##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q


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

Commission File Number 1-10351


POTASH CORPORATION OF SASKATCHEWAN INC.


(Exact name of registrant as specified in its charter)


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

306-933-8500


(Registrants telephone number, including area code)




þ o


12b-2


þ o o


12b-2).


o þ












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TABLE OF CONTENTS



|                                                                                             |  |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I.FINANCIAL INFORMATION                                                                
|ITEM 1.FINANCIAL STATEMENTS                                                                 
|Condensed Consolidated Statements of Financial Position                                     
|Condensed Consolidated Statements of Operations and Retained Earnings                       
|Condensed Consolidated Statements of Cash Flow                                              
|ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|ITEM 4.CONTROLS AND PROCEDURES                                                              
|PART II.OTHER INFORMATION                                                                   
|ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|ITEM 6.EXHIBITS                                                                             
|SIGNATURES                                                                                  
|EXHIBIT INDEX                                                                               
|Computation of Per Share Earnings Six Months Ended June 30                                  
|Certification of William J Doyle                                                            
|Certification of Wayne R Brownlee                                                           
|Sarbanes-Oxley Certification                                                                



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##### Table of Contents






PART I.       FINANCIAL
INFORMATION







ITEM 1.       FINANCIAL
STATEMENTS


Potash Corporation of Saskatchewan Inc.







Condensed Consolidated Statements of Financial Position


(in millions of US dollars except share amounts)


(unaudited)


|                                                                |                                                                                                                                                                             |          |         |              |  |   |         |       | 
|--------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | ------- | ------------ |  | - | ------- | ----- | 
|                                                                |                                                                                                                                                                             | June 30, |         | December 31,
|                                                                |                                                                                                                                                                             | 2006     |         | 2005        
|                                                               
|Assets                                                          |                                                                                                                                                                             |          |         |              |  |   |         |      
|Current assets                                                  |                                                                                                                                                                             |          |         |              |  |   |         |      
|                                                                | Cash and cash equivalents                                                                                                                                                   |          | $       | 129.7        |  |   | $       | 93.9  | 
|                                                                | Accounts receivable                                                                                                                                                         |          |         | 401.8        |  |   |         | 453.3 | 
|                                                                | Inventories (Note 2)                                                                                                                                                        |          |         | 517.7        |  |   |         | 522.5 | 
|                                                                | Prepaid expenses and other current assets                                                                                                                                   |          |         | 74.8         |  |   |         | 41.1  | 
|                                                               
|                                                                |                                                                                                                                                                             |          | 1,124.0 |              |  |   | 1,110.8 |      
|                                                               
|Property, plant and equipment                                   |                                                                                                                                                                             |          | 3,397.7 |              |  |   | 3,262.8 |      
|Other assets (Note 3)                                           |                                                                                                                                                                             |          | 976.6   |              |  |   | 852.8   |      
|Intangible assets                                               |                                                                                                                                                                             |          | 32.1    |              |  |   | 34.5    |      
|Goodwill                                                        |                                                                                                                                                                             |          | 97.0    |              |  |   | 97.0    |      
|                                                               
|                                                                |                                                                                                                                                                             | $        | 5,627.4 |              |  | $ | 5,357.9 |      
|                                                               
|                                                               
|Liabilities                                                    
|Current liabilities                                             |                                                                                                                                                                             |          |         |              |  |   |         |      
|                                                                | Short-term debt                                                                                                                                                             |          | $       | 556.5        |  |   | $       | 252.2 | 
|                                                                | Accounts payable and accrued charges                                                                                                                                        |          |         | 489.9        |  |   |         | 842.7 | 
|                                                                | Current portion of long-term debt                                                                                                                                           |          |         | 401.0        |  |   |         | 1.2   | 
|                                                               
|                                                                |                                                                                                                                                                             |          | 1,447.4 |              |  |   | 1,096.1 |      
|                                                               
|Long-term debt                                                  |                                                                                                                                                                             |          | 857.1   |              |  |   | 1,257.6 |      
|Future income tax liability                                     |                                                                                                                                                                             |          | 555.7   |              |  |   | 543.3   |      
|Accrued pension and other post-retirement benefits              |                                                                                                                                                                             |          | 215.6   |              |  |   | 213.9   |      
|Accrued environmental costs and asset retirement obligations    |                                                                                                                                                                             |          | 101.6   |              |  |   | 97.3    |      
|Other non-current liabilities and deferred credits              |                                                                                                                                                                             |          | 13.4    |              |  |   | 17.2    |      
|                                                               
|                                                                |                                                                                                                                                                             |          | 3,190.8 |              |  |   | 3,225.4 |      
|                                                               
|Contingencies and Guarantees(Notes 11 and 12,
    respectively) |                                                                                                                                                                             |          |         |              |  |   |         |      
|Shareholders Equity                                            |                                                                                                                                                                             |          |         |              |  |   |         |      
|Share capital                                                   |                                                                                                                                                                             |          | 1,390.9 |              |  |   | 1,379.3 |      
|                                                                | Unlimited authorization of common shares without par value;
    issued and outstanding 103,873,947 and 103,593,792 at
    June 30, 2006 and December 31, 2005, respectively |          |         |              |  |   |         |       | 
|                                                                | Unlimited authorization of first preferred shares; none
    outstanding                                                                                                     |          |         |              |  |   |         |       | 
|Contributed surplus                                             |                                                                                                                                                                             |          | 59.1    |              |  |   | 36.3    |      
|Retained earnings                                               |                                                                                                                                                                             |          | 986.6   |              |  |   | 716.9   |      
|                                                               
|                                                                |                                                                                                                                                                             |          | 2,436.6 |              |  |   | 2,132.5 |      
|                                                               
|                                                                |                                                                                                                                                                             | $        | 5,627.4 |              |  | $ | 5,357.9 |      
|                                                               



2



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##### Table of Contents



Potash Corporation of Saskatchewan Inc.







Condensed Consolidated Statements of Operations and Retained
Earnings


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


(unaudited)


|                                       |         |                    |       |                  |  |      |         |      |  |   |         |      |  |   |         |      | 
|-------------------------------------- | ------- | ------------------ | ----- | ---------------- |  | ---- | ------- | ---- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                       |         | Three Months Ended |       | Six Months Ended
|                                       |         | June 30            |       | June 30         
|                                       |         | 2006               |       | 2005             |  | 2006 |         | 2005
|                                      
|Sales(Note 6)                          |         | $                  | 928.7 |                  |  | $    | 1,057.3 |      |  | $ | 1,790.3 |      |  | $ | 1,978.7 |     
|Less: Freight                          |         |                    | 62.3  |                  |  |      | 67.4    |      |  |   | 117.2   |      |  |   | 134.6   |     
|Transportation
    and distribution    |         |                    | 35.8  |                  |  |      | 32.1    |      |  |   | 67.0    |      |  |   | 61.0    |     
|Cost of
    goods sold                 |         |                    | 577.2 |                  |  |      | 613.0   |      |  |   | 1,149.2 |      |  |   | 1,179.8 |     
|                                      
|Gross Margin                           |         |                    | 253.4 |                  |  |      | 344.8   |      |  |   | 456.9   |      |  |   | 603.3   |     
|                                      
|Selling and administrative             |         |                    | 47.9  |                  |  |      | 54.9    |      |  |   | 78.7    |      |  |   | 84.2    |     
|Provincial mining and other taxes      |         |                    | 14.5  |                  |  |      | 44.2    |      |  |   | 28.7    |      |  |   | 82.6    |     
|Foreign exchange loss (gain)           |         |                    | 16.3  |                  |  |      | (6.1    | )    |  |   | 13.9    |      |  |   | (12.0   | )   
|Other income (Note 9)                  |         |                    | (20.0 | )                |  |      | (13.9   | )    |  |   | (51.2   | )    |  |   | (33.9   | )   
|                                      
|                                       |         |                    | 58.7  |                  |  |      | 79.1    |      |  |   | 70.1    |      |  |   | 120.9   |     
|                                      
|Operating Income                       |         |                    | 194.7 |                  |  |      | 265.7   |      |  |   | 386.8   |      |  |   | 482.4   |     
|Interest Expense                       |         |                    | 20.7  |                  |  |      | 20.6    |      |  |   | 43.9    |      |  |   | 41.3    |     
|                                      
|Income Before Income Taxes             |         |                    | 174.0 |                  |  |      | 245.1   |      |  |   | 342.9   |      |  |   | 441.1   |     
|Income Taxes(Note 4)                   |         |                    | (1.1  | )                |  |      | 80.9    |      |  |   | 42.3    |      |  |   | 145.6   |     
|                                      
|Net Income                             |         | $                  | 175.1 |                  |  | $    | 164.2   |      |  |   | 300.6   |      |  |   | 295.5   |     
|                                       |         |                    |       |                  |  |      |         |      |  |  
|Retained Earnings, Beginning of Period |         |                    |       |                  |  |      |         |      |  |   | 716.9   |      |  |   | 701.5   |     
|Dividends                              |         |                    |       |                  |  |      |         |      |  |   | (30.9   | )    |  |   | (33.5   | )   
|                                      
|Retained Earnings, End of Period       |         |                    |       |                  |  |      |         |      |  | $ | 986.6   |      |  | $ | 963.5   |     
|                                      
|Net Income Per Share(Note 5)           |         |                    |       |                  |  |      |         |      |  |   |         |      |  |   |         |     
|                                       | Basic   |                    | $     | 1.69             |  |      | $       | 1.50 |  |   | $       | 2.90 |  |   | $       | 2.68 | 
|                                       | Diluted |                    | $     | 1.65             |  |      | $       | 1.46 |  |   | $       | 2.84 |  |   | $       | 2.61 | 
|                                      
|Dividends Per Share                    |         | $                  | 0.15  |                  |  | $    | 0.15    |      |  | $ | 0.30    |      |  | $ | 0.30    |     
|                                      



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##### Table of Contents



Potash Corporation of Saskatchewan Inc.







