 2003, despite a rise in Canpotexs ocean
freight costs of approximately $15 per tonne on volumes sold on
a cost and freight basis over this period. As new contracts were
negotiated with many customers, tight market conditions enabled
the company to more than cover the increases in ocean freight
rates. Year over year, the companys gains in overall
average realized offshore prices favorably impacted net sales by
$73.6 million, even while China was supplied with potash
under a contract negotiated last year at old prices.

Brazil had record potash imports last year and
continues to bring additional acres into agricultural production
in regions where the soil is low in potassium and the climate is
ideal for growing soybeans. China continues to have a high
demand for soybeans, as soybean meal is used as a protein source
for livestock and soybean oil is used for cooking. The situation
is similar in India, where third-quarter potash volumes were up
34 percent over the same quarter last year. The consumption
growth for potash in developing nations extends beyond the big
three countries of Brazil, China and India. Indonesia, Korea,
Malaysia, Thailand, Taiwan, Vietnam, Colombia, Mexico and
Costa Rica have all bought more potash this year than
last year.

In the domestic market, the pricing momentum from
the second quarter continued throughout the third quarter.
Domestic prices climbed 41 percent over last years
third quarter due to price increases in July 2003, September
2003, February 2004 and May 2004, resulting in a favorable price
variance of $17.0 million. The rise in offshore volumes
were offset by a 27-percent decline in domestic volumes quarter
over quarter, which resulted from timing issues on shipments and
negatively impacted net sales by $15.7 million. Although
domestic volumes remained flat on a year-over-year basis, the
four above-mentioned price increases were largely responsible
for the improvement in domestic net sales from
$190.9 million to $254.4 million.

The growth in volumes allowed the company to
capitalize on economies of scale. Production levels increased
22 percent over last years third quarter, utilizing
some of the companys excess capacity to fill growing
demand. While the strength of the Canadian dollar increased cost
of goods sold per tonne by nearly 3 percent quarter over
quarter, the reduction in per-tonne costs due to the combination
of a higher operating rate to meet sales demand, lower natural
gas costs and the utilization of potash from our larger mines,
more than offset the foreign exchange rate impact on both a
quarter-over-quarter and year-over-year basis.

During the third quarter and in response to
demand, the company announced the addition of a fourth shift at
its Allan mine to begin in November. This is in addition to the
fourth shift that was added at the Lanigan mine in June of this
year. Combined, these extra shifts will add approximately
1.2 million tonnes of production on an annual basis at a
nominal capital cost to the company.

28



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##### Table of Contents



Phosphate

|                                |                      |                                 |       |                    |  |                      |       |       |  |      |     |        |   |      |       |      |  |        |     |     |  |  |   |    |  |   |        |        |  |   |        |        |  |  |     |    |  
|------------------------------- | -------------------- | ------------------------------- | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | --- | ------ | - | ---- | ----- | ---- |  | ------ | --- | --- |  |  | - | -- |  | - | ------ | ------ |  | - | ------ | ------ |  |  | --- | -- | -
|                                |                      |                                
|                                |                      | Three Months Ended September 30
|                               
|                               
|                                |                      |                                 |       |                    |  |                     
|                                |                      | Dollars (millions)              |       | Tonnes (thousands) |  | Average Price per MT
|                               
|                               
|                                |                      | %                               |       |                    |  | %                    |       |       |  | %   
|                                |                      | 2004                            |       | 2003               |  | Change               |       | 2004  |  | 2003 |     | Change |   | 2004 |       | 2003 |  | Change
|                               
|                               
|Sales                           |                      | $                               | 257.7 |                    |  | $                    | 229.7 |       |  |      | 12  |        |   |      |       |      |  |        |     |     |  |  |   |    |  |   |        |        |  |   |        |        |  |  |     |   
|Freight                         |                      |                                 | 19.7  |                    |  |                      | 17.6  |       |  |      | 12  |        |   |      |       |      |  |        |     |     |  |  |   |    |  |   |        |        |  |   |        |        |  |  |     |   
|Transportation and distribution |                      |                                 | 8.8   |                    |  |                      | 7.8   |       |  |      | 13  |        |   |      |       |      |  |        |     |     |  |  |   |    |  |   |        |        |  |   |        |        |  |  |     |   
|                               
|                                |                      | $                               | 229.2 |                    |  | $                    | 204.3 |       |  |      | 12  |        |   |      |       |      |  |        |     |     |  |  |   |    |  |   |        |        |  |   |        |        |  |  |     |   
|                               
|Net Sales                       |                      |                                 |       |                    |  |                      |       |       |  |      |     |        |   |      |       |      |  |        |     |     |  |  |   |    |  |   |        |        |  |   |        |        |  |  |     |   
|                                | Fertilizer  liquids |                                 | $     | 38.9               |  |                      | $     | 40.0  |  |      |     | (3     | ) |      |       | 194  |  |        |     | 188 |  |  |   | 3  |  |   | $      | 200.73 |  |   | $      | 212.69 |  |  |     | (6 | )
|                                | Fertilizer  solids  |                                 |       | 85.7               |  |                      |       | 71.3  |  |      |     | 20     |   |      |       | 439  |  |        |     | 434 |  |  |   | 1  |  |   | $      | 194.97 |  |   | $      | 164.46 |  |  |     | 19 |  
|                                | Feed                 |                                 |       | 49.5               |  |                      |       | 46.1  |  |      |     | 7      |   |      |       | 232  |  |        |     | 211 |  |  |   | 10 |  |   | $      | 213.52 |  |   | $      | 218.50 |  |  |     | (2 | )
|                                | Industrial           |                                 |       | 52.5               |  |                      |       | 44.6  |  |      |     | 18     |   |      |       | 156  |  |        |     | 140 |  |  |   | 11 |  |   | $      | 337.11 |  |   | $      | 318.87 |  |  |     | 6  |  
|                               
|                                |                      |                                 | 226.6 |                    |  |                      | 202.0 |       |  |      | 12  |        |   |      | 1,021 |      |  |        | 973 |     |  |  | 5 |    |  | $ | 221.94 |        |  | $ | 207.61 |        |  |  | 7   |   
|                                | Miscellaneous        |                                 |       | 2.6                |  |                      |       | 2.3   |  |      |     | 13     |   |      |       |     |  |        |     |    |  |  |   |   |  |   |        |       |  |   |        |       |  |  |     |   |  
|                               
|                                |                      | $                               | 229.2 |                    |  | $                    | 204.3 |       |  |      | 12  |        |   |      | 1,021 |      |  |        | 973 |     |  |  | 5 |    |  | $ | 224.54 |        |  | $ | 210.06 |        |  |  | 7   |   
|                               
|                                | North American       |                                 | $     | 177.0              |  |                      | $     | 159.2 |  |      |     | 11     |   |      |       | 728  |  |        |     | 696 |  |  |   | 5  |  |   | $      | 243.24 |  |   | $      | 228.60 |  |  |     | 6  |  
|                                | Offshore             |                                 |       | 52.2               |  |                      |       | 45.1  |  |      |     | 16     |   |      |       | 293  |  |        |     | 277 |  |  |   | 6  |  |   | $      | 178.11 |  |   | $      | 163.34 |  |  |     | 9  |  
|                               
|                                |                      |                                 | 229.2 |                    |  |                      | 204.3 |       |  |      | 12  |        |   |      | 1,021 |      |  |        | 973 |     |  |  | 5 |    |  | $ | 224.54 |        |  | $ | 210.06 |        |  |  | 7   |   
|Cost of goods sold              |                      |                                 | 228.6 |                    |  |                      | 214.0 |       |  |      | 7   |        |   |      |       |      |  |        |     |     |  |  |   |    |  | $ | 223.95 |        |  | $ | 220.03 |        |  |  | 2   |   
|                               
|Gross Margin                    |                      | $                               | 0.6   |                    |  | $                    | (9.7  | )     |  |      | n/m |        |   |      |       |      |  |        |     |     |  |  |   |    |  | $ | 0.59   |        |  | $ | (9.97  | )      |  |  | n/m |   
|                               

|                                |                      |                                |       |                    |  |                      |       |       |  |      |     |        |   |      |       |       |  |        |       |       |  |  |   |     |   |   |        |        |  |   |        |        |  |  |     |    |  
|------------------------------- | -------------------- | ------------------------------ | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | --- | ------ | - | ---- | ----- | ----- |  | ------ | ----- | ----- |  |  | - | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | --- | -- | -
|                                |                      |                               
|                                |                      | Nine Months Ended September 30
|                               
|                               
|                                |                      |                                |       |                    |  |                     
|                                |                      | Dollars (millions)             |       | Tonnes (thousands) |  | Average Price per MT
|                               
|                               
|                                |                      | %                              |       |                    |  | %                    |       |       |  | %   
|                                |                      | 2004                           |       | 2003               |  | Change               |       | 2004  |  | 2003 |     | Change |   | 2004 |       | 2003  |  | Change
|                               
|                               
|Sales                           |                      | $                              | 712.2 |                    |  | $                    | 635.1 |       |  |      | 12  |        |   |      |       |       |  |        |       |       |  |  |   |     |   |   |        |        |  |   |        |        |  |  |     |   
|Freight                         |                      |                                | 51.5  |                    |  |                      | 53.0  |       |  |      | (3  | )      |   |      |       |       |  |        |       |       |  |  |   |     |   |   |        |        |  |   |        |        |  |  |     |   
|Transportation and distribution |                      |                                | 21.5  |                    |  |                      | 19.7  |       |  |      | 9   |        |   |      |       |       |  |        |       |       |  |  |   |     |   |   |        |        |  |   |        |        |  |  |     |   
|                               
|                                |                      | $                              | 639.2 |                    |  | $                    | 562.4 |       |  |      | 14  |        |   |      |       |       |  |        |       |       |  |  |   |     |   |   |        |        |  |   |        |        |  |  |     |   
|                               
|Net Sales                       |                      |                                |       |                    |  |                      |       |       |  |      |     |        |   |      |       |       |  |        |       |       |  |  |   |     |   |   |        |        |  |   |        |        |  |  |     |   
|                                | Fertilizer  liquids |                                | $     | 100.4              |  |                      | $     | 119.6 |  |      |     | (16    | ) |      |       | 473   |  |        |       | 533   |  |  |   | (11 | ) |   | $      | 212.04 |  |   | $      | 224.31 |  |  |     | (5 | )
|                                | Fertilizer  solids  |                                |       | 243.1              |  |                      |       | 170.3 |  |      |     | 43     |   |      |       | 1,221 |  |        |       | 1,022 |  |  |   | 19  |   |   | $      | 199.04 |  |   | $      | 166.76 |  |  |     | 19 |  
|                                | Feed                 |                                |       | 137.6              |  |                      |       | 138.0 |  |      |     |       |   |      |       | 645   |  |        |       | 650   |  |  |   | (1  | ) |   | $      | 213.25 |  |   | $      | 212.37 |  |  |     |   |  
|                                | Industrial           |                                |       | 150.6              |  |                      |       | 128.7 |  |      |     | 17     |   |      |       | 455   |  |        |       | 400   |  |  |   | 14  |   |   | $      | 331.34 |  |   | $      | 321.82 |  |  |     | 3  |  
|                               
|                                |                      |                                | 631.7 |                    |  |                      | 556.6 |       |  |      | 13  |        |   |      | 2,794 |       |  |        | 2,605 |       |  |  | 7 |     |   | $ | 226.09 |        |  | $ | 213.67 |        |  |  | 6   |   
|                                | Miscellaneous        |                                |       | 7.5                |  |                      |       | 5.8   |  |      |     | 29     |   |      |       |      |  |        |       |      |  |  |   |    |   |   |        |       |  |   |        |       |  |  |     |   |  
|                               
|                                |                      | $                              | 639.2 |                    |  | $                    | 562.4 |       |  |      | 14  |        |   |      | 2,794 |       |  |        | 2,605 |       |  |  | 7 |     |   | $ | 228.75 |        |  | $ | 215.94 |        |  |  | 6   |   
|                               
|                                | North American       |                                | $     | 504.1              |  |                      | $     | 475.0 |  |      |     | 6      |   |      |       | 2,059 |  |        |       | 2,074 |  |  |   | (1  | ) |   | $      | 244.85 |  |   | $      | 229.04 |  |  |     | 7  |  
|                                | Offshore             |                                |       | 135.1              |  |                      |       | 87.4  |  |      |     | 55     |   |      |       | 735   |  |        |       | 531   |  |  |   | 38  |   |   | $      | 183.69 |  |   | $      | 164.74 |  |  |     | 12 |  
|                               
|                                |                      |                                | 639.2 |                    |  |                      | 562.4 |       |  |      | 14  |        |   |      | 2,794 |       |  |        | 2,605 |       |  |  | 7 |     |   | $ | 228.75 |        |  | $ | 215.94 |        |  |  | 6   |   
|Cost of goods sold              |                      |                                | 633.8 |                    |  |                      | 571.2 |       |  |      | 11  |        |   |      |       |       |  |        |       |       |  |  |   |     |   | $ | 226.82 |        |  | $ | 219.32 |        |  |  | 3   |   
|                               
|Gross Margin                    |                      | $                              | 5.4   |                    |  | $                    | (8.8  | )     |  |      | n/m |        |   |      |       |       |  |        |       |       |  |  |   |     |   | $ | 1.93   |        |  | $ | (3.38  | )      |  |  | n/m |   
|                               

n/m = not meaningful


Certain of the prior periods figures have
been reclassified to conform with the current periods
presentation.