Condensed Consolidated Statements of Cash Flow


(in millions of US dollars)


(unaudited)


|                                                                                      |                                                           |                    |        |                  |   |      |        |       |   |   |        |        |   |   |        |       |  
|------------------------------------------------------------------------------------- | --------------------------------------------------------- | ------------------ | ------ | ---------------- | - | ---- | ------ | ----- | - | - | ------ | ------ | - | - | ------ | ----- | -
|                                                                                      |                                                           | Three Months Ended |        | Six Months Ended
|                                                                                      |                                                           | June 30            |        | June 30         
|                                                                                      |                                                           | 2006               |        | 2005             |   | 2006 |        | 2005 
|                                                                                     
|Operating Activities                                                                  |                                                           |                    |        |                  |   |      |        |       |   |   |        |        |   |   |        |      
|Net income                                                                            |                                                           | $                  | 175.1  |                  |   | $    | 164.2  |       |   | $ | 300.6  |        |   | $ | 295.5  |      
|                                                                                     
|Adjustments to reconcile net income to cash provided by
    operating activities      |                                                           |                    |        |                  |   |      |        |       |   |   |        |        |   |   |        |      
|                                                                                      | Depreciation and amortization                             |                    |        | 60.4             |   |      |        | 62.4  |   |   |        | 119.2  |   |   |        | 122.0 |  
|                                                                                      | Stock-based compensation                                  |                    |        | 22.5             |   |      |        | 23.0  |   |   |        | 24.0   |   |   |        | 24.0  |  
|                                                                                      | Loss on disposal of long-term assets                      |                    |        |                 |   |      |        | 3.5   |   |   |        | 0.3    |   |   |        | 5.5   |  
|                                                                                      | Foreign exchange on future income tax                     |                    |        | 12.3             |   |      |        | (2.8  | ) |   |        | 12.1   |   |   |        | (4.0  | )
|                                                                                      | (Recovery of) provision for future income tax             |                    |        | (27.8            | ) |      |        | 8.1   |   |   |        | (13.9  | ) |   |        | 14.6  |  
|                                                                                      | Undistributed earnings of equity investees                |                    |        | 13.9             |   |      |        | (1.3  | ) |   |        | 1.5    |   |   |        | (14.4 | )
|                                                                                      | Other long-term liabilities                               |                    |        | 0.6              |   |      |        | 13.8  |   |   |        | 2.6    |   |   |        | 19.0  |  
|                                                                                     
|                                                                                      | Subtotal of adjustments                                   |                    |        | 81.9             |   |      |        | 106.7 |   |   |        | 145.8  |   |   |        | 166.7 |  
|                                                                                     
|                                                                                      | Changes in non-cash operating working capital             |                    |        |                  |   |      |        |       |   |   |        |        |   |   |        |       |  
|                                                                                      | Accounts receivable                                       |                    |        | (11.8            | ) |      |        | 35.5  |   |   |        | 51.5   |   |   |        | (28.0 | )
|                                                                                      | Inventories                                               |                    |        | (10.4            | ) |      |        | 11.3  |   |   |        | (1.5   | ) |   |        | 9.6   |  
|                                                                                      | Prepaid expenses and other current assets                 |                    |        | (6.7             | ) |      |        | 6.7   |   |   |        | (33.7  | ) |   |        | 0.5   |  
|                                                                                      | Accounts payable and accrued charges                      |                    |        | (86.9            | ) |      |        | 23.9  |   |   |        | (334.0 | ) |   |        | 25.7  |  
|                                                                                     
|                                                                                      | Subtotal of changes in non-cash operating working capital |                    |        | (115.8           | ) |      |        | 77.4  |   |   |        | (317.7 | ) |   |        | 7.8   |  
|                                                                                     
|Cash provided by operating activities                                                 |                                                           |                    | 141.2  |                  |   |      | 348.3  |       |   |   | 128.7  |        |   |   | 470.0  |      
|                                                                                     
|Investing Activities                                                                  |                                                           |                    |        |                  |   |      |        |       |   |   |        |        |   |   |        |      
|Additions to property, plant and equipment                                            |                                                           |                    | (131.1 | )                |   |      | (74.4  | )     |   |   | (251.1 | )      |   |   | (137.4 | )    
|Purchase of long-term investments                                                     |                                                           |                    | (3.7   | )                |   |      | (93.5  | )     |   |   | (130.0 | )      |   |   | (93.5  | )    
|Proceeds from disposal of property, plant and equipment and
    long-term investments |                                                           |                    | 0.2    |                  |   |      | 0.9    |       |   |   | 2.2    |        |   |   | 10.5   |      
|Other assets and intangible assets                                                    |                                                           |                    | 7.5    |                  |   |      |       |       |   |   | 3.0    |        |   |   | 3.0    |      
|                                                                                     
|Cash used in investing activities                                                     |                                                           |                    | (127.1 | )                |   |      | (167.0 | )     |   |   | (375.9 | )      |   |   | (217.4 | )    
|                                                                                     
|Cash before financing activities                                                      |                                                           |                    | 14.1   |                  |   |      | 181.3  |       |   |   | (247.2 | )      |   |   | 252.6  |      
|                                                                                     
|Financing Activities                                                                  |                                                           |                    |        |                  |   |      |        |       |   |   |        |        |   |   |        |      
|Repayment of long-term debt obligations                                               |                                                           |                    | (0.4   | )                |   |      | (0.4   | )     |   |   | (0.7   | )      |   |   | (0.6   | )    
|(Repayment of) proceeds from short-term debt obligations                              |                                                           |                    | (48.4  | )                |   |      | (1.0   | )     |   |   | 304.3  |        |   |   | (0.2   | )    
|Dividends                                                                             |                                                           |                    | (15.2  | )                |   |      | (16.7  | )     |   |   | (30.5  | )      |   |   | (33.2  | )    
|Repurchase of common shares                                                           |                                                           |                    |       |                  |   |      | (235.1 | )     |   |   |       |        |   |   | (317.4 | )    
|Issuance of common shares                                                             |                                                           |                    | 6.9    |                  |   |      | 16.2   |       |   |   | 9.9    |        |   |   | 63.2   |      
|                                                                                     
|Cash (used in) provided by financing activities                                       |                                                           |                    | (57.1  | )                |   |      | (237.0 | )     |   |   | 283.0  |        |   |   | (288.2 | )    
|                                                                                     
|(Decrease) Increase in Cash and Cash Equivalents                                      |                                                           |                    | (43.0  | )                |   |      | (55.7  | )     |   |   | 35.8   |        |   |   | (35.6  | )    
|Cash and Cash Equivalents, Beginning of Period                                        |                                                           |                    | 172.7  |                  |   |      | 479.0  |       |   |   | 93.9   |        |   |   | 458.9  |      
|                                                                                     
|Cash and Cash Equivalents, End of Period                                              |                                                           | $                  | 129.7  |                  |   | $    | 423.3  |       |   | $ | 129.7  |        |   | $ | 423.3  |      
|                                                                                     
|Supplemental cash flow disclosure                                                     |                                                           |                    |        |                  |   |      |        |       |   |   |        |        |   |   |        |      
|                                                                                      | Interest paid                                             |                    | $      | 33.8             |   |      | $      | 29.5  |   |   | $      | 50.1   |   |   | $      | 40.7  |  
|                                                                                      | Income taxes paid                                         |                    | $      | 82.5             |   |      | $      | 31.9  |   |   | $      | 224.5  |   |   | $      | 107.4 |  
|                                                                                     



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Potash Corporation of Saskatchewan Inc.


Notes to the Condensed Consolidated Financial Statements


For the Three and Six Months Ended June 30, 2006


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


(unaudited)




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

Basis of Presentation






Changes in Accounting Policies


Implicit Variable Interests




Conditional Asset Retirement Obligations




5



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Recent Accounting Pronouncements


Comprehensive Income, Equity, Financial Instruments and
Hedges






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



Stripping Costs Incurred in the Production Phase of a Mining
Operation




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


EIC-162 EIC-162


6



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##### Table of Contents



2.   Inventories


|                       |  |          |       |              |  |   |       | 
|---------------------- |  | -------- | ----- | ------------ |  | - | ----- | 
|                       |  | June 30, |       | December 31,
|                       |  | 2006     |       | 2005        
|                      
|Finished product       |  | $        | 251.3 |              |  | $ | 268.5 | 
|Intermediate products  |  |          | 102.0 |              |  |   | 94.9  | 
|Raw materials          |  |          | 62.9  |              |  |   | 59.9  | 
|Materials and supplies |  |          | 101.5 |              |  |   | 99.2  | 
|                      
|                       |  | $        | 517.7 |              |  | $ | 522.5 | 
|                      

3.   Other Assets






4.   Income Taxes






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the quarter ended June 30, 2006, the company reduced
    its consolidated effective income tax rate from 33 percent
    to 30 percent for the 2006 year. The impact of this
    change on prior periods, as applicable, was reflected during the
    quarter. The change was primarily attributable to two factors.
    First, during the quarter ended June 30, 2006, the Province
    of Saskatchewan enacted changes to the corporation income tax.
    The corporate income tax rate will be reduced from
    17 percent to 12 percent over the next three years,
    with a 3 percentage point reduction (to 14 percent)
    effective July 1, 2006 and further 1 percentage point
    reductions on July 1, 2007 and July 1, 2008. The
    impact of this change on the companys future income tax
    liability was recognized during the second quarter of 2006.
    Second, during the three months ended June 30, 2006, the
    company revised its estimated allocation of annual income before
    income taxes by jurisdiction.
|
| |  | During the quarter ended June 30, 2006, the Government of
    Canada enacted changes to the federal corporation income tax and
    the corporate surtax. The federal corporate income tax rate will
    be reduced from 21 percent to 19 percent over the next
    four years, with a 0.5 percentage point reduction effective
    January 1, 2008 and January 1, 2009, and a further
    1 percentage point reduction on January 1, 2010. The
    federal corporate surtax will be reduced from 1.12 percent
    to nil in 2008. The impact of this change on the companys
    future income tax liability was recognized during the second
    quarter of 2006.                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Income tax refunds totaling $15.8 were recorded relating to a
    recent Canadian appeals court decision (pertaining to a uranium
    producer) which affirmed the deductibility of the Saskatchewan
    capital tax resource surcharge. Refunds related to the 2002-2004
    taxation years were recognized during the three months ended
    March 31, 2006 and a refund in connection with the 2001
    taxation year was recognized during the three months ended
    June 30, 2006. The company also expects income tax refunds
    in connection with the 1999-2000 taxation years and a further
    refund in respect of the 2001 taxation year. These refunds are
    currently under review and have not been reflected in these
    interim condensed consolidated financial statements.                                                                                                                                                                                                                                                  

7



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##### Table of Contents



5.   Net Income Per Share






6.   Segment Information




|                                |  |                                  |       |          |  |           |       |            |  |              |       |  |  |   |     |  |  |   |       | 
|------------------------------- |  | -------------------------------- | ----- | -------- |  | --------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ----- | 
|                                |  | Three Months Ended June 30, 2006
|                                |  | Potash                           |       | Nitrogen |  | Phosphate |       | All Others |  | Consolidated
|                               
|Sales                           |  | $                                | 296.4 |          |  | $         | 342.4 |            |  | $            | 289.9 |  |  | $ |    |  |  | $ | 928.7 | 
|Freight                         |  |                                  | 32.8  |          |  |           | 9.1   |            |  |              | 20.4  |  |  |   |    |  |  |   | 62.3  | 
|Transportation and distribution |  |                                  | 11.0  |          |  |           | 13.6  |            |  |              | 11.2  |  |  |   |    |  |  |   | 35.8  | 
|Net sales  third party         |  |                                  | 252.6 |          |  |           | 319.7 |            |  |              | 258.3 |  |  |   |    |  |  |   |       | 
|Cost of goods sold              |  |                                  | 119.8 |          |  |           | 228.0 |            |  |              | 229.4 |  |  |   |    |  |  |   | 577.2 | 
|Gross margin                    |  |                                  | 132.8 |          |  |           | 91.7  |            |  |              | 28.9  |  |  |   |    |  |  |   | 253.4 | 
|Depreciation and amortization   |  |                                  | 15.0  |          |  |           | 19.0  |            |  |              | 22.9  |  |  |   | 3.5 |  |  |   | 60.4  | 
|Inter-segment sales             |  |                                  | 0.8   |          |  |           | 28.5  |            |  |              | 2.4   |  |  |   |    |  |  |   |      | 

|                                |  |                                  |       |          |  |           |       |            |  |              |       |  |  |   |     |  |  |   |         | 
|------------------------------- |  | -------------------------------- | ----- | -------- |  | --------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ------- | 
|                                |  | Three Months Ended June 30, 2005
|                                |  | Potash                           |       | Nitrogen |  | Phosphate |       | All Others |  | Consolidated
|                               
|Sales                           |  | $                                | 401.6 |          |  | $         | 364.4 |            |  | $            | 291.3 |  |  | $ |    |  |  | $ | 1,057.3 | 
|Freight                         |  |                                  | 37.5  |          |  |           | 9.9   |            |  |              | 20.0  |  |  |   |    |  |  |   | 67.4    | 
|Transportation and distribution |  |                                  | 9.5   |          |  |           | 13.8  |            |  |              | 8.8   |  |  |   |    |  |  |   | 32.1    | 
|Net sales  third party         |  |                                  | 354.6 |          |  |           | 340.7 |            |  |              | 262.5 |  |  |   |    |  |  |   |         | 
|Cost of goods sold              |  |                                  | 131.3 |          |  |           | 241.3 |            |  |              | 240.4 |  |  |   |    |  |  |   | 613.0   | 
|Gross margin                    |  |                                  | 223.3 |          |  |           | 99.4  |            |  |              | 22.1  |  |  |   |    |  |  |   | 344.8   | 
|Depreciation and amortization   |  |                                  | 18.3  |          |  |           | 17.5  |            |  |              | 24.0  |  |  |   | 2.6 |  |  |   | 62.4    | 
|Inter-segment sales             |  |                                  | 2.4   |          |  |           | 28.7  |            |  |              | 4.7   |  |  |   |    |  |  |   |        | 

8



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|                                |  |                                |       |          |  |           |       |            |  |              |       |  |  |   |     |  |  |   |         | 
|------------------------------- |  | ------------------------------ | ----- | -------- |  | --------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ------- | 
|                                |  | Six Months Ended June 30, 2006
|                                |  | Potash                         |       | Nitrogen |  | Phosphate |       | All Others |  | Consolidated
|                               
|Sales                           |  | $                              | 522.2 |          |  | $         | 674.3 |            |  | $            | 593.8 |  |  | $ |    |  |  | $ | 1,790.3 | 
|Freight                         |  |                                | 57.8  |          |  |           | 18.7  |            |  |              | 40.7  |  |  |   |    |  |  |   | 117.2   | 
|Transportation and distribution |  |                                | 18.4  |          |  |           | 26.9  |            |  |              | 21.7  |  |  |   |    |  |  |   | 67.0    | 
|Net sales  third party         |  |                                | 446.0 |          |  |           | 628.7 |            |  |              | 531.4 |  |  |   |    |  |  |   |         | 
|Cost of goods sold              |  |                                | 222.4 |          |  |           | 457.6 |            |  |              | 469.2 |  |  |   |    |  |  |   | 1,149.2 | 
|Gross margin                    |  |                                | 223.6 |          |  |           | 171.1 |            |  |              | 62.2  |  |  |   |    |  |  |   | 456.9   | 
|Depreciation and amortization   |  |                                | 26.8  |          |  |           | 38.3  |            |  |              | 47.2  |  |  |   | 6.9 |  |  |   | 119.2   | 
|Inter-segment sales             |  |                                | 4.8   |          |  |           | 60.4  |            |  |              | 4.6   |  |  |   |    |  |  |   |        | 

|                                |  |                                |       |          |  |           |       |            |  |              |       |  |  |   |     |  |  |   |         | 
|------------------------------- |  | ------------------------------ | ----- | -------- |  | --------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ------- | 
|                                |  | Six Months Ended June 30, 2005
|                                |  | Potash                         |       | Nitrogen |  | Phosphate |       | All Others |  | Consolidated
|                               
|Sales                           |  | $                              | 753.7 |          |  | $         | 669.2 |            |  | $            | 555.8 |  |  | $ |    |  |  | $ | 1,978.7 | 
|Freight                         |  |                                | 74.7  |          |  |           | 20.1  |            |  |              | 39.8  |  |  |   |    |  |  |   | 134.6   | 
|Transportation and distribution |  |                                | 18.6  |          |  |           | 25.5  |            |  |              | 16.9  |  |  |   |    |  |  |   | 61.0    | 
|Net sales  third party         |  |                                | 660.4 |          |  |           | 623.6 |            |  |              | 499.1 |  |  |   |    |  |  |   |         | 
|Cost of goods sold              |  |                                | 260.9 |          |  |           | 458.9 |            |  |              | 460.0 |  |  |   |    |  |  |   | 1,179.8 | 
|Gross margin                    |  |                                | 399.5 |          |  |           | 164.7 |            |  |              | 39.1  |  |  |   |    |  |  |   | 603.3   | 
|Depreciation and amortization   |  |                                | 36.4  |          |  |           | 34.4  |            |  |              | 46.3  |  |  |   | 4.9 |  |  |   | 122.0   | 
|Inter-segment sales             |  |                                | 4.4   |          |  |           | 48.5  |            |  |              | 8.9   |  |  |   |    |  |  |   |        | 

7.   Stock-Based Compensation




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

8.   Pension and Other Post-Retirement
Expenses


|                               |  |               |      |               |  |      |      |      |  |   |       |   |  |   |       |  
|------------------------------ |  | ------------- | ---- | ------------- |  | ---- | ---- | ---- |  | - | ----- | - |  | - | ----- | -
|                               |  | Three Months  |      | Six Months   
|                               |  | Ended June 30 |      | Ended June 30
|Defined Benefit Pension Plans  |  | 2006          |      | 2005          |  | 2006 |      | 2005
|                              
|Service cost                   |  | $             | 3.6  |               |  | $    | 3.4  |      |  | $ | 7.2   |   |  | $ | 7.0   |  
|Interest cost                  |  |               | 8.4  |               |  |      | 7.8  |      |  |   | 16.8  |   |  |   | 15.6  |  
|Expected return on plan assets |  |               | (9.6 | )             |  |      | (9.5 | )    |  |   | (19.2 | ) |  |   | (18.4 | )
|Net amortization               |  |               | 2.8  |               |  |      | 1.3  |      |  |   | 5.7   |   |  |   | 3.0   |  
|                              
|Net expense                    |  | $             | 5.2  |               |  | $    | 3.0  |      |  | $ | 10.5  |   |  | $ | 7.2   |  
|                              

9



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|                            |  |               |      |               |  |      |     |      |  |   |      |   |  |   |      | 
|--------------------------- |  | ------------- | ---- | ------------- |  | ---- | --- | ---- |  | - | ---- | - |  | - | ---- | 
|                            |  | Three Months  |      | Six Months   
|                            |  | Ended June 30 |      | Ended June 30
|Other Post-Retirement Plans |  | 2006          |      | 2005          |  | 2006 |     | 2005
|                           
|Service cost                |  | $             | 1.2  |               |  | $    | 1.4 |      |  | $ | 2.4  |   |  | $ | 2.8  | 
|Interest cost               |  |               | 3.1  |               |  |      | 3.3 |      |  |   | 6.1  |   |  |   | 6.6  | 
|Net amortization            |  |               | (0.1 | )             |  |      | 0.4 |      |  |   | (0.2 | ) |  |   | 0.8  | 
|                           
|Net expense                 |  | $             | 4.2  |               |  | $    | 5.1 |      |  | $ | 8.3  |   |  | $ | 10.2 | 
|                           



9.   Other Income


|                                      |  |               |      |               |  |      |      |      |  |   |      |  |  |   |      | 
|------------------------------------- |  | ------------- | ---- | ------------- |  | ---- | ---- | ---- |  | - | ---- |  |  | - | ---- | 
|                                      |  | Three Months  |      | Six Months   
|                                      |  | Ended June 30 |      | Ended June 30
|                                      |  | 2006          |      | 2005          |  | 2006 |      | 2005
|                                     
|Share of earnings of equity investees |  | $             | 16.0 |               |  | $    | 13.4 |      |  | $ | 28.4 |  |  | $ | 26.5 | 
|Dividend income                       |  |               | 3.0  |               |  |      |     |      |  |   | 12.1 |  |  |   | 3.1  | 
|Other                                 |  |               | 1.0  |               |  |      | 0.5  |      |  |   | 10.7 |  |  |   | 4.3  | 
|                                     
|                                      |  | $             | 20.0 |               |  | $    | 13.9 |      |  | $ | 51.2 |  |  | $ | 33.9 | 
|                                     

10. Seasonality




11. Contingencies


Canpotex




Mining Risk




Investment in APC




10



---



##### Table of Contents





Legal and Other Matters












11



---



##### Table of Contents













12. Guarantees




back-to


12



---



##### Table of Contents













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




(a) Long-term investments:




13



---



##### Table of Contents



(b) Property, plant and equipment and goodwill:


(c) Depreciation and amortization:


(d) Exploration costs:


(e) Pre-operating costs: start-up start-up


(f) Pension and other post-retirement benefits:




(g) Foreign currency translation adjustment:


(h) Derivative instruments and hedging activities:


14



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##### Table of Contents





(i) Comprehensive income:


(j) Stock-based compensation:




(k) Stripping costs:


(l) Income taxes related to the above adjustments:


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


(n) Cash flow statements:


15



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##### Table of Contents



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


|                                                      |                                                        |                    |             |                  |   |      |             |      |   |   |             |      |   |   |             |       |  
|----------------------------------------------------- | ------------------------------------------------------ | ------------------ | ----------- | ---------------- | - | ---- | ----------- | ---- | - | - | ----------- | ---- | - | - | ----------- | ----- | -
|                                                      |                                                        | Three Months Ended |             | Six Months Ended
|                                                      |                                                        | June 30            |             | June 30         
|                                                      |                                                        | 2006               |             | 2005             |   | 2006 |             | 2005
|                                                     
|Net income as reported  Canadian GAAP                |                                                        | $                  | 175.1       |                  |   | $    | 164.2       |      |   | $ | 300.6       |      |   | $ | 295.5       |      
|Items increasing (decreasing) reported net income     |                                                        |                    |             |                  |   |      |             |      |   |   |             |      |   |   |             |      
|                                                      | Cash flow hedge ineffectiveness                        |                    |             | 0.2              |   |      |             | 0.8  |   |   |             | 0.6  |   |   |             | 1.0   |  
|                                                      | Depreciation and amortization                          |                    |             | 2.1              |   |      |             | 2.1  |   |   |             | 4.2  |   |   |             | 4.2   |  
|                                                      | Stock-based compensation                               |                    |             | 1.9              |   |      |             |     |   |   |             | 1.9  |   |   |             |      |  
|                                                      | Stripping costs                                        |                    |             | 0.7              |   |      |             |     |   |   |             | 2.2  |   |   |             |      |  
|                                                      | Share of earnings of equity investees                  |                    |             | 0.5              |   |      |             |     |   |   |             | 0.5  |   |   |             |      |  
|                                                      | Deferred income taxes related to the above adjustments |                    |             | 9.7              |   |      |             | (1.0 | ) |   |             | 8.3  |   |   |             | (1.7  | )
|                                                      | Income taxes related to stock-based compensation       |                    |             | (3.6             | ) |      |             | (1.5 | ) |   |             | (4.4 | ) |   |             | (12.3 | )
|                                                     
|Net income  US GAAP                                  |                                                        |                    | 186.6       |                  |   | $    | 164.6       |      |   |   | 313.9       |      |   | $ | 286.7       |      
|                                                     
|Basic weighted average shares outstanding  US GAAP   |                                                        |                    | 103,794,000 |                  |   |      | 109,636,000 |      |   |   | 103,718,000 |      |   |   | 110,365,000 |      
|                                                     
|Diluted weighted average shares outstanding  US GAAP |                                                        |                    | 105,920,000 |                  |   |      | 112,436,000 |      |   |   | 105,879,000 |      |   |   | 113,406,000 |      
|                                                     
|Basic net income per share  US GAAP                  |                                                        | $                  | 1.80        |                  |   | $    | 1.50        |      |   | $ | 3.03        |      |   | $ | 2.60        |      
|                                                     
|Diluted net income per share  US GAAP                |                                                        | $                  | 1.76        |                  |   | $    | 1.46        |      |   | $ | 2.96        |      |   | $ | 2.53        |      
|                                                     