Phosphate gross margin improved from a loss of
$9.7 million in the third quarter of 2003 to
$0.6 million this quarter. Phosphate sales increased
$28.0 million and net sales increased $24.9 million
quarter over quarter. The DAP market was significantly impacted
by the weather, as the series of hurricanes that hit the eastern
United States devastated many communities and had a major effect
on the industry. While the

29



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##### Table of Contents



company did not experience any significant damage
to facilities, the storms slowed production for many producers
and DAP inventories across the industry were effectively cleaned
out, tightening supply.


Solid fertilizer sales volumes were flat compared
to the third quarter of 2003, as the company shifted tonnes from
the offshore market to the North American market where average
price realizations were higher. Significantly higher prices for
DAP and MAP favorably impacted net sales by $12.0 million.
On a year-over-year basis, solid fertilizer net sales increased
$72.8 million, driven principally by a 44-percent increase
in offshore volumes and a 9-percent increase in North American
volumes. Volumes in early 2003 were impacted by the shutdown of
DAP capacity at the White Springs Suwannee River plant. Higher
delivered prices for both DAP and MAP positively impacted net
sales by $33.7 million for the first nine months of 2004
compared to the same period last year.

Net sales of liquid fertilizers declined
$1.1 million from the same quarter last year. Sales volumes
increased by 3 percent, while average realized prices fell
by 6 percent mainly due to product sales mix. On a
year-over-year basis, net sales dropped $19.2 million.
Although offshore volumes more than doubled, total sales tonnes
declined by 11 percent due to a 24-percent reduction in
North American volumes. The reduction in overall liquid
fertilizer volumes negatively impacted net sales by
$23.1 million.

In feed, increases in competitive production and
a downward shift in demand slowed performance. Despite a
34-percent increase in offshore volumes over the third quarter
of 2003, net sales of feed improved only $3.4 million
because overall prices dropped 2 percent as a result of the
negative impact of ocean freight increases on offshore realized
prices. The company did, however, benefit from higher DFP prices
and extra volumes due to the previous shutdown of a competitor.
This benefits us as we have a more prominent position in this
product line, which is primarily used in feeding poultry. Year
over year, net sales of feed were essentially unchanged. Average
realized prices remained flat in both markets, and offshore
volume increases of 8 percent were offset by a 5-percent
decline in North American tonnes. The company has announced a
$33.00 per tonne price increase effective December 1, 2004
for various feed products.

Industrial net sales rose $7.9 million
compared to third-quarter 2003. Industrial phosphate volumes
increased by 11 percent, favorably impacting net sales by
$6.5 million. Realized prices climbed 6 percent
quarter over quarter due to reduced supply caused by the closure
of the Conda purified acid plant earlier in the year and a
decline in imports of purified and thermal phosphoric acid
(P4) from China and other sources. Year over year,
net sales increased by $21.9 million, chiefly due to the
closure of the Conda facility and more product being available
from the purified acid plant expansion at Aurora that was
completed in the first quarter of 2003. As part of its
decommoditization strategy, the company has recently announced
another expansion of the Aurora purified acid plant. The 82,000
tonne expansion will not increase the companys overall
capacity in phosphoric acid (P2O5), which
is the key ingredient in purified acid. Rather, PotashCorp will
be redirecting its existing P2O5 capacity
to higher-margin products sold to industrial customers in North
America. Historically, these products have provided a
significantly higher gross margin than phosphate fertilizers.
This expansion will accommodate growing demand in both North and
South America.

While overall phosphate prices and volumes were
up over the same quarter last year, product costs continued to
be a challenge. Cost of goods sold increased nearly $4.00 per
tonne from third-quarter 2003 and $7.50 per tonne from the first
nine months of 2003. The increase in third-quarter costs per
tonne resulted primarily from higher raw material costs and a
planned maintenance outage at the White Springs Swift Creek
plant in the month of September. Quarter over quarter, the
companys average sulfur costs per tonne increased
3 percent and average ammonia costs per tonne increased
31 percent, negatively impacting margins by
$0.8 million and $5.6 million, respectively. Average
phosphate rock costs declined 3 percent from last
years same quarter and from the first nine months of 2003.
Year over year, average sulfur and ammonia input costs per tonne
rose 5 percent and 31 percent, respectively,
negatively impacting margins by a total of $23.8 million.

30



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##### Table of Contents



Nitrogen

|                                |                                  |                                 |       |                    |  |                      |       |       |  |      |     |        |   |      |       |      |  |        |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |    | 
|------------------------------- | -------------------------------- | ------------------------------- | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | --- | ------ | - | ---- | ----- | ---- |  | ------ | ----- | --- |  |  | -- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | -- | -- | 
|                                |                                  |                                
|                                |                                  | Three Months Ended September 30
|                               
|                               
|                                |                                  |                                 |       |                    |  |                     
|                                |                                  | Dollars (millions)              |       | Tonnes (thousands) |  | Average Price per MT
|                               
|                               
|                                |                                  | %                               |       |                    |  | %                    |       |       |  | %   
|                                |                                  | 2004                            |       | 2003               |  | Change               |       | 2004  |  | 2003 |     | Change |   | 2004 |       | 2003 |  | Change
|                               
|                               
|Sales                           |                                  | $                               | 306.2 |                    |  | $                    | 264.7 |       |  |      | 16  |        |   |      |       |      |  |        |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|Freight                         |                                  |                                 | 8.5   |                    |  |                      | 10.3  |       |  |      | (17 | )      |   |      |       |      |  |        |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|Transportation and distribution |                                  |                                 | 9.2   |                    |  |                      | 12.3  |       |  |      | (25 | )      |   |      |       |      |  |        |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|                               
|                                |                                  | $                               | 288.5 |                    |  | $                    | 242.1 |       |  |      | 19  |        |   |      |       |      |  |        |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|                               
|Net Sales                       |                                  |                                 |       |                    |  |                      |       |       |  |      |     |        |   |      |       |      |  |        |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|                                | Ammonia                          |                                 | $     | 104.7              |  |                      | $     | 83.2  |  |      |     | 26     |   |      |       | 392  |  |        |       | 406 |  |  |    | (3  | ) |   | $      | 266.96 |  |   | $      | 204.83 |  |  |    | 30 | 
|                                | Urea                             |                                 |       | 72.2               |  |                      |       | 66.9  |  |      |     | 8      |   |      |       | 324  |  |        |       | 361 |  |  |    | (10 | ) |   | $      | 222.72 |  |   | $      | 184.96 |  |  |    | 20 | 
|                                | Nitrogen Solutions               |                                 |       | 9.9                |  |                      |       | 19.7  |  |      |     | (50    | ) |      |       | 60   |  |        |       | 161 |  |  |    | (63 | ) |   | $      | 165.97 |  |   | $      | 122.22 |  |  |    | 36 | 
|                                | Nitric Acid and Ammonium Nitrate |                                 |       | 45.9               |  |                      |       | 42.4  |  |      |     | 8      |   |      |       | 359  |  |        |       | 360 |  |  |    |    |   |   | $      | 128.08 |  |   | $      | 117.54 |  |  |    | 9  | 
|                                | Purchased                        |                                 |       | 49.4               |  |                      |       | 24.3  |  |      |     | 103    |   |      |       | 204  |  |        |       | 131 |  |  |    | 56  |   |   | $      | 241.90 |  |   | $      | 186.28 |  |  |    | 30 | 
|                               
|                                |                                  |                                 | 282.1 |                    |  |                      | 236.5 |       |  |      | 19  |        |   |      | 1,339 |      |  |        | 1,419 |     |  |  | (6 | )   |   | $ | 210.68 |        |  | $ | 166.67 |        |  |  | 26 |   
|                                | Miscellaneous                    |                                 |       | 6.4                |  |                      |       | 5.6   |  |      |     | 14     |   |      |       |     |  |        |       |    |  |  |    |    |   |   |        |       |  |   |        |       |  |  |    |   | 
|                               
|                                |                                  | $                               | 288.5 |                    |  | $                    | 242.1 |       |  |      | 19  |        |   |      | 1,339 |      |  |        | 1,419 |     |  |  | (6 | )   |   | $ | 215.52 |        |  | $ | 170.63 |        |  |  | 26 |   
|                               
|                                | Fertilizer                       |                                 | $     | 102.8              |  |                      | $     | 107.7 |  |      |     | (5     | ) |      |       | 476  |  |        |       | 644 |  |  |    | (26 | ) |   | $      | 216.04 |  |   | $      | 167.26 |  |  |    | 29 | 
|                                | Non-fertilizer                   |                                 |       | 185.7              |  |                      |       | 134.4 |  |      |     | 38     |   |      |       | 863  |  |        |       | 775 |  |  |    | 11  |   |   | $      | 215.24 |  |   | $      | 173.43 |  |  |    | 24 | 
|                               
|                                |                                  |                                 | 288.5 |                    |  |                      | 242.1 |       |  |      | 19  |        |   |      | 1,339 |      |  |        | 1,419 |     |  |  | (6 | )   |   | $ | 215.52 |        |  | $ | 170.63 |        |  |  | 26 |   
|Cost of goods sold              |                                  |                                 | 220.5 |                    |  |                      | 200.2 |       |  |      | 10  |        |   |      |       |      |  |        |       |     |  |  |    |     |   | $ | 164.74 |        |  | $ | 141.10 |        |  |  | 17 |   
|                               
|Gross Margin                    |                                  | $                               | 68.0  |                    |  | $                    | 41.9  |       |  |      | 62  |        |   |      |       |      |  |        |       |     |  |  |    |     |   | $ | 50.78  |        |  | $ | 29.53  |        |  |  | 72 |   
|                               