|                                                    |                                                                   |          |         |              |   |   |         |        |  
|--------------------------------------------------- | ----------------------------------------------------------------- | -------- | ------- | ------------ | - | - | ------- | ------ | -
|                                                    |                                                                   | June 30, |         | December 31,
|                                                    |                                                                   | 2006     |         | 2005        
|                                                   
|Total assets as reported  Canadian GAAP            |                                                                   | $        | 5,627.4 |              |   | $ | 5,357.9 |       
|Items increasing (decreasing) reported total assets |                                                                   |          |         |              |   |   |         |       
|                                                    | Inventory                                                         |          |         |             |   |   |         | (7.2   | )
|                                                    | Available-for-sale securities (unrealized holding gain)           |          |         | 575.7        |   |   |         | 355.2  |  
|                                                    | Fair value of derivative instruments                              |          |         | 184.8        |   |   |         | 277.1  |  
|                                                    | Property, plant and equipment                                     |          |         | (113.9       | ) |   |         | (118.1 | )
|                                                    | Exploration costs                                                 |          |         | (6.4         | ) |   |         | (6.4   | )
|                                                    | Stripping costs                                                   |          |         | (22.1        | ) |   |         |       |  
|                                                    | Pension and other post-retirement benefits                        |          |         | 14.1         |   |   |         | 14.1   |  
|                                                    | Intangible asset relating to additional minimum pension liability |          |         | 11.1         |   |   |         | 11.1   |  
|                                                    | Investment in equity investees                                    |          |         | 5.5          |   |   |         | 4.8    |  
|                                                    | Goodwill                                                          |          |         | (46.7        | ) |   |         | (46.7  | )
|                                                   
|Total assets  US GAAP                              |                                                                   | $        | 6,229.5 |              |   | $ | 5,841.8 |       
|                                                   

16



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##### Table of Contents



|                                                                |                                                                                     |          |         |              |   |   |         |        |  
|--------------------------------------------------------------- | ----------------------------------------------------------------------------------- | -------- | ------- | ------------ | - | - | ------- | ------ | -
|                                                                |                                                                                     | June 30, |         | December 31,
|                                                                |                                                                                     | 2006     |         | 2005        
|                                                               
|Total shareholders equity as reported  Canadian
    GAAP      |                                                                                     | $        | 2,436.6 |              |   | $ | 2,132.5 |       
|Items increasing (decreasing) reported shareholders
    equity |                                                                                     |          |         |              |   |   |         |       
|                                                                | Accumulated other comprehensive income, net of related income
    taxes             |          |         | 519.3        |   |   |         | 343.2  |  
|                                                                | Foreign currency translation adjustment                                             |          |         | 20.9         |   |   |         | 20.9   |  
|                                                                | Provision for asset impairment                                                      |          |         | (218.0       | ) |   |         | (218.0 | )
|                                                                | Depreciation and amortization                                                       |          |         | 57.4         |   |   |         | 53.2   |  
|                                                                | Exploration costs                                                                   |          |         | (6.4         | ) |   |         | (6.4   | )
|                                                                | Stripping costs                                                                     |          |         | 2.2          |   |   |         |       |  
|                                                                | Cash flow hedge ineffectiveness                                                     |          |         | 5.5          |   |   |         | 4.9    |  
|                                                                | Pension and other post-retirement benefits                                          |          |         | 14.1         |   |   |         | 14.1   |  
|                                                                | Share of earnings of equity investees                                               |          |         | 4.2          |   |   |         | 3.7    |  
|                                                                | Deferred income taxes relating to the above adjustments                             |          |         | 35.3         |   |   |         | 27.0   |  
|                                                                | Cumulative-effect adjustment to retained earnings in respect of
    stripping costs |          |         | (16.3        | ) |   |         |       |  
|                                                               
|Shareholders equity  US GAAP                                  |                                                                                     | $        | 2,854.8 |              |   | $ | 2,375.1 |       
|                                                               

|                               |                                                                              |                  |       |       |   |   |       |       |  
|------------------------------ | ---------------------------------------------------------------------------- | ---------------- | ----- | ----- | - | - | ----- | ----- | -
|                               |                                                                              | Six Months Ended
|                               |                                                                              | June 30         
|                               |                                                                              | 2006             |       | 2005 
|                              
|Net income  US GAAP           |                                                                              | $                | 313.9 |       |   | $ | 286.7 |      
|                              
|Other comprehensive income     |                                                                              |                  |       |       |   |   |       |      
|                               | Change in unrealized holding gain on available-for-sale
    securities       |                  |       | 220.5 |   |   |       | 79.1  |  
|                               | Change in gains and losses on derivatives designated as cash
    flow hedges |                  |       | (42.7 | ) |   |       | 131.0 |  
|                               | Reclassification to income of gains and losses on cash flow
    hedges       |                  |       | (40.7 | ) |   |       | (22.9 | )
|                               | Share of other comprehensive income of equity investees                      |                  |       | 0.2   |   |   |       |      |  
|                               | Deferred income taxes related to other comprehensive income                  |                  |       | 38.8  |   |   |       | (61.8 | )
|                              
|                               | Other comprehensive income, net of related income taxes                      |                  |       | 176.1 |   |   |       | 125.4 |  
|                              
|Comprehensive income  US GAAP |                                                                              | $                | 490.0 |       |   | $ | 412.1 |      
|                              



|                                                                        |  |          |       |              |  |   |       |  
|----------------------------------------------------------------------- |  | -------- | ----- | ------------ |  | - | ----- | -
|                                                                        |  | June 30, |       | December 31,
|                                                                        |  | 2006     |       | 2005        
|                                                                       
|Unrealized gains and losses on available-for-sale securities            |  | $        | 478.8 |              |  | $ | 236.3 |  
|Gains and losses on derivatives designated as cash flow hedges          |  |          | 114.2 |              |  |   | 182.4 |  
|Additional minimum pension liability                                    |  |          | (54.1 | )            |  |   | (55.4 | )
|Share of accumulated other comprehensive income of equity
    investees |  |          | 1.3   |              |  |   | 0.8   |  
|Foreign currency translation adjustment                                 |  |          | (20.9 | )            |  |   | (20.9 | )
|                                                                       
|Accumulated other comprehensive
    income(1) 
    US GAAP             |  | $        | 519.3 |              |  | $ | 343.2 |  
|                                                                       



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

Supplemental US GAAP Disclosures


Recent Accounting Pronouncements




17



---



##### Table of Contents





Available-for-Sale Securities




Stock-based Compensation






Stock Option Plans








18



---



##### Table of Contents









|                               |  |                          |           |                                                   |  |              |        |           |  |            |   |           |  |              |   |           |  |  |           |   |  |   |       |  |  |  |   |  |  |   |       | 
|------------------------------ |  | ------------------------ | --------- | ------------------------------------------------- |  | ------------ | ------ | --------- |  | ---------- | - | --------- |  | ------------ | - | --------- |  |  | --------- | - |  | - | ----- |  |  |  | - |  |  | - | ----- | 
|                               |  | Performance Option Plans |           | Officers and Employees and Directors Option Plans
|                              
|                               |  | Weighted-                |           |                                                   |  | Weighted-    |        |          
|                               |  | Number of                |           | Weighted-                                         |  | Average      |        | Aggregate |  | Number of  |   | Weighted- |  | Average      |   | Aggregate
|                               |  | Shares                   |           | Average                                           |  | Remaining    |        | Intrinsic |  | Shares     |   | Average   |  | Remaining    |   | Intrinsic
|                               |  | Subject to               |           | Exercise                                          |  | Contractual  |        | Value (in |  | Subject to |   | Exercise  |  | Contractual  |   | Value (in
|                               |  | Option                   |           | Price                                             |  | Term (Years) |        | millions) |  | Option     |   | Price     |  | Term (Years) |   | millions)
|                              
|Outstanding at January 1, 2006 |  |                          | 1,186,000 |                                                   |  | $            | 90.08  |           |  |            |   |           |  |              |   |           |  |  | 3,895,756 |   |  | $ | 38.41 |  |  |  |   |  |  |   |       | 
|Granted                        |  |                          | 894,900   |                                                   |  |              | 101.01 |           |  |            |   |           |  |              |   |           |  |  |          |   |  |   |      |  |  |  |   |  |  |   |       | 
|Exercised                      |  |                          |          |                                                   |  |              |       |           |  |            |   |           |  |              |   |           |  |  | (274,463  | ) |  |   | 38.17 |  |  |  |   |  |  |   |       | 
|Cancelled                      |  |                          | (11,500   | )                                                 |  |              | 89.90  |           |  |            |   |           |  |              |   |           |  |  |          |   |  |   |      |  |  |  |   |  |  |   |       | 
|                               |  |                          |           |                                                   |  |              |        |           |  |            |   |           |  |              |   |           |  |  |           |  
|Outstanding at June 30, 2006   |  |                          | 2,069,400 |                                                   |  | $            | 95.45  |           |  |            | 9 |           |  | $            |  |           |  |  | 3,621,293 |   |  | $ | 39.34 |  |  |  | 6 |  |  | $ | 168.5 | 
|                              
|Exercisable at June 30, 2006   |  |                          |          |                                                   |  | $            |       |           |  |            |  |           |  | $            |  |           |  |  | 3,621,293 |   |  | $ | 39.34 |  |  |  | 6 |  |  | $ | 168.5 | 
|                              



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



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|                             |  |           |           |            |  |   |       | 
|---------------------------- |  | --------- | --------- | ---------- |  | - | ----- | 
|                             |  |           |           | Weighted- 
|                             |  |           |           | Average   
|                             |  | Number of |           | Grant-Date
|                             |  | Shares    |           | Fair Value
|                            
|Nonvested at January 1, 2006 |  |           | 1,186,000 |            |  | $ | 29.82 | 
|Granted                      |  |           | 894,900   |            |  |   | 38.53 | 
|Vested                       |  |           |          |            |  |   |      | 
|Cancelled                    |  |           | (11,500   | )          |  |   | 29.50 | 
|                            
|Nonvested at June 30, 2006   |  |           | 2,069,400 |            |  | $ | 33.58 | 
|                            