|                                |                                  |                                |       |                    |  |                      |       |       |  |      |     |        |   |      |       |       |  |        |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |    | 
|------------------------------- | -------------------------------- | ------------------------------ | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | --- | ------ | - | ---- | ----- | ----- |  | ------ | ----- | ----- |  |  | --- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | -- | -- | 
|                                |                                  |                               
|                                |                                  | Nine Months Ended September 30
|                               
|                               
|                                |                                  |                                |       |                    |  |                     
|                                |                                  | Dollars (millions)             |       | Tonnes (thousands) |  | Average Price per MT
|                               
|                               
|                                |                                  | %                              |       |                    |  | %                    |       |       |  | %   
|                                |                                  | 2004                           |       | 2003               |  | Change               |       | 2004  |  | 2003 |     | Change |   | 2004 |       | 2003  |  | Change
|                               
|                               
|Sales                           |                                  | $                              | 873.7 |                    |  | $                    | 845.2 |       |  |      | 3   |        |   |      |       |       |  |        |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|Freight                         |                                  |                                | 29.0  |                    |  |                      | 36.8  |       |  |      | (21 | )      |   |      |       |       |  |        |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|Transportation and distribution |                                  |                                | 29.6  |                    |  |                      | 34.6  |       |  |      | (14 | )      |   |      |       |       |  |        |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|                               
|                                |                                  | $                              | 815.1 |                    |  | $                    | 773.8 |       |  |      | 5   |        |   |      |       |       |  |        |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|                               
|Net Sales                       |                                  |                                |       |                    |  |                      |       |       |  |      |     |        |   |      |       |       |  |        |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|                                | Ammonia                          |                                | $     | 325.2              |  |                      | $     | 270.1 |  |      |     | 20     |   |      |       | 1,308 |  |        |       | 1,356 |  |  |     | (4  | ) |   | $      | 248.63 |  |   | $      | 199.19 |  |  |    | 25 | 
|                                | Urea                             |                                |       | 188.0              |  |                      |       | 205.4 |  |      |     | (8     | ) |      |       | 887   |  |        |       | 1,122 |  |  |     | (21 | ) |   | $      | 211.87 |  |   | $      | 183.02 |  |  |    | 16 | 
|                                | Nitrogen Solutions               |                                |       | 37.1               |  |                      |       | 68.9  |  |      |     | (46    | ) |      |       | 254   |  |        |       | 597   |  |  |     | (57 | ) |   | $      | 146.11 |  |   | $      | 115.38 |  |  |    | 27 | 
|                                | Nitric Acid and Ammonium Nitrate |                                |       | 138.4              |  |                      |       | 122.0 |  |      |     | 13     |   |      |       | 1,091 |  |        |       | 1,065 |  |  |     | 2   |   |   | $      | 127.02 |  |   | $      | 114.52 |  |  |    | 11 | 
|                                | Purchased                        |                                |       | 109.5              |  |                      |       | 91.8  |  |      |     | 19     |   |      |       | 461   |  |        |       | 450   |  |  |     | 2   |   |   | $      | 237.31 |  |   | $      | 204.16 |  |  |    | 16 | 
|                               
|                                |                                  |                                | 798.2 |                    |  |                      | 758.2 |       |  |      | 5   |        |   |      | 4,001 |       |  |        | 4,590 |       |  |  | (13 | )   |   | $ | 199.50 |        |  | $ | 165.19 |        |  |  | 21 |   
|                                | Miscellaneous                    |                                |       | 16.9               |  |                      |       | 15.6  |  |      |     | 8      |   |      |       |      |  |        |       |      |  |  |     |    |   |   |        |       |  |   |        |       |  |  |    |   | 
|                               
|                                |                                  | $                              | 815.1 |                    |  | $                    | 773.8 |       |  |      | 5   |        |   |      | 4,001 |       |  |        | 4,590 |       |  |  | (13 | )   |   | $ | 203.75 |        |  | $ | 168.57 |        |  |  | 21 |   
|                               
|                                | Fertilizer                       |                                | $     | 316.1              |  |                      | $     | 344.5 |  |      |     | (8     | ) |      |       | 1,557 |  |        |       | 2,108 |  |  |     | (26 | ) |   | $      | 203.05 |  |   | $      | 163.41 |  |  |    | 24 | 
|                                | Non-fertilizer                   |                                |       | 499.0              |  |                      |       | 429.3 |  |      |     | 16     |   |      |       | 2,444 |  |        |       | 2,482 |  |  |     | (2  | ) |   | $      | 204.20 |  |   | $      | 172.96 |  |  |    | 18 | 
|                               
|                                |                                  |                                | 815.1 |                    |  |                      | 773.8 |       |  |      | 5   |        |   |      | 4,001 |       |  |        | 4,590 |       |  |  | (13 | )   |   | $ | 203.75 |        |  | $ | 168.57 |        |  |  | 21 |   
|Cost of goods sold              |                                  |                                | 645.3 |                    |  |                      | 639.5 |       |  |      | 1   |        |   |      |       |       |  |        |       |       |  |  |     |     |   | $ | 161.31 |        |  | $ | 139.31 |        |  |  | 16 |   
|                               
|Gross Margin                    |                                  | $                              | 169.8 |                    |  | $                    | 134.3 |       |  |      | 26  |        |   |      |       |       |  |        |       |       |  |  |     |     |   | $ | 42.44  |        |  | $ | 29.26  |        |  |  | 45 |   
|                               

Certain of the prior periods figures have
been reclassified to conform with the current periods
presentation.


Nitrogen sales increased $41.5 million and
net sales increased $46.4 million quarter over quarter.
Supply/ demand fundamentals remained tight as the growth of
demand in China and India became more pronounced. India has been
importing more tonnage from the Middle East while China has been
exporting less, keeping

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world markets firm and driving up global nitrogen
prices. In North America, high natural gas prices are still
preventing some producers from restarting nitrogen production,
supporting strong US pricing.


Nitrogen gross margin grew to $68.0 million
from $41.9 million in the third quarter of 2003. With
ammonia prices tracking natural gas prices, our large-scale
facility in Trinidad (where we have long-term, low-cost gas
contracts) was particularly valuable to the company. Our
operation in Trinidad provided 57 percent of our total
nitrogen gross margin while our US operations contributed
31 percent. The remainder of the margin was achieved from
our US gas hedging program. On a year-to-date basis, we
benefited from our ability to produce nitrogen with low-cost gas
in Trinidad as ammonia prices achieved record levels in
February. Almost 56 percent of this years gross
margin in nitrogen came from Trinidad (2003 
51 percent), and the remainder came from our
US operations and hedging program.

Overall sales volumes were down 6 percent
from last years same quarter due primarily to the decision
to keep production shut down at Memphis and Geismar. The
continued shutdowns contributed to a 63-percent reduction in
nitrogen solutions sales volumes and a 12-percent decline in
US urea volumes compared to last years same quarter,
negatively impacting net sales by $12.4 million and
$4.2 million, respectively. Similar to the second quarter,
the volume reductions were partially offset by a rise in
realized prices that increased net sales of these products by a
total of $8.5 million. Trinidads ammonia and urea
prices increased 35 percent and 22 percent,
respectively, favorably impacting net sales by
$26.7 million. Net sales of purchased products rose by
$25.1 million primarily due to a 30-percent increase in
ammonia volumes and a 42-percent increase in realized ammonia
prices.

Year over year, sales tonnes declined
13 percent principally because of the decision to keep
production shut down at Memphis and Geismar and tonnage outages
at Trinidad. Nitrogen solutions sales volumes dropped
57 percent and US urea volumes declined by
32 percent compared to the first nine months of 2003. The
reduced tonnes negatively impacted year-to-date net sales by
$39.6 million for nitrogen solutions and $40.7 million
for urea, respectively; however, these reductions were offset by
$22.7 million realized due to increases in average prices
in those products. The high natural gas price environment
contributed to an 18-percent increase in average realized
US ammonia prices, resulting in $13.6 million
additional net sales compared to the prior year. At our Trinidad
facility, average ammonia and urea prices climbed
29 percent and 18 percent, respectively, favorably
impacting net sales by $66.1 million. Higher average
realized prices for nitric acid and ammonium nitrate were also
the primary reason for the $16.4 million increase in net
sales compared to the first nine months of 2003.

The companys average unit cost of natural
gas continued to climb during the quarter. Overall gas costs
rose 22 percent from the second quarter, and were
46 percent higher than third-quarter 2003 ($3.76 per MMBtu
compared to $2.57 per MMBtu). On a year-to-date basis, the
average unit cost of natural gas in 2004 was $3.52 per MMBtu
compared to $2.95 per MMBtu in 2003. This increase was a key
factor in a 16-percent rise in per-tonne costs year over year.
Within the US, our natural gas hedging activities reduced costs
by $8.4 million for the quarter (2003 
$18.1 million). These hedging activities contributed
$34.3 million to gross margin in the first nine months of
2004 compared to $73.1 million in last years
same period.

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Expenses and Other Income

|                                  |  |                    |      |                   |  |        |       |      |  |      |      |        |  |   |      |  |  |   |       |   |  |  |      |  
|--------------------------------- |  | ------------------ | ---- | ----------------- |  | ------ | ----- | ---- |  | ---- | ---- | ------ |  | - | ---- |  |  | - | ----- | - |  |  | ---- | -
|                                  |  |                    |      |                  
|                                  |  | Three Months Ended |      | Nine Months Ended
|                                  |  | September 30       |      | September 30     
|                                 
|                                 
|                                  |  | %                  |      |                   |  | %     
|Dollars (millions)                |  | 2004               |      | 2003              |  | Change |       | 2004 |  | 2003 |      | Change
|                                 
|                                 
|Selling and Administrative        |  | $                  | 32.2 |                   |  | $      | 24.2  |      |  |      | 33   |        |  | $ | 83.8 |  |  | $ | 71.8  |   |  |  | 17   |  
|Provincial Mining and Other Taxes |  |                    | 23.1 |                   |  |        | 12.2  |      |  |      | 89   |        |  |   | 67.5 |  |  |   | 45.1  |   |  |  | 50   |  
|Provision for Plant Shutdowns     |  |                    |     |                   |  |        | 121.5 |      |  |      | (100 | )      |  |   |     |  |  |   | 123.7 |   |  |  | (100 | )
|Provision for PCS Yumbes S.C.M.   |  |                    |     |                   |  |        | 140.5 |      |  |      | (100 | )      |  |   | 5.9  |  |  |   | 140.5 |   |  |  | (96  | )
|Foreign Exchange Loss             |  |                    | 20.1 |                   |  |        | 2.2   |      |  |      | 814  |        |  |   | 2.0  |  |  |   | 41.5  |   |  |  | (95  | )
|Other Income                      |  |                    | 19.1 |                   |  |        | 5.2   |      |  |      | 267  |        |  |   | 35.2 |  |  |   | 21.6  |   |  |  | 63   |  
|Interest Expense                  |  |                    | 20.8 |                   |  |        | 24.6  |      |  |      | (15  | )      |  |   | 63.8 |  |  |   | 67.2  |   |  |  | (5   | )
|Income Tax Expense (Recovery)     |  |                    | 37.1 |                   |  |        | (49.6 | )    |  |      | n/m  |        |  |   | 97.8 |  |  |   | (27.5 | ) |  |  | n/m  |  

n/m = not meaningful


Selling and administrative expenses increased
$8.0 million on a quarter-over-quarter basis and
$12.0 million on a year-over-year basis. This increase was
attributable primarily to our performance-based compensation
programs. Given the strength of our share price, higher accruals
were recorded in respect of incentive programs linked to certain
corporate performance measures, including total shareholder
return. Additionally, $2.1 million in compensation expense
relating to stock options was recorded during the quarter
($6.2 million year to date). This non-cash expense arose on
the prospective adoption of a new provision of Canadian GAAP in
fourth-quarter 2003. As such, no corresponding amounts relating
to stock options were recorded in the first nine months
of 2003.

Provincial Mining and Other Taxes increased by
$10.9 million on a quarter-over-quarter basis and
$22.4 million year over year as a result of an increase in
sales volumes and profit per tonne. Saskatchewans Potash
Production Tax is comprised of a base tax per tonne of product
sold and an additional tax based on mine profits. Effective
January 2003, the provincial government reduced the profits tax
on all incremental sales tonnes above the 2001 and 2002 average
of 5.722 million tonnes. In addition, to the extent that
net capital spending is greater than 90 percent of 2002 net
expenditures, the excess is fully deductible in the current
year. These changes have allowed the company to begin expanding
capacity at Rocanville. The Saskatchewan divisions and the New
Brunswick division also pay a provincial Crown royalty, which is
accounted for in cost of goods sold.

Refer to the section titled, Status of
Restructuring Activities for a discussion of the provision
for plant shutdowns and provision for PCS Yumbes S.C.M.

The company experienced a net foreign exchange
loss of $20.1 million in third-quarter 2004
(2003  $2.2 million). The significant third
quarter loss arose primarily from the period-end translation of
Canadian-dollar denominated monetary items on the Consolidated
Statement of Financial Position. This loss was offset slightly
by $1.3 million in gains realized from corporate treasury
activities. The marked increase in foreign exchange loss quarter
over quarter and year over year was due predominantly to the
considerable strengthening of the Canadian dollar relative to
the US dollar during those periods. Specifically, the Canadian
dollar closed the third quarter of 2004 $0.08 stronger than at
June 30, 2004 and $0.03 stronger than at December 31,
2003. This compares to the strengthening of the Canadian dollar
by $0.23 from December 31, 2002 to September 30, 2003
and a nominal appreciation from June 30, 2003 to
September 30, 2003.

Other income rose $13.9 million from last
years same quarter and $13.6 million on a
year-over-year basis due primarily to (i) improvements in
the companys share of earnings and dividends,
respectively, from global potash investments in Sociedad Quimica
y Minera de Chile S.A. (SQM) and Israel Chemicals
Limited; and, (ii) the companys share of earnings
pertaining to its October 2003 equity investment in Arab Potash
Company.