Deferred Share Unit and Other Plans










20



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##### Table of Contents





Derivative Instruments and Hedging Activities


Cash Flow Hedges




Fair Value Hedges




14. Comparative Figures









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

10-K,


POTASHCORP AND OUR BUSINESS ENVIRONMENT








21



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POTASHCORP VISION






POTASHCORP STRATEGY






day-to


KEY PERFORMANCE DRIVERS  PERFORMANCE COMPARED TO
GOALS






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

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|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                |  |  | 
|--------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | 
|                                                                                                          |  | Representative                                                                                             |  |  | Performance                                                                                                                                                                                                                                                                                                    |  |  | 
|Goal                                                                                                      |  | 2006 Annual Target                                                                                         |  |  | to June 30, 2006                                                                                                                                                                                                                                                                                               |  |  | 
|                                                                                                          | 
|To continue to outperform our sector and other basic materials
    companies in total shareholder return. |  | Exceed total shareholder return performance for our sector and
    companies on the DJUSBMI for 2006.      |  |  | PotashCorps total shareholder return was 7 percent in
    the first six months of 2006, exceeding our sector average
    return of 5 percent though not the DJUSBMI return of
    10 percent.                                                                                                                 |  |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                | 
|                                                                                                          |  | Carry a higher multiple than the average of other fertilizer
    companies on both earnings and cash flow. |  |  | The companys multiple at June 30, 2006 was 16.7 on
    earnings and 10.8 on cash flow versus the average of other
    fertilizer companies in our sector of 13.4 on earnings and 8.0
    on cash flow.                                                                                                        |  |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                | 
|To remain the leader and preferred supplier of potash, nitrogen
    and phosphate products worldwide.     |  | Increase North American realized prices for potash by
    10 percent.                                      |  |  | North American realized potash prices were 11 percent
    higher in the first six months of 2006 compared to the 2005
    annual average.                                                                                                                                                                      |  |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                | 
|                                                                                                          |  | Increase North American realized feed prices by 20 percent.                                                |  |  | Compared to the 2005 annual average, North American realized
    feed prices increased in the six months ended June 30, 2006
    as follows: Monocal by 24 percent, Dical by 25 percent
    and DFP by 31 percent.                                                                                             |  |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                | 
|                                                                                                          |  | Increase realized nitric acid prices by 5 percent.                                                         |  |  | Realized nitric acid prices increased 14 percent during the
    six months ended June 30, 2006 compared to the average
    prices realized during 2005.                                                                                                                                                        |  |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                | 
|To be the low-cost supplier in our industry.                                                              |  | Achieve rock costs at Aurora and White Springs 3 percent
    below 2005.                                   |  |  | Rock costs at Aurora were flat while White Springs increased
    11 percent during the first half of 2006 compared to the
    corresponding period in 2005. Compared to the 2005 annual
    average, rock costs were flat at Aurora and up 9 percent at
    White Springs for the first six months of 2006.    |  |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                | 
|                                                                                                          |  | Achieve 5-percent reduction in per-tonne potash conversion costs
    on a Canadian dollar basis.           |  |  | When compared to the 2005 annual average, Canadian dollar potash
    conversion costs increased 34 percent per tonne during the
    first half of 2006, largely as a result of the 339 days of
    production shutdowns during the first six months of 2006 as the
    company produced to meet market demand. |  |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                | 
|                                                                                                          |  | Improve energy efficiency in Trinidad by 10 percent from
    2005.                                         |  |  | Trinidad energy efficiency rate deteriorated 5 percent
    during the first six months of 2006 compared to the 2005 annual
    average.                                                                                                                                                                        |  |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                | 
|To move closer to our goal of no harm to people, no accidents,
    no damage to the environment.          |  | Reduce recordable and lost- time injury rates by 30 percent
    from 2005 levels.                          |  |  | Recordable and lost-time injury rates were 1.53 and 0.29,
    respectively, as compared to the targets of 1.60 and 0.19,
    respectively.                                                                                                                                                                     |  |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                | 
|                                                                                                          |  | Reduce reportable releases and permit excursions by
    30 percent from 2005 levels.                       |  |  | Reportable release annualized rates declined 40 percent
    while permit excursions were down 45 percent during the
    first half of 2006 compared to 2005 annual levels.                                                                                                                                     |  |  | 
|                                                                                                          |  |                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                | 

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FINANCIAL OVERVIEW


10-Q.




Earnings Guidance




Overview of Actual Results


Operations


|                                              |  |                            |       |                          |  |        |         |        |  |      |        |      |  |        |     |        |  |   |         |  |  |   |         |  |  |   |        |   |  |  |     |  
|--------------------------------------------- |  | -------------------------- | ----- | ------------------------ |  | ------ | ------- | ------ |  | ---- | ------ | ---- |  | ------ | --- | ------ |  | - | ------- |  |  | - | ------- |  |  | - | ------ | - |  |  | --- | -
|                                              |  | Three Months Ended June 30 |       | Six Months Ended June 30
|                                             
|                                              |  | Dollar                     |       | %                        |  |        |         | Dollar |  | %   
|(Dollars millions  except per-share amounts) |  | 2006                       |       | 2005                     |  | Change |         | Change |  | 2006 |        | 2005 |  | Change |     | Change
|                                             
|Sales                                         |  | $                          | 928.7 |                          |  | $      | 1,057.3 |        |  | $    | (128.6 | )    |  |        | (12 | )      |  | $ | 1,790.3 |  |  | $ | 1,978.7 |  |  | $ | (188.4 | ) |  |  | (10 | )
|Freight                                       |  |                            | 62.3  |                          |  |        | 67.4    |        |  |      | (5.1   | )    |  |        | (8  | )      |  |   | 117.2   |  |  |   | 134.6   |  |  |   | (17.4  | ) |  |  | (13 | )
|Transportation and distribution               |  |                            | 35.8  |                          |  |        | 32.1    |        |  |      | 3.7    |      |  |        | 12  |        |  |   | 67.0    |  |  |   | 61.0    |  |  |   | 6.0    |   |  |  | 10  |  
|Cost of goods sold                            |  |                            | 577.2 |                          |  |        | 613.0   |        |  |      | (35.8  | )    |  |        | (6  | )      |  |   | 1,149.2 |  |  |   | 1,179.8 |  |  |   | (30.6  | ) |  |  | (3  | )
|                                             
|Gross margin                                  |  | $                          | 253.4 |                          |  | $      | 344.8   |        |  | $    | (91.4  | )    |  |        | (27 | )      |  | $ | 456.9   |  |  | $ | 603.3   |  |  | $ | (146.4 | ) |  |  | (24 | )
|                                             
|Operating income                              |  | $                          | 194.7 |                          |  | $      | 265.7   |        |  | $    | (71.0  | )    |  |        | (27 | )      |  | $ | 386.8   |  |  | $ | 482.4   |  |  | $ | (95.6  | ) |  |  | (20 | )
|                                             
|Net income                                    |  | $                          | 175.1 |                          |  | $      | 164.2   |        |  | $    | 10.9   |      |  |        | 7   |        |  | $ | 300.6   |  |  | $ | 295.5   |  |  | $ | 5.1    |   |  |  | 2   |  
|                                             
|Net income per share  basic                  |  | $                          | 1.69  |                          |  | $      | 1.50    |        |  | $    | 0.19   |      |  |        | 13  |        |  | $ | 2.90    |  |  | $ | 2.68    |  |  | $ | 0.22   |   |  |  | 8   |  
|                                             
|Net income per share  diluted                |  | $                          | 1.65  |                          |  | $      | 1.46    |        |  | $    | 0.19   |      |  |        | 13  |        |  | $ | 2.84    |  |  | $ | 2.61    |  |  | $ | 0.23   |   |  |  | 9   |  
|                                             



$90.5-million $175.9-million


24



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Balance Sheet




10-percent $70.3-million)


$352.8-million


25



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$304.3-million




Business Segment Review






Potash


|                                |                        |                            |       |                    |  |                            |       |       |  |      |     |          |   |      |       |      |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |    |  
|------------------------------- | ---------------------- | -------------------------- | ----- | ------------------ |  | -------------------------- | ----- | ----- |  | ---- | --- | -------- | - | ---- | ----- | ---- |  | -------- | ----- | ----- |  |  | --- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | --- | -- | -
|                                |                        | Three Months Ended June 30
|                               
|                                |                        | Dollars (millions)         |       | Tonnes (thousands) |  | Average Price per Tonne(1)
|                               
|                                |                        | 2006                       |       | 2005               |  | % Change                   |       | 2006  |  | 2005 |     | % Change |   | 2006 |       | 2005 |  | % Change
|                               
|Sales                           |                        | $                          | 296.4 |                    |  | $                          | 401.6 |       |  |      | (26 | )        |   |      |       |      |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|Freight                         |                        |                            | 32.8  |                    |  |                            | 37.5  |       |  |      | (13 | )        |   |      |       |      |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|Transportation and distribution |                        |                            | 11.0  |                    |  |                            | 9.5   |       |  |      | 16  |          |   |      |       |      |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|                               
|                                |                        | $                          | 252.6 |                    |  | $                          | 354.6 |       |  |      | (29 | )        |   |      |       |      |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|                               
|Net Sales                       |                        |                            |       |                    |  |                            |       |       |  |      |     |          |   |      |       |      |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|                                | North American         |                            | $     | 129.2              |  |                            | $     | 155.7 |  |      |     | (17      | ) |      |       | 739  |  |          |       | 973   |  |  |     | (24 | ) |   | $      | 174.65 |  |   | $      | 159.98 |  |  |     | 9  |  
|                                | Offshore               |                            |       | 122.0              |  |                            |       | 196.0 |  |      |     | (38      | ) |      |       | 951  |  |          |       | 1,427 |  |  |     | (33 | ) |   | $      | 128.24 |  |   | $      | 137.31 |  |  |     | (7 | )
|                               
|                                |                        |                            | 251.2 |                    |  |                            | 351.7 |       |  |      | (29 | )        |   |      | 1,690 |      |  |          | 2,400 |       |  |  | (30 | )   |   | $ | 148.54 |        |  | $ | 146.54 |        |  |  | 1   |   
|                                | Miscellaneous products |                            |       | 1.4                |  |                            |       | 2.9   |  |      |     | (52      | ) |      |       |     |  |          |       |      |  |  |     |    |   |   |        |       |  |   |        |       |  |  |     |   |  
|                               
|                                |                        |                            | 252.6 |                    |  |                            | 354.6 |       |  |      | (29 | )        |   |      | 1,690 |      |  |          | 2,400 |       |  |  | (30 | )   |   | $ | 149.47 |        |  | $ | 147.75 |        |  |  | 1   |   
|Cost of goods sold              |                        |                            | 119.8 |                    |  |                            | 131.3 |       |  |      | (9  | )        |   |      |       |      |  |          |       |       |  |  |     |     |   | $ | 70.89  |        |  | $ | 54.71  |        |  |  | 30  |   
|                               
|Gross margin                    |                        | $                          | 132.8 |                    |  | $                          | 223.3 |       |  |      | (41 | )        |   |      |       |      |  |          |       |       |  |  |     |     |   | $ | 78.58  |        |  | $ | 93.04  |        |  |  | (16 | ) 
|                               