Interest expense decreased $3.8 million
quarter over quarter and $3.4 million year over year,
mainly as a result of reduced commercial paper balances
outstanding, initiation of interest rate hedging activities in

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January and February 2004, capitalization of
interest on the Rocanville expansion, and a substantial build-up
of cash balances through September 2004. Weighted average
long-term debt outstanding in the third quarter of 2004 was
$1,269.4 million (2003  $1,272.7 million)
with a weighted average interest rate of 6.9 percent
(2003  6.9 percent). Weighted average long-term
debt outstanding for the first nine months of 2004 was
$1,269.6 million (2003  $1,217.4 million)
with a weighted average interest rate of 6.9 percent
(2003  7.0 percent). The weighted average
interest rate on short-term debt outstanding in the third
quarter of 2004 was 1.7 percent (2003 
1.4 percent) and for the first nine months of 2004 was
1.3 percent (2003  1.5 percent).


The companys effective consolidated income
tax rate for the third quarter and first nine months of 2004
approximated 33 percent of income before income taxes. This
compares to an effective consolidated income tax rate of
approximately 40 percent (exclusive of the charges relating
to PCS Yumbes described below) for the comparable periods in
2003. The decrease in rate is due primarily to the impact of
Saskatchewan resource tax incentives, changes to the Canadian
federal resource allowance, and the scheduled Canadian federal
statutory rate reduction. Notwithstanding the reduction in
effective rate, income tax expense increased substantially
quarter over quarter and year over year, driven by the
substantial rise in operating income levels. For the first nine
months of 2004, 65 percent of the effective rate pertained
to current income taxes and 35 percent related to future
income taxes. The increase in the current tax provision from
zero percent in 2003 and from 60 percent in the first six
months of 2004 is primarily due to increases in potash operating
income in Canada.

Status of Restructuring
Activities

Memphis and Geismar Nitrogen
Operations  2003

In June 2003, the company indefinitely shut down
its Memphis, Tennessee plant and suspended production of ammonia
and nitrogen solutions at its Geismar, Louisiana facilities due
to high US natural gas costs and low product margins. The plants
have not been re-started since that time.

The company determined that all employee
positions pertaining to the affected operations would be
eliminated and recorded $4.8 million in connection with
costs of special termination benefits in the third quarter of
2003. The number of employees terminated as a result of the
shutdowns was 187, of which 186 had left the company as of
September 30, 2004. The company has made payments relating
to the terminations totaling $4.2 million. All remaining
workforce reduction costs pertaining to the 187 employees are
expected to be paid by December 31, 2004.

In connection with the shutdowns, management had
determined that the carrying amounts of the long-lived assets at
the Memphis and Geismar nitrogen facilities were not fully
recoverable, and an impairment loss of $101.6 million,
equal to the amount by which the carrying amount of the
facilities asset groups exceeded their respective fair
values, was recognized. Of the total impairment charge,
$100.6 million related to property, plant and equipment and
$1.0 million related to other assets. As part of its
review, management also wrote-down certain parts inventories at
these plants in the amount of $12.4 million.

In addition to the costs described above,
management expects to incur other shutdown-related costs of
approximately $11.1 million and nominal annual expenditures
for site security and other maintenance costs. The other
shutdown-related costs have not been recorded in the
consolidated financial statements as of September 30, 2004.
Such costs will be recognized and recorded in the period in
which they are incurred.

No additional costs were incurred in connection
with the nitrogen plant shutdowns in the first nine months
of 2004.

Kinston Phosphate Feed Plant 
2003

The phosphate feed plant at Kinston, North
Carolina ceased operations in the first quarter of 2003. In that
quarter, the company recorded $0.6 million for costs of
special termination benefits for Kinston employees,
$0.3 million for parts inventory write-downs, and
$1.3 million for long-lived asset impairment charges. In
lieu of full plant closure, the company continued to operate the
facility as a warehouse. In the third

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quarter of 2003, company management determined
that the cost of operating Kinston as a stand-alone warehouse
was uneconomical. This decision triggered a further review by
management of the carrying amounts of the plants
long-lived assets. As a result of this review, management
determined that the carrying amounts of the long-lived assets
were not recoverable, and an additional impairment charge of
$2.7 million, equal to the amount by which the carrying
amount of the plants long-lived assets exceeded their fair
value, was recognized.


The Kinston property was sold in the third
quarter of 2004 for nominal proceeds. There was no significant
gain or loss on sale. No additional costs were incurred in
connection with the phosphate plant shutdown in the first nine
months of 2004.

PCS Yumbes S.C.M.

2003

In November 2003, the company entered into a
share purchase agreement with SQM, whereby SQM is to acquire the
shares of PCS Yumbes for an aggregate purchase price of
$35.0 million, subject to adjustments. Under the terms of
the share purchase agreement, and prior to the sale closing, PCS
Yumbes will continue to operate the facility and expeditiously
liquidate the inventory of nitrates. All other working capital
is to be fully realized or discharged (as applicable) by the
company prior to the closing. It is expected that closing will
occur no later than the end of 2004.

In 2003, management conducted an assessment of
the recoverability of the long-lived assets of the PCS Yumbes
operations. As a result of its review, management determined
that the carrying amounts of PCS Yumbes long-lived assets
were not recoverable and recorded an impairment charge of
$77.4 million, equal to the amount by which the carrying
amount of the asset group exceeded fair value. Of the total
impairment charge, $13.0 million related to property, plant
and equipment, $63.9 million related to deferred
pre-production costs and $0.5 million related to deferred
acquisition costs. As part of the review, management also
wrote-down certain non-parts inventory by $50.2 million due
to the need to liquidate all inventories that would not be
transferred to SQM under the agreement.

The company plans to eliminate all employee
positions at PCS Yumbes by December 31, 2004 and has
recorded a provision of $1.8 million pertaining to
contractual termination benefits to be paid, primarily under
Chilean law. As of September 30, 2004, 148 of the employees
had left the company. The remaining 76 employees are expected to
leave the company by December 31, 2004, and all remaining
workforce reduction costs are expected to be paid by
that date.

The company had incurred early termination
penalties in respect of certain PCS Yumbes contractual
arrangements. The company recorded a provision of
$11.1 million in the third quarter of 2003 for these
contract termination costs and $0.1 million remained to be
paid at September 30, 2004.

2004

During the second quarter of 2004, the company
recorded an additional writedown of $5.9 million, relating
primarily to certain mining machinery and equipment that will
not be transferred to SQM under the terms of the agreement and
that management plans to sell prior to the end of the year. As
of September 30, 2004, the fair value and carrying amount
of the machinery and equipment that remains to be sold was
$1.1 million. For measurement purposes, fair value was
determined in reference to market prices for similar assets.

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LIQUIDITY AND CAPITAL RESOURCES

Cash Requirements

The following aggregated information about our
contractual obligations and other commitments aims to provide
insight into our short- and long-term liquidity and capital
resource requirements. The information presented in the table
below does not include obligations that have original maturities
of less than one year or planned capital expenditures.

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 (Including Interest) |  | $                      | 1,740.5 |               |  | $            | 82.4  |              |  | $            | 573.0 |  |  | $ | 105.6 |  |  | $ | 979.5   | 
|Operating Leases                    |  |                        | 507.6   |               |  |              | 64.2  |              |  |              | 121.2 |  |  |   | 88.4  |  |  |   | 233.8   | 
|Purchase Obligations                |  |                        | 930.6   |               |  |              | 110.2 |              |  |              | 185.7 |  |  |   | 162.8 |  |  |   | 471.9   | 
|Other Commitments                   |  |                        | 58.2    |               |  |              | 15.8  |              |  |              | 19.1  |  |  |   | 17.0  |  |  |   | 6.3     | 
|Other Long-term Liabilities         |  |                        | 313.0   |               |  |              | 33.6  |              |  |              | 43.8  |  |  |   | 33.8  |  |  |   | 201.8   | 
|                                   
|Total                               |  | $                      | 3,549.9 |               |  | $            | 306.2 |              |  | $            | 942.8 |  |  | $ | 407.6 |  |  | $ | 1,893.3 | 
|                                   

Long-term
Debt

Long-term debt consists of $1,250.0 million
of notes payable that were issued under our US shelf
registration statements, $9.0 million of Adjustable Rate
Industrial Revenue and Pollution Control Obligations, a net of
$5.9 million under a back-to-back loan arrangement
(described in Note 11 to the 2003 annual consolidated
financial statements) and other commitments of $4.3 million
payable over the next five years. The notes payable are
unsecured. Of the notes outstanding, $400.0 million bear
interest at 7.125 percent and mature in 2007,
$600.0 million bear interest at 7.750 percent and
mature in 2011 and $250.0 million bear interest at
4.875 percent and mature in 2013. There are no sinking fund
requirements. The Adjustable Rate Industrial Revenue and
Pollution Control Obligations bear interest at varying rates,
are secured by bank letters of credit and have no sinking fund
requirements. The notes payable are not subject to any financial
test covenants but are subject to certain customary covenants
(including limitations on liens and sale and leaseback
transactions) and events of default, including an event of
default for acceleration of other debt in excess of
$50.0 million. Neither the Industrial Revenue and Pollution
Control Obligations nor the other long-term debt instruments are
subject to any financial test covenants but each is subject to
certain customary covenants and events of default, including,
for other long-term debt, an event of default for acceleration
of other debt of $25.0 million or more. Non-compliance with
any of the above covenants could result in accelerated
payment of the related debt. The company was in compliance with
all covenants as at September 30, 2004.

The commitments included in the above table
include our cumulative scheduled interest payments on fixed and
variable rate long-term debt, totaling $471.3 million.
Interest on variable rate debt is based on prevailing interest
rates. Except as described immediately below, there have been no
significant changes to long-term debt during the first three
quarters of 2004.

In January and February 2004, the company entered
into interest rate swap contracts that effectively converted a
notional amount of $300.0 million of fixed rate debt (due
2011) into floating rate debt based on six-month US dollar
LIBOR rates. In October 2004, the company terminated the
interest rate swap contracts referred to above. The company did
not enter into any interest rate swap contracts in 2003.

Operating
Leases

We have long-term operating lease agreements for
buildings, port facilities, equipment, ocean-going
transportation vessels and railcars, the latest of which expires
in 2020 (excluding mineral leases).

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The most significant operating leases consist
primarily of three items. The first is our lease of railcars
used to transport finished goods and raw materials. These leases
extend to approximately 2020. The second is the lease of port
facilities at the Port of Saint John for shipping New Brunswick
potash offshore. This lease runs until 2018. The third is the
lease of three vessels for transporting ammonia from Trinidad.
One vessel agreement runs until 2011 with the other two
agreements terminating in 2016.

Purchase
Obligations

We have long-term agreements for the purchase of
sulfur for use in the production of phosphoric acid. These
agreements provide for minimum purchase quantities, and certain
prices are based on market rates at the time of delivery. The
commitments included in the above table are based on contract
prices.

Our Trinidad subsidiaries have entered into
long-term natural gas contracts with the National Gas Company of
Trinidad. The contracts provide for prices that vary with
ammonia market prices, escalating floor prices and minimum
purchase quantities. The commitments included in the above table
are based on floor prices and minimum purchase quantities.

We also have a long-term agreement through 2010
for the purchase of phosphate rock used at our Geismar facility.
This agreement sets base prices (less volume discounts) through
December 2004. The commitments included in the above table are
based on the expected purchase quantity and the set base prices
(less applicable discounts).

Other
Commitments

Other operating commitments consist of amounts
relating to an acid storage agreement that is in effect until
2004, our Rocanville expansion and compactor upgrade project
through 2005, contracts to purchase limestone that run through
2007 and various rail freight contracts, the latest of which
expire in 2010.

Other
Long-term Liabilities

Other long-term liabilities consist primarily of
accrued post-retirement/post-employment benefits and accrued
reclamation costs.

Capital
Expenditures

During 2004, we expect to incur capital
expenditures of approximately $115.0 million for
opportunity capital and approximately $90.0 million for
sustaining capital. The most significant single project relates
to the expansion and increase of granular potash production
capacity at Rocanville.

We have also exercised an option agreement to
purchase certain corporate office facilities for approximately
$8.0 million in 2005.

We anticipate that all capital spending will be
financed by internally generated cash flows supplemented, if and
as necessary, by borrowing from existing financing sources.