26



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|                                |                        |                          |       |                    |  |                            |       |       |  |      |     |          |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |    | 
|------------------------------- | ---------------------- | ------------------------ | ----- | ------------------ |  | -------------------------- | ----- | ----- |  | ---- | --- | -------- | - | ---- | ----- | ----- |  | -------- | ----- | ----- |  |  | --- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | --- | -- | 
|                                |                        | Six Months Ended June 30
|                               
|                                |                        | Dollars (millions)       |       | Tonnes (thousands) |  | Average Price per Tonne(1)
|                               
|                                |                        | 2006                     |       | 2005               |  | % Change                   |       | 2006  |  | 2005 |     | % Change |   | 2006 |       | 2005  |  | % Change
|                               
|Sales                           |                        | $                        | 522.2 |                    |  | $                          | 753.7 |       |  |      | (31 | )        |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|Freight                         |                        |                          | 57.8  |                    |  |                            | 74.7  |       |  |      | (23 | )        |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|Transportation and distribution |                        |                          | 18.4  |                    |  |                            | 18.6  |       |  |      | (1  | )        |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|                               
|                                |                        | $                        | 446.0 |                    |  | $                          | 660.4 |       |  |      | (32 | )        |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|                               
|Net Sales                       |                        |                          |       |                    |  |                            |       |       |  |      |     |          |   |      |       |       |  |          |       |       |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|                                | North American         |                          | $     | 221.1              |  |                            | $     | 284.6 |  |      |     | (22      | ) |      |       | 1,266 |  |          |       | 1,895 |  |  |     | (33 | ) |   | $      | 174.51 |  |   | $      | 150.19 |  |  |     | 16 | 
|                                | Offshore               |                          |       | 219.2              |  |                            |       | 368.8 |  |      |     | (41      | ) |      |       | 1,683 |  |          |       | 2,828 |  |  |     | (40 | ) |   | $      | 130.27 |  |   | $      | 130.40 |  |  |     |   | 
|                               
|                                |                        |                          | 440.3 |                    |  |                            | 653.4 |       |  |      | (33 | )        |   |      | 2,949 |       |  |          | 4,723 |       |  |  | (38 | )   |   | $ | 149.27 |        |  | $ | 138.34 |        |  |  | 8   |   
|                                | Miscellaneous products |                          |       | 5.7                |  |                            |       | 7.0   |  |      |     | (19      | ) |      |       |      |  |          |       |      |  |  |     |    |   |   |        |       |  |   |        |       |  |  |     |   | 
|                               
|                                |                        |                          | 446.0 |                    |  |                            | 660.4 |       |  |      | (32 | )        |   |      | 2,949 |       |  |          | 4,723 |       |  |  | (38 | )   |   | $ | 151.24 |        |  | $ | 139.83 |        |  |  | 8   |   
|Cost of goods sold              |                        |                          | 222.4 |                    |  |                            | 260.9 |       |  |      | (15 | )        |   |      |       |       |  |          |       |       |  |  |     |     |   | $ | 75.42  |        |  | $ | 55.24  |        |  |  | 37  |   
|                               
|Gross margin                    |                        | $                        | 223.6 |                    |  | $                          | 399.5 |       |  |      | (44 | )        |   |      |       |       |  |          |       |       |  |  |     |     |   | $ | 75.82  |        |  | $ | 84.59  |        |  |  | (10 | ) 
|                               



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

Highlights




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | As a result of reduced sales volumes, potash gross margin was
    substantially lower than the three and six months ended
    June 30, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Offshore potash demand was constrained as price contracts
    between potash suppliers and buyers in China and India remained
    unresolved. Despite North American and offshore sales volumes
    being down 33 and 40 percent, respectively, compared to
    first-half 2005, North American realized prices were
    16 percent higher. Offshore prices were flat over the same
    period.                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Continuing our strategy of producing to meet market demand
    increased our costs in the quarter. We took 16.7 shutdown weeks
    in second-quarter 2006 and 48.4 weeks during the first six
    months of the year as compared to nine in the same periods of
    2005. As a result, potash production declined from
    2.4 million tonnes to 1.9 million tonnes quarter over
    quarter and from 4.8 million tonnes to 3.2 million
    tonnes year over year. Incurring fixed costs during shutdown
    periods contributed to a reduction in our gross margin
    percentage from 63 percent in the second quarter of last
    year to 53 percent this quarter. Potash inventories at the
    end of June were 1.35 million tonnes, up from
    1.14 million tonnes at the end of 2005.

Potash gross margin variance attributable to:


|                   |  |                            |       |       |                          |             |       |          |              |   |         |   |             |   |            |   |          |  |   |        |   |  |   |      |   |  |   |       |   |  |   |        |  
|------------------ |  | -------------------------- | ----- | ----- | ------------------------ | ----------- | ----- | -------- | ------------ | - | ------- | - | ----------- | - | ---------- | - | -------- |  | - | ------ | - |  | - | ---- | - |  | - | ----- | - |  | - | ------ | -
|                   |  |                            |      
|Dollars (millions) |  |                            |       |       |                         
|                   |  | Three Months Ended June 30 |       |       | Six Months Ended June 30
|                   |  | 2006 vs. 2005              |       |       | 2006 vs. 2005           
|                   |  |                            |      
|                   |  | Change in                  |       |       |                          |             |       |          | Change in    |   |        
|                   |  | Prices/Costs               |       |       |                          |             |       |          | Prices/Costs |   |        
|                   |  | Change in                  |       |       |                          | Total Gross |       |          | Change in    |   |         |   | Total Gross
|                   |  | Sales                      |       | Net   |                          | Cost of     |       | Margin   |              |   | Sales   |   | Net         |   | Cost of    |   | Margin  
|                   |  | Volumes                    |       | Sales |                          | Goods Sold  |       | Variance |              |   | Volumes |   | Sales       |   | Goods Sold |   | Variance
|                   |  |                            |      
|North American     |  | $                          | (29.1 | )     |                          | $           | 12.0  |          |              | $ | (0.7    | ) |             | $ | (17.8      | ) |          |  | $ | (66.7  | ) |  | $ | 30.5 |   |  | $ | (2.4  | ) |  | $ | (38.6  | )
|Offshore           |  |                            | (46.0 | )     |                          |             | (11.1 | )        |              |   | (11.0   | ) |             |   | (68.1      | ) |          |  |   | (101.6 | ) |  |   | (6.2 | ) |  |   | (25.5 | ) |  |   | (133.3 | )
|Other              |  |                            |      |       |                          |             | (1.1  | )        |              |   | (3.5    | ) |             |   | (4.6       | ) |          |  |   | 0.4    |   |  |   | (1.6 | ) |  |   | (2.8  | ) |  |   | (4.0   | )
|                   |  |                            |      
|Total              |  | $                          | (75.1 | )     |                          | $           | (0.2  | )        |              | $ | (15.2   | ) |             | $ | (90.5      | ) |          |  | $ | (167.9 | ) |  | $ | 22.7 |   |  | $ | (30.7 | ) |  | $ | (175.9 | )
|                   |  |                            |      

Sales and Cost of Goods Sold


$90.5-million




| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Offshore sales volumes were down 33 percent as many
    customers delayed purchasing ahead of 2006 pricing in China.
    Canpotex Limited (Canpotex), the offshore marketing
    company for

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | Saskatchewan potash producers, shipped 0.24 million tonnes
    to its major markets (China, India and Brazil) in second-quarter
    2006 compared to 1.3 million tonnes in the same period in
    2005. China was virtually absent from the market as it waited to
    conclude new pricing contracts with suppliers, including
    Canpotex, before coming back into the market for new tonnage.
    Brazil was again affected by the strengthening of the Brazilian
    real relative to the US dollar. This was accompanied by lower
    soybean prices which continued to pressure margins for Brazilian
    farmers and limited their credit availability, leading to fewer
    acres being planted and in turn a decrease in imports. We
    believe globally offshore customers were buying potash as it was
    needed; inventories were not being replenished and as a result
    our sales volumes were down to most countries.
|
| |  | North American sales volumes were weakened through the spring
    season by low crop commodity prices and fewer corn acres
    planted. Compounding this was the efforts of fertilizer dealers
    to finish the season without inventories, which further reduced
    potash shipments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Realized prices in the North American market were 9 percent
    higher as price increases announced through 2005 held into 2006.
    Realized prices from offshore customers were down
    7 percent, in part because the reduced volumes raised fixed
    distribution costs on a per-tonne basis. In addition, realized
    price reductions were seen in Brazil due to increased
    competition. Realized prices in the North American market
    were $46 per tonne, or 36 percent, higher than
    offshore prices. The gap between the two markets is partly due
    to offshore customers purchasing under long-term contracts that
    lag behind North American spot-market increases. The difference
    also reflects product mix, as North American customers prefer
    granular product that commands a premium over standard product,
    which is more typically consumed offshore.                                     
|
| |  | Higher cost of goods sold negatively impacted the change in
    gross margin due to the combination of higher unit costs
    associated with production shutdowns, production inefficiencies
    resulting from negative variations in ore recovery rates, and
    escalation of prices for supplies and services. We also saw
    higher depreciation costs as a result of our expansion projects
    being completed and commencing depreciation during 2006.
    Further, a stronger Canadian dollar negatively impacted cost of
    goods sold.                                                                                                                                                                                                                                                                                                                                                                                      

$175.9-million




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Sales by Canpotex were reduced from 4.7 million to
    2.3 million tonnes, contributing to the
    40-percent decline in
    offshore sales volumes. In its most significant markets (China,
    India and Brazil), Canpotex sales dropped from 2.5 million
    to 0.4 million tonnes. This slowdown was not global as
    volumes to many smaller potash-consuming countries such as
    Malaysia, Ecuador, the Philippines and Mexico increased. North
    American sales volumes also dropped as declines during the
    second quarter added to the impact of first-quarter reductions
    that resulted from weaker dealer fill and field application of
    potash, due to low commodity prices, high energy input costs,
    uncertainty about planting decisions and, to a lesser degree,
    weather.
|
| |  | Realized prices in the North American market were
    16 percent higher as 2005 announced price increases held
    into the first half of 2006. Offshore prices were flat due to
    higher per-unit throughput costs and price reductions realized
    on sales to Brazil. Prices in the North American market were
    $44 per tonne, or 34 percent, higher than offshore
    prices.                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | The change in gross margin was negatively impacted by higher
    cost of goods sold. Plant shutdowns raised unit costs while
    increased depreciation due to completion of our expansion
    projects, higher natural gas prices earlier in the year and
    escalating prices for supplies and services throughout the year
    further increased cost of goods sold. The impact of a stronger
    Canadian dollar also negatively impacted cost of goods sold.                                                                                                                                                                                                                                                                                                                                            