Sources and Uses of Cash

The companys cash flows from operating,
investing and financing activities, as reflected in the
Consolidated Statements of Cash Flows, are summarized in the
following table:

|                                                |  |                    |       |                   |  |      |       |      |  |   |       |   |  |   |        |  
|----------------------------------------------- |  | ------------------ | ----- | ----------------- |  | ---- | ----- | ---- |  | - | ----- | - |  | - | ------ | -
|                                                |  |                    |       |                  
|                                                |  | Three Months Ended |       | Nine Months Ended
|                                                |  | September 30       |       | September 30     
|                                               
|                                               
|Dollars (millions)                              |  | 2004               |       | 2003              |  | 2004 |       | 2003
|                                               
|                                               
|Cash Provided by Operating Activities           |  | $                  | 168.6 |                   |  | $    | 128.4 |      |  | $ | 481.1 |   |  | $ | 239.4  |  
|Cash Used in Investing Activities               |  | $                  | (43.1 | )                 |  | $    | (37.3 | )    |  | $ | (82.9 | ) |  | $ | (92.0  | )
|Cash Provided by (Used in) Financing Activities |  | $                  | 48.7  |                   |  | $    | (96.7 | )    |  | $ | (22.2 | ) |  | $ | (114.0 | )

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The following table presents summarized working
capital information as at September 30, 2004 compared to
December 31, 2003:

|                                        |  |               |         |              |  |   |        |  
|--------------------------------------- |  | ------------- | ------- | ------------ |  | - | ------ | -
|                                        |  | September 30, |         | December 31,
|Dollars (millions) except ratio amounts |  | 2004          |         | 2003        
|                                       
|                                       
|Current Assets                          |  | $             | 1,103.6 |              |  | $ | 733.9  |  
|Current Liabilities                     |  | $             | (572.6  | )            |  | $ | (557.8 | )
|Working Capital                         |  | $             | 531.0   |              |  | $ | 176.1  |  
|Current Ratio                           |  |               | 1.93    |              |  |   | 1.32   |  

PotashCorps principal sources of funds
include cash generated from our operations, short-term
borrowings against our line of credit and commercial paper
program, and long-term debt issued under our US shelf
registration statements and drawn down under our syndicated
credit facility. Our primary uses of funds are operational
expenses, sustaining and opportunity capital spending,
dividends, and interest and principal payments on our debt
securities.

Cash provided by operating activities was
$168.6 million, up $40.2 million from the third
quarter last year. Stronger gross margin in potash
($120.8 million as compared to $52.3 million) driven
by higher prices and another quarter of record volumes
contributed significantly to the improvement. In addition,
working capital requirements were lower by $34.8 million,
largely due to reduced inventory levels resulting from the high
volume of potash shipments. Strong nine month 2004 potash and
nitrogen margins were a key factor in the $241.7 million
increase in cash provided by operating activities compared to
the same period last year. In addition, working capital
requirements were $99.3 million lower, principally due to
reduced potash inventory levels, improvements in phosphate work
in process and feed inventory management, an increase in margin
deposits, and an increase in income taxes and provincial mining
taxes payable on higher profits in our Canadian potash
operations.

Cash used in investing activities increased
$5.8 million quarter over quarter and declined
$9.1 million year over year. Additions to property, plant
and equipment were $10.5 million and $12.0 million
higher compared to last years three and nine month
periods, respectively. However, cash outlays in connection with
other assets declined $4.2 million and $19.3 million
during these same periods, primarily due to lower spending,
reductions in long-term inventory balances, and the fact that
issuance costs were incurred in fiscal 2003 relating to a
$250.0 million offering of 4.875 percent notes due
in 2013.

Cash provided by financing activities during the
quarter was $48.7 million, an increase of
$145.4 million compared to the same quarter last year. The
principal reasons for the change relate to (i) receipt of
$53.6 million more proceeds from the issuance of common
shares (mostly arising from the exercise of stock options as our
share price appreciated substantially during the quarter); and,
(ii) a $91.5 million change in commercial paper
balances as part of our cash and debt management program.

Year over year, cash used in financing activities
declined $91.8 million. In March 2003, we issued
$250.0 million of notes under our US shelf registration
statement. The net proceeds from the issue of these notes were
used to make short-term debt repayments of $208.8 million
in that quarter, and a total of $329.6 million was repaid
in the first nine months of 2003. In the first three quarters of
2004, the company paid down short-term debt by
$81.3 million entirely with cash generated from operations.
Cash received year to date from share issuances contributed
$99.6 million in financing activities, compared to
$5.5 million in the first nine months of 2003. Stock
options exercises were prevalent due to a marked share price
increase. The companys NYSE share price at
September 30, 2004 was $64.17 (2003  $35.28)
compared to $43.24 at December 31, 2003 (2002 
$31.80).

The company has historically paid quarterly
dividends to shareholders at a rate of $0.125 per share on a
post-split basis, and all such payments were made in the first
three quarters of 2004 and 2003. In July 2004, the company
announced that its quarterly cash dividend payment would be
increasing to $0.15 per share, commencing with the dividend
payable in November 2004.

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PotashCorp believes that internally generated
cash flow, supplemented by borrowing from existing financing
sources if necessary, will be sufficient to meet our anticipated
capital expenditures and other cash requirements in 2004,
exclusive of any possible acquisitions, as was the case in 2003.
At this time, the company does not reasonably expect any
presently known trend or uncertainty to affect our ability to
access our historical sources of cash.

Debt Instruments

|                           |  |                    |         |               |  |               |         |  |  |   |       | 
|-------------------------- |  | ------------------ | ------- | ------------- |  | ------------- | ------- |  |  | - | ----- | 
|                           |  |                   
|                           |  | Dollars (millions)
|                          
|                          
|                           |  | Amount             |         | Amount       
|                           |  | Outstanding at     |         | Available at 
|                           |  | Total              |         | September 30, |  | September 30,
|                           |  | Amount             |         | 2004          |  | 2004         
|                          
|                          
|Syndicated Credit Facility |  | $                  | 750.0   |               |  | $             |        |  |  | $ | 655.1 | 
|Line of Credit             |  |                    | 75.0    |               |  |               | 2.6     |  |  |   | 55.7  | 
|Commercial Paper           |  |                    | 500.0   |               |  |               | 94.9    |  |  |   | 405.1 | 
|US Shelf Registration      |  |                    | 2,000.0 |               |  |               | 1,250.0 |  |  |   | 750.0 | 

PotashCorp has a $750.0 million syndicated
credit facility, renewable annually, which provides for
unsecured advances. In September 2004, the company renewed the
facility for one year, amended the table of interest rate
margins applicable to any funds borrowed under the facility and
expanded the class of permitted liens under the facilitys
covenant on encumbrances. The credit facility amendment and a
description thereof are provided in our Current Report on
Form 8-K dated September 21, 2004. The amount
available to the company is the total committed amount less
direct borrowings and commercial paper outstanding. No funds
were borrowed under the facility as of September 30, 2004.
The line of credit is also renewable annually, and outstanding
letters of credit and direct borrowings reduce the amount
available. Both the line of credit and the syndicated credit
facility have financial tests and other covenants with which the
company must comply at each quarter end. Principal covenants
under the credit facility and line of credit require debt to
capital of less than or equal to 0.55:1, long-term debt to
EBITDA (defined in the respective agreements as earnings before
interest, income taxes, provincial mining and other taxes,
depreciation, amortization and other non-cash expenses) of less
than or equal to 3.5:1, tangible net worth greater than or equal
to $1,250.0 million and debt of subsidiaries less than
$590.0 million. The syndicated credit facility and line of
credit are also subject to other customary covenants and events
of default, including an event of default for non-payment of
other debt in excess of Cdn $40.0 million. Non-compliance
with any of the above covenants could result in accelerated
payment of the related debt and termination of the line of
credit. The company was in compliance with all covenants as at
September 30, 2004.

We also have a commercial paper program of up to
$500.0 million. Access to this source of short-term
financing depends primarily on our rating by Dominion Bond
Rating Service (DBRS) and conditions in the money
markets. PotashCorps commercial paper continues to be
rated by DBRS as R1 low, which should allow unrestricted access
to the money markets. Our other ratings did not change from
December 31, 2003 (Moodys: Baa2, with a positive
outlook; Standard and Poors: BBB+).

We have a US shelf registration statement
under which we may issue up to an additional $750.0 million
in unsecured debt securities.

At the end of September 2004, our weighted
average cost of capital was 8.2 percent (2003 
7.3 percent), of which 18 percent represented debt and
82 percent equity. The increase was principally due to a
shift in mix to equity  which carries a higher cost
than debt  as the stock price closed 82-percent
higher this quarter end compared to last years same
quarter.

Off-Balance Sheet
Arrangements

In the normal course of operations, PotashCorp
engages in a variety of transactions that, under Canadian GAAP,
are either not recorded on our Consolidated Statements of
Financial Position or are recorded on our Consolidated
Statements of Financial Position in amounts that differ from the
full contract amounts. Principal

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off-balance sheet activities we undertake include
issuance of guarantee contracts, certain derivative instruments
and long-term fixed price contracts. We do not reasonably expect
any presently known trend or uncertainty to affect our ability
to continue using these arrangements. These types of
arrangements are discussed below.


Guarantee Contracts

The company enters into agreements in the normal
course of business that may contain features which meet the
definition of a guarantee. Various debt obligations (such as
overdrafts, lines of credit with counterparties for derivatives,
and back-to-back loan arrangements) related to certain
subsidiaries have been directly guaranteed by the company under
agreements with third parties. The company would be required to
perform on these guarantees in the event of default by the
guaranteed parties. No material loss is anticipated by reason of
such agreements and guarantees. At September 30, 2004, the
maximum potential amount of future (undiscounted) payments under
significant guarantees provided to third parties approximated
$113.4 million, representing the maximum risk of loss if
there were a total default by the guaranteed parties, without
consideration of possible recoveries under recourse provisions
or from collateral held or pledged. At September 30, 2004,
no subsidiary balances subject to guarantees were outstanding in
connection with the companys cash management facilities,
and the company had no liabilities recorded for other
obligations other than subsidiary bank borrowings of
approximately $5.9 million, which are reflected in other
long-term debt and cash margin requirements of approximately
$33.4 million to maintain derivatives, which are included
in accounts payable and accrued charges.

During the first nine months of 2004, the company
renewed its letter of credit in respect of the Province of
Saskatchewans potash decommissioning and reclamation
financial assurance requirements and entered into various other
commercial letters of credit in the normal course of operations.
Refer to Note 15 to the unaudited interim consolidated
financial statements included in Item 1 of this Quarterly
Report on Form 10-Q for a description of other guarantees
relating to the company.

Derivative Instruments

Under Canadian GAAP, the company does not record
the fair value of derivatives designated (and qualifying) as
effective hedges on its Consolidated Statements of Financial
Position.

The company has designated its natural gas
derivative instruments as cash flow hedges. The companys
natural gas purchase strategy is based on diversification of
price for its total gas requirements. The objective is to
acquire a reliable supply of natural gas feedstock and fuel on a
location-adjusted, cost-competitive basis in a manner that
minimizes volatility without undue risk. In addition to physical
spot and term purchases, the company employs futures, swaps and
option agreements to manage the cost on a portion of our natural
gas requirements. These instruments are intended to hedge the
future cost of the committed and anticipated natural gas
purchases primarily for its US nitrogen plants. By policy,
except as specifically permitted by the companys Gas
Policy Advisory Committee, the maximum period for these hedges
cannot exceed five years. The company uses these instruments to
reduce price risk, not for speculative purposes. The fair value
of the companys gas hedging contracts at
September 30, 2004 was $89.8 million. The
companys futures contracts are exchange-traded and fair
value was determined based on exchange prices. Swaps and option
agreements are traded in the over-the-counter market and fair
value was calculated based on a price that was converted to an
exchange-equivalent price.

The company primarily uses interest rate swaps to
manage the interest rate mix of the total debt portfolio and
related overall cost of borrowing. In January and February 2004,
the company entered into interest rate swap agreements with
total notional amounts of $300.0 million, whereby the
company, over the remaining terms of the underlying notes, would
receive a fixed rate payment equivalent to the fixed interest
rate of the underlying note and pay a floating rate of interest
that is based on six-month US dollar LIBOR. The fair value
of the swaps outstanding at September 30, 2004 was a
liability of $0.7 million. In October 2004, the company
terminated the interest rate swap contracts referred to above
for cash proceeds of $3.0 million and a gain of

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$0.8 million. Hedge accounting has been
discontinued prospectively and the associated gain will be
recognized in income over the remaining term of the debt in the
same periods as the corresponding interest expense.