28



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##### Table of Contents



Nitrogen


|                                |                                                   |                            |       |                    |  |                            |       |       |  |      |    |          |   |      |       |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |   |    |  
|------------------------------- | ------------------------------------------------- | -------------------------- | ----- | ------------------ |  | -------------------------- | ----- | ----- |  | ---- | -- | -------- | - | ---- | ----- | ---- |  | -------- | ----- | --- |  |  | --- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | - | -- | -
|                                |                                                   | Three Months Ended June 30
|                               
|                                |                                                   | Dollars (millions)         |       | Tonnes (thousands) |  | Average Price per Tonne(1)
|                               
|                                |                                                   | 2006                       |       | 2005               |  | % Change                   |       | 2006  |  | 2005 |    | % Change |   | 2006 |       | 2005 |  | % Change
|                               
|Sales                           |                                                   | $                          | 342.4 |                    |  | $                          | 364.4 |       |  |      | (6 | )        |   |      |       |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |   |   
|Freight                         |                                                   |                            | 9.1   |                    |  |                            | 9.9   |       |  |      | (8 | )        |   |      |       |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |   |   
|Transportation and distribution |                                                   |                            | 13.6  |                    |  |                            | 13.8  |       |  |      | (1 | )        |   |      |       |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |   |   
|                               
|                                |                                                   | $                          | 319.7 |                    |  | $                          | 340.7 |       |  |      | (6 | )        |   |      |       |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |   |   
|                               
|Net Sales                       |                                                   |                            |       |                    |  |                            |       |       |  |      |    |          |   |      |       |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |   |   
|                                | Ammonia                                           |                            | $     | 135.7              |  |                            | $     | 139.6 |  |      |    | (3       | ) |      |       | 442  |  |          |       | 482 |  |  |     | (8  | ) |   | $      | 307.27 |  |   | $      | 289.70 |  |  |   | 6  |  
|                                | Urea                                              |                            |       | 87.4               |  |                            |       | 92.4  |  |      |    | (5       | ) |      |       | 328  |  |          |       | 331 |  |  |     | (1  | ) |   | $      | 266.34 |  |   | $      | 279.05 |  |  |   | (5 | )
|                                | Nitrogen solutions/ Nitric acid/ Ammonium nitrate |                            |       | 83.9               |  |                            |       | 72.8  |  |      |    | 15       |   |      |       | 468  |  |          |       | 479 |  |  |     | (2  | ) |   | $      | 178.98 |  |   | $      | 152.17 |  |  |   | 18 |  
|                                | Purchased                                         |                            |       | 4.6                |  |                            |       | 28.9  |  |      |    | (84      | ) |      |       | 15   |  |          |       | 103 |  |  |     | (85 | ) |   | $      | 312.29 |  |   | $      | 278.40 |  |  |   | 12 |  
|                               
|                                |                                                   |                            | 311.6 |                    |  |                            | 333.7 |       |  |      | (7 | )        |   |      | 1,253 |      |  |          | 1,395 |     |  |  | (10 | )   |   | $ | 248.68 |        |  | $ | 239.21 |        |  |  | 4 |   
|                                | Miscellaneous                                     |                            |       | 8.1                |  |                            |       | 7.0   |  |      |    | 16       |   |      |       |     |  |          |       |    |  |  |     |    |   |   |        |       |  |   |        |       |  |  |   |   |  
|                               
|                                |                                                   |                            | 319.7 |                    |  |                            | 340.7 |       |  |      | (6 | )        |   |      | 1,253 |      |  |          | 1,395 |     |  |  | (10 | )   |   | $ | 255.10 |        |  | $ | 244.14 |        |  |  | 4 |   
|Cost of goods sold              |                                                   |                            | 228.0 |                    |  |                            | 241.3 |       |  |      | (6 | )        |   |      |       |      |  |          |       |     |  |  |     |     |   | $ | 181.92 |        |  | $ | 172.89 |        |  |  | 5 |   
|                               
|Gross margin                    |                                                   | $                          | 91.7  |                    |  | $                          | 99.4  |       |  |      | (8 | )        |   |      |       |      |  |          |       |     |  |  |     |     |   | $ | 73.18  |        |  | $ | 71.25  |        |  |  | 3 |   
|                               

|                                |                                                  |                          |       |                    |  |                            |       |       |  |      |    |          |   |      |       |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |    | 
|------------------------------- | ------------------------------------------------ | ------------------------ | ----- | ------------------ |  | -------------------------- | ----- | ----- |  | ---- | -- | -------- | - | ---- | ----- | ---- |  | -------- | ----- | --- |  |  | --- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | -- | -- | 
|                                |                                                  | Six Months Ended June 30
|                               
|                                |                                                  | Dollars (millions)       |       | Tonnes (thousands) |  | Average Price per Tonne(1)
|                               
|                                |                                                  | 2006                     |       | 2005               |  | % Change                   |       | 2006  |  | 2005 |    | % Change |   | 2006 |       | 2005 |  | % Change
|                               
|Sales                           |                                                  | $                        | 674.3 |                    |  | $                          | 669.2 |       |  |      | 1  |          |   |      |       |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|Freight                         |                                                  |                          | 18.7  |                    |  |                            | 20.1  |       |  |      | (7 | )        |   |      |       |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|Transportation and distribution |                                                  |                          | 26.9  |                    |  |                            | 25.5  |       |  |      | 5  |          |   |      |       |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|                               
|                                |                                                  | $                        | 628.7 |                    |  | $                          | 623.6 |       |  |      | 1  |          |   |      |       |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|                               
|Net Sales                       |                                                  |                          |       |                    |  |                            |       |       |  |      |    |          |   |      |       |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|                                | Ammonia                                          |                          | $     | 258.7              |  |                            | $     | 238.5 |  |      |    | 8        |   |      |       | 806  |  |          |       | 888 |  |  |     | (9  | ) |   | $      | 321.02 |  |   | $      | 268.71 |  |  |    | 19 | 
|                                | Urea                                             |                          |       | 168.8              |  |                            |       | 182.8 |  |      |    | (8       | ) |      |       | 609  |  |          |       | 690 |  |  |     | (12 | ) |   | $      | 277.16 |  |   | $      | 264.68 |  |  |    | 5  | 
|                                | Nitrogen solutions/ Nitric acid/Ammonium nitrate |                          |       | 164.9              |  |                            |       | 138.0 |  |      |    | 19       |   |      |       | 850  |  |          |       | 929 |  |  |     | (9  | ) |   | $      | 193.80 |  |   | $      | 148.58 |  |  |    | 30 | 
|                                | Purchased                                        |                          |       | 21.6               |  |                            |       | 52.1  |  |      |    | (59      | ) |      |       | 69   |  |          |       | 196 |  |  |     | (65 | ) |   | $      | 315.86 |  |   | $      | 265.32 |  |  |    | 19 | 
|                               
|                                |                                                  |                          | 614.0 |                    |  |                            | 611.4 |       |  |      |   |          |   |      | 2,334 |      |  |          | 2,703 |     |  |  | (14 | )   |   | $ | 263.07 |        |  | $ | 226.19 |        |  |  | 16 |   
|                                | Miscellaneous                                    |                          |       | 14.7               |  |                            |       | 12.2  |  |      |    | 20       |   |      |       |     |  |          |       |    |  |  |     |    |   |   |        |       |  |   |        |       |  |  |    |   | 
|                               
|                                |                                                  |                          | 628.7 |                    |  |                            | 623.6 |       |  |      | 1  |          |   |      | 2,334 |      |  |          | 2,703 |     |  |  | (14 | )   |   | $ | 269.32 |        |  | $ | 230.68 |        |  |  | 17 |   
|Cost of goods sold              |                                                  |                          | 457.6 |                    |  |                            | 458.9 |       |  |      |   |          |   |      |       |      |  |          |       |     |  |  |     |     |   | $ | 196.01 |        |  | $ | 169.75 |        |  |  | 15 |   
|                               
|Gross margin                    |                                                  | $                        | 171.1 |                    |  | $                          | 164.7 |       |  |      | 4  |          |   |      |       |      |  |          |       |     |  |  |     |     |   | $ | 73.31  |        |  | $ | 60.93  |        |  |  | 20 |   
|                               



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

Highlights




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Quarterly nitrogen gross margin of $91.7 million was the
    second highest in our history, trailing only the
    $99.4 million in last years second quarter.
    First-half 2006 nitrogen gross margin was $171.1 million,
    4 percent higher than the record first half of 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Price increases were realized in all major nitrogen products
    year over year, and all except urea quarter over quarter.
    Supply/demand fundamentals remained tight and ammonia prices
    stayed firm despite a drop in the North American spot price for
    natural gas since the end of 2005. Tight supply/demand
    fundamentals in Eastern and Western Europe  driven by
    continuing high gas prices and producer curtailments in those
    markets  set a floor for nitrogen prices in North
    America. However, prices declined 11 percent, with
    decreases in all major categories, compared to first-quarter
    2006 as a result of the decline in the North American spot price
    for natural gas compared to the first quarter of the year.

29



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##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Higher ammonia and urea prices during the first half of 2006
    were beneficial for PotashCorps Trinidad facility due to
    our long-term lower-cost natural gas price contracts. Our
    operations in Trinidad delivered $44.6 million, or
    49 percent, of nitrogen gross margin for the quarter and
    $95.0 million for the first half of 2006. Our US operations
    contributed $27.9 million in gross margin for the quarter
    and $36.0 million in the first six months of 2006, and we
    gained $19.2 million and $40.1 million from our
    natural gas hedges during these periods, respectively.
|
| |  | We are capitalizing on our competitive advantage in Trinidad
    with debottlenecking projects at our 01 and 02 plants that were
    completed during
    first-half 2006, adding
    138,000 tonnes of annual capacity.                                                                                                                                                                                                                                                                                                                                                                                               