Refer to Note 27 of our 2003 Annual Report
for detailed information regarding the nature of our financial
instruments. Other than as described above, there have been no
significant changes to these instruments during the first three
quarters of 2004.

Long-term Fixed Price Contracts

Certain of our long-term raw materials agreements
contain fixed price components. Our significant agreements, and
the related obligations under such agreements, are discussed in
Contractual Obligations and Other Commitments.

OUTSTANDING SHARE DATA

The company had, at September 30, 2004,
109,065,096 common shares issued and outstanding, compared to
106,224,432 common shares issued and outstanding at
December 31, 2003. At September 30, 2004, there were
7,967,434 options to purchase common shares outstanding, as
compared to 10,876,022 at December 31, 2003.

RELATED PARTY TRANSACTIONS

The company sells potash from its Saskatchewan
mines for use outside of North America exclusively to Canpotex,
a potash export, sales and marketing company owned in equal
shares by the three potash producers in the Province of
Saskatchewan. Sales to Canpotex for the quarter ended
September 30, 2004 were $130.7 million
(2003  $58.6 million). On a year-to-date basis,
these sales were $315.1 million (2003 
$200.4 million). Sales to Canpotex are at prevailing market
prices and are settled on normal trade terms.

In connection with entering into the option
agreement with SQM in 2003, PCS Yumbes has agreed to purchase
potash from SQM at a negotiated price that approximates market
value. In addition, PCS Yumbes has agreed to sell to SQM all of
its potassium nitrate production at a negotiated price that
approximates market value. Both agreements are in effect until
no later than December 31, 2004. Potash purchases from SQM
for the quarter were $1.3 million (2003 
$5.3 million). On a year-to-date basis, these purchases
were $6.0 million (2003  $8.0 million).
Potassium nitrate sales to SQM for the quarter were
$6.0 million (2003  $7.3 million). On a
year-to-date basis, these sales were $20.1 million
(2003  $17.2 million). All transactions with SQM
are settled on normal trade terms.

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of our financial
condition and results of operations is based upon our unaudited
interim consolidated financial statements, which have been
prepared in accordance with Canadian GAAP. These principles
differ in certain significant respects from accounting
principles generally accepted in the United States. These
differences are described and quantified in Note 16 to the
unaudited interim consolidated financial statements included in
Item 1 of this Quarterly Report on Form 10-Q.

The accounting policies used in preparing the
unaudited interim consolidated financial statements are
consistent with those used in the preparation of the 2003 annual
consolidated financial statements, except as disclosed in
Note 2 to the unaudited interim consolidated financial
statements. Certain of these policies involve critical
accounting estimates because they require us to make
particularly subjective or complex judgments about matters that
are inherently uncertain and because of the likelihood that
materially different amounts could be reported under different
conditions or using different assumptions.

In 2003, the company approved plans to
restructure certain operations. Those plans required significant
estimates to be made of: (i) the recoverability of the
carrying value of certain assets based on their capacity to
generate future cash flows, and (ii) employee termination,
contract termination and other exit costs. Because restructuring
activities are complex processes that can take several months to
complete, they involve

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periodically reassessing estimates. Refer to
Note 6 and Note 7 to the unaudited interim
consolidated financial statements for managements current
estimate assessments.


We have discussed the development, selection and
application of our key accounting policies, and the critical
accounting estimates and assumptions they involve, with the
audit committee of the Board of Directors, and our audit
committee has reviewed the disclosures described in this section.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2003, the FASB revised FIN
No. 46, Consolidation of Variable Interest
Entities, which clarifies the application of Accounting
Research Bulletin No. 51 Consolidated Financial
Statements to those entities (defined as VIEs) in which
either the equity at risk is not sufficient to permit that
entity to finance its activities without additional subordinated
financial support from other parties, or equity investors lack
voting control, an obligation to absorb expected losses or the
right to receive expected residual returns. FIN No. 46(R)
requires consolidation by a business of VIEs in which it is the
primary beneficiary. The primary beneficiary is defined as the
party that has exposure to the majority of the expected losses
and/or expected residual returns of the VIE. FIN No. 46(R)
was effective for the company in the first quarter, and there
was no material impact on its financial position, results of
operations or cash flows from adoption. In Canada, Accounting
Guideline 15 (AcG-15), Consolidation of
Variable Interest Entities, is harmonized with FIN
No. 46(R). The CICA has recently amended AcG-15 in an
effort to clarify certain issues. The amended guideline is
effective for all annual and interim periods beginning on or
after November 1, 2004. The company does not expect
application of the guideline to have a material impact on its
consolidated financial statements.

In December 2003, the Medicare Prescription Drug
Improvement and Modernization Act of 2003 (the Act)
was signed into law in the US. The Act introduced a
prescription drug benefit under Medicare (Medicare Part D)
as well as a federal subsidy to sponsors of retiree health care
benefit plans that provide a benefit that is at least
actuarially equivalent to Medicare Part D. In May 2004,
FASB Staff Position (FSP) No. 106-2,
Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of
2003 was issued. FSP No. 106-2 supersedes FSP
No. 106-1 of the same title, and provides guidance on the
accounting, disclosure and transition related to the Act. The
company applied the provisions of the FSP prospectively as of
July 1, 2004. The federal subsidy had the effect of
reducing the companys accumulated post-retirement benefit
obligation by $26.9 million and did not have a significant
impact on the measurement of the net periodic post-retirement
benefit cost for the period.

In March 2004, the FASB ratified consensuses
reached by the Emerging Issues Task Force (EITF)
with respect to EITF Issue No. 03-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain
Investments. EITF Issue No. 03-1 addresses
recognition, measurement and disclosure of other-than-temporary
impairment evaluations for securities within the scope of
SFAS 115, Accounting for Certain Investments in Debt
and Equity Securities, and equity securities that are not
subject to the scope of SFAS No. 115 and are not accounted
for under the equity method according to Accounting Principles
Board Opinion No. 18, The Equity Method of Accounting
for Investments in Common Stock. The recognition and
measurement guidance is effective for reporting periods
beginning after June 15, 2004. Disclosures for cost method
investments are required to be included in annual financial
statements prepared for fiscal years ending after June 15,
2004. In September 2004, the FASB issued FSP EITF
Issue 03-1-1, which delayed the effective date of certain
guidance on how to evaluate and recognize an impairment loss
that is other than temporary, pending issuance of proposed FSP
EITF Issue 03-1-a. The company does not expect this
consensus or FSP to have a material impact on its consolidated
financial statements.

In March 2004, the FASB issued an exposure draft,
Share-Based Payment  an amendment of Statements
No. 123 and 95 that addresses the accounting for
share-based payment transactions in which an enterprise receives
employee services in exchange for (a) equity instruments of
the enterprise or (b) liabilities that are based on the
fair value of the enterprises equity instruments or that
may be settled by the issuance of such equity instruments. The
proposal would eliminate the ability to account for share-based
compensation transactions using APB Opinion No. 25,
Accounting for Stock Issued to Employees, and
generally would

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require instead that such transactions be
accounted for using a fair-value-based method. In October 2004,
the FASB deferred the effective date of the proposal to interim
or annual periods beginning after June 15, 2005, meaning
that an entity would apply the guidance to all employee awards
of share-based payment granted, modified, or settled in any
interim or annual period beginning after June 15, 2005. The
company is reviewing the proposal to determine the potential
impact, if any, on its consolidated financial statements.


In June 2004, the FASB issued an exposure draft
of a proposed Statement, Fair Value Measurements to
provide guidance on how to measure the fair value of financial
and non-financial assets and liabilities when required by other
authoritative accounting pronouncements. The proposed statement
attempts to address concerns about the ability to develop
reliable estimates of fair value and inconsistencies in fair
value guidance provided by current US GAAP, by creating a
framework that clarifies the fair value objective and its
application in GAAP. In addition, the proposal expands
disclosures required about the use of fair value to remeasure
assets and liabilities. The standard would be effective for
financial statements issued for fiscal years beginning after
June 15, 2005.

In July 2004, the EITF discussed Issue
No. 04-6, Accounting for Post-Production Stripping
Costs in the Mining Industry. At its September meeting,
the EITF generally supported an approach that stripping costs
incurred during production are mine-development costs that
should be capitalized as an investment in the mine, and these
capitalized costs should be attributed to reserves in a
systematic and rational manner. The EITF clarified that an
enterprise would be expected to perform a detailed analysis of
its particular facts and circumstances to support its method of
attribution. Furthermore, an enterprise specifically must
attribute stripping costs incurred during production to reserves
that directly benefit from the stripping activities. The EITF
did not make this a final consensus because it wanted to explore
the impact of any consensus on mines with differing physical
patterns of ore location (which affects the overall timing of
attribution). Further discussion of this issue is expected at
the November EITF meeting.

In July 2004, the CICA proposed, subject to
comments received following exposure, to amend
Section 3500, Earnings per Share, to conform to
recent corresponding amendments proposed by the FASB and to
those adopted by the International Accounting Standards Board.
The CICA expects to issue its proposals in the fourth quarter of
2004 with an effective date for interim and annual periods
relating to fiscal years beginning on or after January 1,
2005.

In September 2004, SEC staff provided guidance on
the use of the so-called residual method to value
acquired intangible assets other than goodwill in a business
combination. The SEC concluded that the residual method does not
comply with the requirements of FASB Statement No. 141,
Business Combinations, and, accordingly, should no
longer be used. Instead, a direct value method should be used to
determine the fair value of all intangible assets required to be
recognized. Similarly, impairment testing of intangible assets
should not rely on a residual method, and should comply instead
with the provisions of FASB Statement No. 142,
Goodwill and Other Intangible Assets. The residual
method should not be used in accounting for intangible assets
(other than goodwill) acquired in business combinations
completed after September 29, 2004. Further, companies that
have applied the residual method to the valuation of intangible
assets for purposes of impairment testing will be required to
perform an impairment test (no later than the beginning of their
first fiscal year beginning after December 15, 2004) using
a direct method. The company does not expect this announcement
to have a material impact on its consolidated financial
statements.

In September 2004, the EITF discussed Issue
No. 03-13, Applying the Conditions in
Paragraph 42 of FASB Statement No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, in Determining
Whether to Report Discontinued Operations. The EITF
reached a tentative consensus that classification of a disposed
of or held-for-sale component as a discontinued operation is
only appropriate if the ongoing entity (i) expects to have
no continuing direct cash flows, and (ii) does
not retain or expect to retain an interest, contract, or other
arrangement sufficient to enable it to exert significant
influence over the disposed components operating and
financial policies after the disposal transaction. If ratified,
the effective date of this consensus would be for a component of
an entity that has been either disposed of, or classified as
held-for-sale, in periods beginning after December 15,
2004. Further discussion of this issue is expected at the
November EITF meeting.

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In October 2004, the CICA decided to defer the
mandatory effective date of proposed Section 1530,
Comprehensive Income, proposed Section 3855,
Financial Instruments  Recognition and
Measurement and proposed Section 3865,
Hedges, by one year, in order to allow adequate time
for implementation. The guidance will now apply for interim and
annual financial statements relating to fiscal years beginning
on or after October 1, 2006. Earlier adoption will be
permitted only as of the beginning of a fiscal year. The CICA
expects to issue the new pronouncements in the first quarter
of 2005.

RISK MANAGEMENT

An important part of PotashCorps strategic
planning process is understanding and managing risk. Our
approach to this responsibility begins with our identification
and analysis of the specific risks we face. We then rank them in
order of importance, according to the combination of their
likelihood of occurring and the significance of the
consequences, and determine the most effective ways to
manage them.

In 2002, management reported to the Board of
Directors on our most significant risks, our risk response
options and our risk administration. In 2003, we updated the
Board of Directors on the progress made on those risks, and
reported on the next tier of risks. Refer to our 2003 Annual
Report for information regarding managements assessments
of the companys risks. In the first nine months of 2004,
as part of its ongoing assessment of risks relating to the
company, management has reviewed and reported to the Board of
Directors and continues to monitor the companys risk
management practices. The identification and management of risk
is an ongoing process because circumstances change and risks
change with them.

OUTLOOK

Inventories for all three nutrients are well
below the five-year average, creating tight supply/ demand
fundamentals. According to The Fertilizer Institute,
producers inventories of potash were 42 percent below
the five-year average at the end of September while DAP
inventories were 33 percent below and urea was
44 percent below. Coupled with strong demand globally, the
momentum looks set to continue.

While the record harvest has put near-term
pressure on grain prices, most farmers are enjoying excellent
yields at previously locked-in higher prices and are facing
nutrient depletion of their land. These nutrients will need to
be replenished before the next planting season. Even with a
bumper crop in most agricultural regions, the worlds grain
stocks-to-use ratio is still projected to be 18.1 percent,
according to the United States Department of Agriculture. With
the exception of last year, that is the lowest ratio since 1975.
The current low grain prices have a closer correlation with
phosphate, if anything, than with potash or nitrogen, where
capacity constraints and natural gas are determining the market
outlook.

In potash, North American sales volumes should
increase from third-quarter levels as orders placed earlier this
year are filled and dealers ramp up for 2005. In fact,
second-half 2004 volumes to North American customers should
equal second-half 2003 volumes. In the offshore market, Canpotex
now expects to draw 8.0 million tonnes from its producers
in 2004, which will keep volumes healthy. PotashCorp currently
supplies 54.2 percent of Canpotex sales. Prices in both
markets are expected to end the fourth quarter at higher levels
than the third quarter. In 2003, PotashCorp produced
7.1 million tonnes KCl. We believe we can bring on
2.5 million tonnes of our excess capacity in short order
with little or no new capital cost. We also believe an
additional 2.5 million tonnes could be brought on stream
with an investment over several years, previously estimated to
approximate $300 million. The company is continuing its
assessment of the capital investment required to bring on this
additional tonnage.

Potash shipments to China will continue in 2004
under contract pricing, which is lower than current world
prices. Although ocean freight rates rose throughout the
quarter, Canpotex has locked in freight rates for approximately
half of delivered sales for the rest of the year, so the
exposure is lessened. On November 5, 2004 the company
announced that Canpotex had signed a 2005 sales contract for
1.5 million tonnes red standard grade potash with Sinochem,
Chinas largest potash importer. The agreement includes a
10 percent additional volume option and provides a price
increase of $40 per tonne over last years contract price.
Canpotex has also contracted for the sale of 0.3 million
tonnes of white standard grade potash at a $43 per tonne price
increase over last years contract price. Over and above
the sale of the two grades of standard

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product, Canpotex and Sinochem have negotiated a
2005 contract for 0.3 million tonnes of granular potash at
prices $10 above the red standard price. This will be the first
time Sinochem has ever taken granular product. In total,
Sinochem is expected to take a minimum of 2.1 million
tonnes of product from Canpotex in 2005, an increase of
27 percent over the 1.65 million expected sales tonnes
in 2004.


In nitrogen, NYMEX natural gas prices will likely
remain high. With ammonia prices tracking gas prices, this makes
our Trinidad asset with its low-cost gas increasingly valuable.
Hence, the strong performance of this nutrient should continue.

For the fourth quarter, PotashCorps natural
gas requirements are approximately 80 percent hedged at
$3.35/MMBtu. At current gas prices, the remaining 2004 hedge
portfolio is valued at approximately $10.0 million. For
2005, including Trinidad indexed gas pricing, the company is
approximately 70 percent hedged at $2.65/MMBtu. Our
US hedge position is subject to collared profits from
November 2004 through to March 2005.

The market for solid phosphate fertilizer remains
tight. Prices, which began to edge up by the end of the third
quarter, should improve further as China is expected to fulfill
its PhosChem obligation in the fourth quarter. Any margin
improvement in phosphate could be tempered by higher ammonia
prices. While the feed business has been under pressure, the
company has recently announced a $33.00 per tonne price increase
effective December 1, 2004. Our industrial business is
expected to be our top achiever in phosphate, with gross margin
approximating 25 percent of net sales.

Given these conditions, the outlook for the
fourth quarter is positive. PotashCorp now expects 2004 earnings
to be in the range of $2.40 to $2.50 per share, depending on the
Canadian dollar. This is up from the previous guidance of $2.13
to $2.38 per share and assumes a Canadian dollar exchange rate
of 1.26 by the end of the year. Every one-cent change in the
Canadian dollar impacts our foreign exchange gain/loss line item
by approximately $3.0 million or $0.02 per share. We expect
these earnings would generate cash from operating activities of
approximately $600.0 million.

The overall effective income tax rate is still
expected to approximate 33 percent for the year with a
current/ future split of 65/35. Provincial mining and other
taxes should approximate 21 percent of potash gross margin
for the fourth quarter, depending on sales mix.

FORWARD LOOKING STATEMENTS

Certain statements in this Quarterly Report on
Form 10-Q and this Managements Discussion and
Analysis of Financial Condition and Results of Operations,
including those in the Outlook section relating to
the period after September 30, 2004, are forward-looking
statements subject to risks and uncertainties. A number of
factors could cause actual results to differ materially from
those expressed in the forward-looking statements, including,
but not limited to: fluctuation in supply and demand in
fertilizer, sulfur and petrochemical markets; changes in
competitive pressures, including pricing pressures; risks
associated with natural gas and other hedging activities;
changes in capital markets; changes in currency and exchange
rates; unexpected geological or environmental conditions;
imprecision in reserve estimates; the outcome of legal
proceedings; changes in government policy and regulation; and
acquisitions the company may undertake in the future. The
company sells to a diverse group of customers both by geography
and by end product. Market conditions will vary on a
quarter-over-quarter and year-over-year basis and sales can be
expected to shift from one period to another. The company
disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise, except as otherwise
required by applicable law.

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|        |                                                               
|------- | --------------------------------------------------------------
|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES
    ABOUT MARKET RISK

Commodity Risk

PotashCorps nitrogen operations are
significantly affected by the price of natural gas. We employ
derivative commodity instruments related to a portion of our
natural gas requirements (primarily futures, swaps and options)
for the purpose of managing our exposure to commodity price risk
in the purchase of natural gas. Changes in the market value of
these derivative instruments have a high correlation to changes
in the spot price of natural gas. Gains or losses arising from
settled hedging transactions are deferred as a component of
inventory until the product containing the hedged item is sold.
Changes in the market value of open hedging transactions are not
recognized as they generally relate to changes in the spot price
of anticipated natural gas purchases.

A sensitivity analysis has been prepared to
estimate our market risk exposure arising from derivative
commodity instruments. The fair value of such instruments is
calculated by valuing each position using quoted market prices.
Market risk is estimated as the potential loss in fair value
resulting from a hypothetical 10-percent adverse change in such
prices. The results of this analysis indicate that as of
September 30, 2004, our estimated derivative commodity
instruments market risk exposure was $31.3 million
(2003  $21.5 million). Actual results may differ
from this estimate. Changes in the fair value of such derivative
instruments, with maturities in 2004 through 2014, will
generally relate to changes in the spot price of anticipated
natural gas purchases.

Foreign Exchange Risk

We also enter into forward exchange contracts for
the sole purpose of limiting exposure to exchange rate
fluctuations relating to certain trade accounts. These contracts
are not designated as hedging instruments for accounting
purposes. Gains or losses resulting from foreign exchange
contracts are recognized in earnings in the period in which
changes in fair value occur.

As at September 30, 2004, we had entered
into forward exchange contracts to sell US dollars and receive
Canadian dollars in the notional amount of $30.0 million
(2003  $38.0 million) at an average exchange
rate of 1.3654 (2003  1.3916). Expected maturity
dates for all forward contracts are within fiscal 2004.

Interest Rate Risk

We address interest rate risk by using a
diversified portfolio of fixed and floating rate instruments. We
are exposed to risk resulting from changes in interest rates as
a result of the issuance of variable rate debt and commercial
paper. The company manages this exposure by aligning current and
long-term assets with variable and fixed rate debt, limiting
variable rate and fixed rate exposures to percentages of total
capitalization and by monitoring the effects of market changes
in interest rates.

As at September 30, 2004, our short-term
debt (comprised of commercial paper) was $94.9 million, our
current portion of long-term debt was $1.3 million and our
long-term debt was $1,267.9 million. Long-term debt is
comprised primarily of $1,250.0 million of notes payable
that were issued under our US shelf registration statements at a
fixed interest rate. In January and February 2004, we entered
into contracts that exchanged a notional amount of
$300.0 million of our 7.75 percent fixed rate notes
into floating rate debt based on six-month US LIBOR rates.
The company terminated the interest rate swap contracts in
October 2004.

One means of assessing exposure to interest rate
changes is a duration-based analysis that measures the potential
loss in net earnings and cash flow resulting from a hypothetical
10-percent change in interest rates across interest rate
sensitive maturities. Under this model, it is estimated that,
all else constant, such a change would not materially impact our
2004 net earnings or cash flows based on the same level of
borrowing. If interest rates changed significantly, management
would likely take actions to manage our exposure to the change.
However, due to the uncertainty of the specific actions that
would be taken and their possible effects, the sensitivity
analysis assumes no changes in our financial structure.

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|        |                        
|------- | -----------------------
|ITEM 4. | CONTROLS AND PROCEDURES

As of September 30, 2004, we carried out an
evaluation under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. There are
inherent limitations to the effectiveness of any system of
disclosure controls and procedures, including the possibility of
human error and the circumvention or overriding of the controls
and procedures. Accordingly, even effective disclosure controls
and procedures can only provide reasonable assurance of
achieving their control objectives. Based upon that evaluation
and as of September 30, 2004, the Chief Executive Officer
and Chief Financial Officer concluded that the disclosure
controls and procedures were effective to provide reasonable
assurance that information required to be disclosed in the
reports the company files and submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and
reported as and when required.

There has been no change in our internal control
over financial reporting during the quarter ended
September 30, 2004 that has materially affected, or is
reasonably likely to materially affect, our internal control
over financial reporting.

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PART II.     OTHER
INFORMATION






ITEM 1.LEGAL
PROCEEDINGS


Pamlico-Tar River Foundation

On April 4, 2002, the Pamlico-Tar River
Foundation filed a complaint under the Clean Water Act against
the U.S. Army Corps of Engineers (the Corps),
the U.S. Environmental Protection Agency, several
individual employees of those agencies and us in
U.S. District Court for the Eastern District of North
Carolina contesting and seeking revocation of our 1997 Corps
permit and alleging that the U.S. Environmental Protection
Agency and the Corps, in the issuance of the permit, violated
certain requirements under the Clean Water Act and the National
Environmental Policy Act governing their evaluation of the
activities to be permitted and of reasonable and practicable
alternatives to those activities. On July 20, 2004, the
District Court heard oral argument on motions for summary
judgment which were filed by all parties. On August 6,
2004, we and the governmental parties received summary judgment
upholding the issuance of the permit. The appeal period has
expired.




ITEM
6.     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 (the Third Quarter
    2003 Form 10-Q).
|       
|        | 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) |                         |  | 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(e) |                         |  | 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(f) |                         |  | 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(g) |                         |  | Form of Notes relating to the registrants
    offering of $600,000,000 principal amount of 7 3/4% 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(h) |                         |  | 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.                                                                                                                           

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The registrant hereby undertakes to file with the
Securities and Exchange Commission, upon request, copies of any
constituent instruments defining the rights of holders of
long-term debt of the registrant or its subsidiaries that have
not been filed herewith because the amounts represented thereby
are less than 10% of the total assets of the registrant and its
subsidiaries on a consolidated basis.

|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | ----- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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) |                         |  | Form of Agreement of Limited Partnership of
    Arcadian Fertilizer, L.P. dated as of March 3, 1992, and
    the related Certificate of Limited Partnership of Arcadian
    Fertilizer, L.P., filed with the Secretary of State of the State
    of Delaware on March 3, 1992, incorporated by reference to
    Exhibits 3.1 and 3.2 to Arcadian Partners L.P.s
    Registration Statement on Form S-1 (File No. 33-45828).                                   
|       
|        | 10(i) |                         |  | Amendment to Agreement of Limited Partnership of
    Arcadian Fertilizer, L.P. and related Certificates of Limited
    Partnership of Arcadian Fertilizer, L.P. filed with the
    Secretary of State of the State of Delaware on March 6,
    1997 and November 26, 1997, incorporated by reference to
    Exhibit 10(f) to the registrants report on
    Form 10-K for the year ended December 31, 1998 (the
    1998 Form 10-K).                         
|       
|        | 10(j) |                         |  | Second amendment to Agreement of Limited
    Partnership of PCS Nitrogen Fertilizer, L.P. dated
    December 15, 2002, incorporated by reference to
    Exhibit 10(i) to the 2002 Form 10-K.                                                                                                                                                                                                                                                                   
|       
|        | 10(k) |                         |  | Third amendment to Agreement of Limited
    Partnership of PCS Nitrogen Fertilizer, L.P. dated
    December 15, 2003, incorporated by reference to
    Exhibit 10(k) to the Second Quarter 2004 Form 10-Q.                                                                                                                                                                                                                                                     
|       
|        | 10(l) |                         |  | Geismar Complex Services Agreement dated
    June 4, 1984, between Honeywell International, Inc. and
    Arcadian Corporation, incorporated by reference to
    Exhibit 10.4 to Arcadian Corporations Registration
    Statement on Form S-1 (File No. 33-34357).                                                                                                                                                                                             

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|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | ----- | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|        | 10(m) |                         |  | 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(n) |                         |  | 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.                                                                                                                                                                                                                               
|       
|        | 10(o) |                         |  | 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 1998
    Form 10-K.                                                                                                                                                                                                                                                                                
|       
|        | 10(p) |                         |  | 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(q) |                         |  | Operating Agreement dated May 11, 1993,
    between BP Chemicals Inc. and Arcadian Ohio, L.P., as amended by
    the First Amendment to the Operating Agreement dated as of
    November 20, 1995, between BP Chemicals Inc. and Arcadian
    Ohio, L.P. (the First Amendment), incorporated by
    reference to Exhibit 10.2 to Arcadian Partners L.P.s
    current report on Form 8-K for the report event dated
    May 11, 1993, except for the First Amendment which is
    incorporated by reference to Arcadian Corporations report
    on Form 10-K for the year ended December 31, 1995.
|       
|        | 10(r) |                         |  | Second Amendment to Operating Agreement between
    BP Chemicals, Inc. and Arcadian Ohio, L.P., dated as of
    November 25, 1996, incorporated by reference to
    Exhibit 10(k) of the registrants report on
    Form 10-K for the year ended December 31, 1997 (the
    1997 Form 10-K).                                                                                                                                                                                                                                                                                                       
|       
|        | 10(s) |                         |  | Manufacturing Support Agreement dated
    May 11, 1993, between BP Chemicals Inc. and Arcadian Ohio,
    L.P., incorporated by reference to Exhibit 10.3 to Arcadian
    Partners L.P.s current report on Form 8-K for the
    report event dated May 11, 1993.                                                                                                                                                                                                                                                                                                                                     
|       
|        | 10(t) |                         |  | First Amendment to Manufacturing Support
    Agreement dated as of November 25, 1996, between BP
    Chemicals, Inc. and Arcadian Ohio, L.P., incorporated by
    reference to Exhibit 10(l) to the 1997 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        | 10(u) |                         |  | Letter of amendment to the Manufacturing Support
    Agreement and Operating Agreement dated September 8, 2003,
    between BP Chemicals Inc. and PCS Nitrogen Ohio, L.P.,
    incorporated by reference to Exhibit 10(s) to the Third
    Quarter 2003 Form 10-Q.                                                                                                                                                                                                                                                                                                                                   
|       
|        | 10(v) |                         |  | Potash Corporation of Saskatchewan Inc. Stock
    Option Plan  Directors, as amended January 23,
    2001, incorporated by reference to Exhibit 10(bb) to the
    Second Quarter 2001 Form 10-Q.                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 10(w) |                         |  | 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(x) |                         |  | Short-Term Incentive Plan of the registrant
    effective January 2000, incorporated by reference to
    Exhibit 10(z) to the registrants report on
    Form 10-Q for the quarterly period ended March 31,
    2000 (the First Quarter 2000 Form 10-Q).                                                                                                                                                                                                                                                                                                                                           
|       
|        | 10(y) |                         |  | Long-Term Incentive Plan of the registrant
    effective January 2000, incorporated by reference to
    Exhibit 10(aa) to the registrants report on
    Form 10-Q for the quarterly period ended June 30, 2000
    (the Second Quarter 2000 Form 10-Q).                                                                                                                                                                                                                                                                                                                                           

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|        |        |                         |  |                                                                                                                                                                                                                                                                                                                                                  
|------- | ------ | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                        
|Number  |        | Description of Document
|        |        |                        
|        | 10(z)  |                         |  | Long-Term Incentive Plan of the registrant
    effective January 2003, incorporated by reference to
    Exhibit 10(y) to the 2002 Form 10-K.                                                                                                                                                                                                     
|       
|        | 10(aa) |                         |  | 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(bb) |                         |  | 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(cc) |                         |  | 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 (the Third Quarter 2000 Form 10-Q).
|       
|        | 10(dd) |                         |  | 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(ee) |                         |  | 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(ff) |                         |  | 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(gg) |                         |  | 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(hh) |                         |  | 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(ii) |                         |  | 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(jj) |                         |  | Chief Executive Officer Medical and Dental Plan,
    incorporated by reference to Exhibit 10(jj) to the 2000
    Form 10-K.                                                                                                                                                                                                                      
|       
|        | 10(kk) |                         |  | 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.                                                                          
|       
|        | 10(ll) |                         |  | 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(mm) |                         |  | 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.                                                                                                                                                             
|       
|        | 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.                                                                                                                                                                                                                                                                     

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SIGNATURES

Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.



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

November 5, 2004

| |     |                      
| | --- | ---------------------
| | By: | /s/ JOHN L.M. HAMPTON

| |                                                         
| | --------------------------------------------------------
| |                                                         
| | John L.M. Hampton                                       
| | Senior Vice President, General Counsel and
    Secretary

November 5, 2004

| |     |                      
| | --- | ---------------------
| | By: | /s/ WAYNE R. BROWNLEE

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

52



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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 (the Third Quarter
    2003 Form 10-Q).
|       
|        | 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) |                         |  | 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(e) |                         |  | 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(f) |                         |  | 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(g) |                         |  | Form of Notes relating to the registrants
    offering of $600,000,000 principal amount of 7 3/4% 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(h) |                         |  | 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.                                                                                                                           



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##### Table of Contents



The registrant hereby undertakes to file with the
Securities and Exchange Commission, upon request, copies of any
constituent instruments defining the rights of holders of
long-term debt of the registrant or its subsidiaries that have
not been filed herewith because the amounts represented thereby
are less than 10% of the total assets of the registrant and its
subsidiaries on a consolidated basis.

|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | ----- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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) |                         |  | Form of Agreement of Limited Partnership of
    Arcadian Fertilizer, L.P. dated as of March 3, 1992, and
    the related Certificate of Limited Partnership of Arcadian
    Fertilizer, L.P., filed with the Secretary of State of the State
    of Delaware on March 3, 1992, incorporated by reference to
    Exhibits 3.1 and 3.2 to Arcadian Partners L.P.s
    Registration Statement on Form S-1 (File No. 33-45828).                                   
|       
|        | 10(i) |                         |  | Amendment to Agreement of Limited Partnership of
    Arcadian Fertilizer, L.P. and related Certificates of Limited
    Partnership of Arcadian Fertilizer, L.P. filed with the
    Secretary of State of the State of Delaware on March 6,
    1997 and November 26, 1997, incorporated by reference to
    Exhibit 10(f) to the registrants report on
    Form 10-K for the year ended December 31, 1998 (the
    1998 Form 10-K).                         
|       
|        | 10(j) |                         |  | Second amendment to Agreement of Limited
    Partnership of PCS Nitrogen Fertilizer, L.P. dated
    December 15, 2002, incorporated by reference to
    Exhibit 10(i) to the 2002 Form 10-K.                                                                                                                                                                                                                                                                   
|       
|        | 10(k) |                         |  | Third amendment to Agreement of Limited
    Partnership of PCS Nitrogen Fertilizer, L.P. dated
    December 15, 2003, incorporated by reference to
    Exhibit 10(k) to the Second Quarter 2004 Form 10-Q.                                                                                                                                                                                                                                                     
|       
|        | 10(l) |                         |  | Geismar Complex Services Agreement dated
    June 4, 1984, between Honeywell International, Inc. and
    Arcadian Corporation, incorporated by reference to
    Exhibit 10.4 to Arcadian Corporations Registration
    Statement on Form S-1 (File No. 33-34357).                                                                                                                                                                                             



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##### Table of Contents



|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | ----- | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|        | 10(m) |                         |  | 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(n) |                         |  | 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.                                                                                                                                                                                                                               
|       
|        | 10(o) |                         |  | 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 1998
    Form 10-K.                                                                                                                                                                                                                                                                                
|       
|        | 10(p) |                         |  | 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(q) |                         |  | Operating Agreement dated May 11, 1993,
    between BP Chemicals Inc. and Arcadian Ohio, L.P., as amended by
    the First Amendment to the Operating Agreement dated as of
    November 20, 1995, between BP Chemicals Inc. and Arcadian
    Ohio, L.P. (the First Amendment), incorporated by
    reference to Exhibit 10.2 to Arcadian Partners L.P.s
    current report on Form 8-K for the report event dated
    May 11, 1993, except for the First Amendment which is
    incorporated by reference to Arcadian Corporations report
    on Form 10-K for the year ended December 31, 1995.
|       
|        | 10(r) |                         |  | Second Amendment to Operating Agreement between
    BP Chemicals, Inc. and Arcadian Ohio, L.P., dated as of
    November 25, 1996, incorporated by reference to
    Exhibit 10(k) of the registrants report on
    Form 10-K for the year ended December 31, 1997 (the
    1997 Form 10-K).                                                                                                                                                                                                                                                                                                       
|       
|        | 10(s) |                         |  | Manufacturing Support Agreement dated
    May 11, 1993, between BP Chemicals Inc. and Arcadian Ohio,
    L.P., incorporated by reference to Exhibit 10.3 to Arcadian
    Partners L.P.s current report on Form 8-K for the
    report event dated May 11, 1993.                                                                                                                                                                                                                                                                                                                                     
|       
|        | 10(t) |                         |  | First Amendment to Manufacturing Support
    Agreement dated as of November 25, 1996, between BP
    Chemicals, Inc. and Arcadian Ohio, L.P., incorporated by
    reference to Exhibit 10(l) to the 1997 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        | 10(u) |                         |  | Letter of amendment to the Manufacturing Support
    Agreement and Operating Agreement dated September 8, 2003,
    between BP Chemicals Inc. and PCS Nitrogen Ohio, L.P.,
    incorporated by reference to Exhibit 10(s) to the Third
    Quarter 2003 Form 10-Q.                                                                                                                                                                                                                                                                                                                                   
|       
|        | 10(v) |                         |  | Potash Corporation of Saskatchewan Inc. Stock
    Option Plan  Directors, as amended January 23,
    2001, incorporated by reference to Exhibit 10(bb) to the
    Second Quarter 2001 Form 10-Q.                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 10(w) |                         |  | 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(x) |                         |  | Short-Term Incentive Plan of the registrant
    effective January 2000, incorporated by reference to
    Exhibit 10(z) to the registrants report on
    Form 10-Q for the quarterly period ended March 31,
    2000 (the First Quarter 2000 Form 10-Q).                                                                                                                                                                                                                                                                                                                                           
|       
|        | 10(y) |                         |  | Long-Term Incentive Plan of the registrant
    effective January 2000, incorporated by reference to
    Exhibit 10(aa) to the registrants report on
    Form 10-Q for the quarterly period ended June 30, 2000
    (the Second Quarter 2000 Form 10-Q).                                                                                                                                                                                                                                                                                                                                           



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##### Table of Contents



|        |        |                         |  |                                                                                                                                                                                                                                                                                                                                                  
|------- | ------ | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                        
|Number  |        | Description of Document
|        |        |                        
|        | 10(z)  |                         |  | Long-Term Incentive Plan of the registrant
    effective January 2003, incorporated by reference to
    Exhibit 10(y) to the 2002 Form 10-K.                                                                                                                                                                                                     
|       
|        | 10(aa) |                         |  | 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(bb) |                         |  | 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(cc) |                         |  | 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 (the Third Quarter 2000 Form 10-Q).
|       
|        | 10(dd) |                         |  | 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(ee) |                         |  | 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(ff) |                         |  | 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(gg) |                         |  | 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(hh) |                         |  | 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(ii) |                         |  | 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(jj) |                         |  | Chief Executive Officer Medical and Dental Plan,
    incorporated by reference to Exhibit 10(jj) to the 2000
    Form 10-K.                                                                                                                                                                                                                      
|       
|        | 10(kk) |                         |  | 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.                                                                          
|       
|        | 10(ll) |                         |  | 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(mm) |                         |  | 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.                                                                                                                                                             
|       
|        | 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.