Nitrogen gross margin variance attributable to:


|                   |  |                            |       |       |                          |             |      |          |              |   |         |   |             |   |            |   |          |  |   |       |   |  |   |      |  |  |   |       |   |  |   |       |  
|------------------ |  | -------------------------- | ----- | ----- | ------------------------ | ----------- | ---- | -------- | ------------ | - | ------- | - | ----------- | - | ---------- | - | -------- |  | - | ----- | - |  | - | ---- |  |  | - | ----- | - |  | - | ----- | -
|                   |  |                            |      
|Dollars (millions) |  |                            |       |       |                         
|                   |  | Three Months Ended June 30 |       |       | Six Months Ended June 30
|                   |  | 2006 vs. 2005              |       |       | 2006 vs. 2005           
|                   |  |                            |      
|                   |  | Change in                  |       |       |                          |             |      |          | Change in    |   |        
|                   |  | Prices/Costs               |       |       |                          |             |      |          | Prices/Costs |   |        
|                   |  | Change in                  |       |       |                          | Total Gross |      |          | Change in    |   |         |   | Total Gross
|                   |  | Sales                      |       | Net   |                          | Cost of     |      | Margin   |              |   | Sales   |   | Net         |   | Cost of    |   | Margin  
|                   |  | Volumes                    |       | Sales |                          | Goods Sold  |      | Variance |              |   | Volumes |   | Sales       |   | Goods Sold |   | Variance
|                   |  |                            |      
|Ammonia            |  | $                          | (6.0  | )     |                          | $           | 7.0  |          |              | $ | (6.8    | ) |             | $ | (5.8       | ) |          |  | $ | (9.5  | ) |  | $ | 40.3 |  |  | $ | (29.8 | ) |  | $ | 1.0   |  
|Urea               |  |                            | 1.3   |       |                          |             | (3.7 | )        |              |   | (3.6    | ) |             |   | (6.0       | ) |          |  |   | (7.9  | ) |  |   | 8.1  |  |  |   | (14.8 | ) |  |   | (14.6 | )
|Solutions, NA, AN  |  |                            | (0.5  | )     |                          |             | 12.5 |          |              |   | (4.7    | ) |             |   | 7.3        |   |          |  |   | (2.9  | ) |  |   | 35.6 |  |  |   | (21.3 | ) |  |   | 11.4  |  
|Purchased          |  |                            | (4.6  | )     |                          |             | 1.8  |          |              |   | (1.3    | ) |             |   | (4.1       | ) |          |  |   | (10.5 | ) |  |   | 6.5  |  |  |   | (0.6  | ) |  |   | (4.6  | )
|Hedge gains        |  |                            |      |       |                          |             |     |          |              |   | 5.0     |   |             |   | 5.0        |   |          |  |   |      |   |  |   |     |  |  |   | 17.3  |   |  |   | 17.3  |  
|Other              |  |                            | (1.6  | )     |                          |             | 2.9  |          |              |   | (5.4    | ) |             |   | (4.1       | ) |          |  |   | (2.4  | ) |  |   | 5.7  |  |  |   | (7.4  | ) |  |   | (4.1  | )
|                   |  |                            |      
|Total              |  | $                          | (11.4 | )     |                          | $           | 20.5 |          |              | $ | (16.8   | ) |             | $ | (7.7       | ) |          |  | $ | (33.2 | ) |  | $ | 96.2 |  |  | $ | (56.6 | ) |  | $ | 6.4   |  
|                   |  |                            |      

Sales and Cost of Goods Sold






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Realized ammonia prices declined 9 percent from
    first-quarter 2006 but were 6 percent higher than
    second-quarter 2005 as a result of fluctuations in natural gas
    prices. Including our Trinidad facilities, gross natural gas
    prices were 13 percent higher than the first half of 2005
    but 1 percent lower than second-quarter 2005 and
    16 percent lower than the first quarter of 2006. These
    fluctuations were not proportional to our changes in realized
    price for ammonia due to the time lag effect of natural gas
    prices on ammonia pricing in the market.                                                                                                                                            
|
| |  | Realized prices for ammonium nitrate contributed an additional
    $10.7 million to the gross margin. As a number of our
    customer contracts are tied to either natural gas prices or the
    NOLA ammonia price on a time lag basis, the company benefited
    from the higher natural gas and NOLA ammonia prices seen earlier
    in the year.                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | The cost of goods sold price variance negatively impacted gross
    margin by $16.8 million. This was due to reduced production
    during the quarter as we took down production at our Trinidad 01
    and 02 plants to complete the last of our debottlenecks at that
    facility. As well, our Lima, Ohio nitrogen facility encountered
    mechanical difficulties, limiting its production through most of
    June. This reduction also contributed to the
    8-percent decline in
    ammonia sales volumes that negatively impacted the gross margin
    change. The companys US natural gas hedging activities
    contributed $19.2 million to the gross margin compared to
    $14.2 million in the corresponding period last year.





| |   |                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Hurricanes that struck the US Gulf region during 2005 and cold
    weather in the US late in the year led to high natural gas
    prices sustained at more than $13 per MMBtu during the
    fourth quarter. This caused ammonia prices to climb rapidly in
    late 2005 and led North American producers to curtail half

30



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##### Table of Contents



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | of their ammonia operating capacity by year-end, tightening
    market supply. Though North American natural gas spot prices
    dropped significantly during the first half of 2006, high
    ammonia prices continued and as a result we realized ammonia
    prices 19 percent higher than first-half 2005. Realized
    prices for nitrogen solutions, nitric acid and ammonium nitrate
    generally followed the rise in ammonia prices, with higher
    ammonium nitrate realized prices contributing $27.0 million
    to the increased gross margin as a result of our customer
    contracts tied to either natural gas prices or the NOLA ammonia
    price.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Total nitrogen sales volumes declined 14 percent. Nitrogen
    fertilizer sales represented the significant portion of this
    drop, down 27 percent primarily due to US farmers
    purchasing less in first-half 2006 as we believe they were
    hoping for lower prices. Therefore, approximately
    68 percent of total nitrogen volumes, including both North
    American and Trinidad production, were sold to our more stable
    industrial customer base outside the fertilizer cycles.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Cost of goods sold increased 15 percent on a per tonne
    basis, the price variance negatively affecting gross margin by
    $56.6 million. This was due to higher natural gas costs
    earlier in 2006, resulting in production curtailments at our
    Augusta and Lima facilities. In addition, reduced production
    resulting from additional plant turnarounds related to
    debottlenecking projects at our 01 and 02 plants in Trinidad,
    and mechanical problems at our Lima facility contributed to the
    increase. Natural gas costs continue to be the single most
    important contributor to cost of goods sold, typically
    representing between 80 and 95 percent of the cash cost of
    producing one tonne of ammonia. The companys total average
    natural gas cost, including the benefit of the companys
    hedge and lower-cost Trinidad gas contracts, was $4.08 per
    MMBtu, 5 percent higher than the same period in 2005. The
    companys US natural gas hedging activities contributed
    $40.1 million to the gross margin compared to
    $22.9 million in the corresponding period last year.

Phosphate


|                                |                      |                            |       |                    |  |                            |       |       |  |      |    |          |   |      |     |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |    |  
|------------------------------- | -------------------- | -------------------------- | ----- | ------------------ |  | -------------------------- | ----- | ----- |  | ---- | -- | -------- | - | ---- | --- | ---- |  | -------- | ----- | --- |  |  | --- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | -- | -- | -
|                                |                      | Three Months Ended June 30
|                               
|                                |                      | Dollars (millions)         |       | Tonnes (thousands) |  | Average Price per Tonne(1)
|                               
|                                |                      | 2006                       |       | 2005               |  | % Change                   |       | 2006  |  | 2005 |    | % Change |   | 2006 |     | 2005 |  | % Change
|                               
|Sales                           |                      | $                          | 289.9 |                    |  | $                          | 291.3 |       |  |      |   |          |   |      |     |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|Freight                         |                      |                            | 20.4  |                    |  |                            | 20.0  |       |  |      | 2  |          |   |      |     |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|Transportation and distribution |                      |                            | 11.2  |                    |  |                            | 8.8   |       |  |      | 27 |          |   |      |     |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|                               
|                                |                      | $                          | 258.3 |                    |  | $                          | 262.5 |       |  |      | (2 | )        |   |      |     |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|                               
|Net Sales                       |                      |                            |       |                    |  |                            |       |       |  |      |    |          |   |      |     |      |  |          |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |    |   
|                                | Fertilizer  liquids |                            | $     | 42.6               |  |                            | $     | 40.4  |  |      |    | 5        |   |      |     | 185  |  |          |       | 171 |  |  |     | 8   |   |   | $      | 230.34 |  |   | $      | 235.83 |  |  |    | (2 | )
|                                | Fertilizer  solids  |                            |       | 93.8               |  |                            |       | 102.7 |  |      |    | (9       | ) |      |     | 385  |  |          |       | 467 |  |  |     | (18 | ) |   | $      | 244.11 |  |   | $      | 219.91 |  |  |    | 11 |  
|                                | Feed                 |                            |       | 60.0               |  |                            |       | 55.6  |  |      |    | 8        |   |      |     | 197  |  |          |       | 222 |  |  |     | (11 | ) |   | $      | 305.46 |  |   | $      | 250.13 |  |  |    | 22 |  
|                                | Industrial           |                            |       | 58.7               |  |                            |       | 60.0  |  |      |    | (2       | ) |      |     | 156  |  |          |       | 176 |  |  |     | (11 | ) |   | $      | 376.46 |  |   | $      | 340.61 |  |  |    | 11 |  
|                               
|                                |                      |                            | 255.1 |                    |  |                            | 258.7 |       |  |      | (1 | )        |   |      | 923 |      |  |          | 1,036 |     |  |  | (11 | )   |   | $ | 276.80 |        |  | $ | 249.54 |        |  |  | 11 |   
|                                | Miscellaneous        |                            |       | 3.2                |  |                            |       | 3.8   |  |      |    | (16      | ) |      |     |     |  |          |       |    |  |  |     |    |   |   |        |       |  |   |        |       |  |  |    |   |  
|                               
|                                |                      |                            | 258.3 |                    |  |                            | 262.5 |       |  |      | (2 | )        |   |      | 923 |      |  |          | 1,036 |     |  |  | (11 | )   |   | $ | 280.25 |        |  | $ | 253.23 |        |  |  | 11 |   
|Cost of goods sold              |                      |                            | 229.4 |                    |  |                            | 240.4 |       |  |      | (5 | )        |   |      |     |      |  |          |       |     |  |  |     |     |   | $ | 248.94 |        |  | $ | 231.90 |        |  |  | 7  |   
|                               
|Gross margin                    |                      | $                          | 28.9  |                    |  | $                          | 22.1  |       |  |      | 31 |          |   |      |     |      |  |          |       |     |  |  |     |     |   | $ | 31.31  |        |  | $ | 21.33  |        |  |  | 47 |   
|                               

31



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|                                |                      |                          |       |                    |  |                            |       |       |  |      |    |          |   |      |       |      |  |          |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |    | 
|------------------------------- | -------------------- | ------------------------ | ----- | ------------------ |  | -------------------------- | ----- | ----- |  | ---- | -- | -------- | - | ---- | ----- | ---- |  | -------- | ----- | --- |  |  | -- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | -- | -- | 
|                                |                      | Six Months Ended June 30
|                               
|                                |                      | Dollars (millions)       |       | Tonnes (thousands) |  | Average Price per Tonne(1)
|                               
|                                |                      | 2006                     |       | 2005               |  | % Change                   |       | 2006  |  | 2005 |    | % Change |   | 2006 |       | 2005 |  | % Change
|                               
|Sales                           |                      | $                        | 593.8 |                    |  | $                          | 555.8 |       |  |      | 7  |          |   |      |       |      |  |          |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|Freight                         |                      |                          | 40.7  |                    |  |                            | 39.8  |       |  |      | 2  |          |   |      |       |      |  |          |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|Transportation and distribution |                      |                          | 21.7  |                    |  |                            | 16.9  |       |  |      | 28 |          |   |      |       |      |  |          |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|                               
|                                |                      | $                        | 531.4 |                    |  | $                          | 499.1 |       |  |      | 6  |          |   |      |       |      |  |          |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|                               
|Net Sales                       |                      |                          |       |                    |  |                            |       |       |  |      |    |          |   |      |       |      |  |          |       |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |    |   
|                                | Fertilizer  liquids |                          | $     | 104.5              |  |                            | $     | 93.0  |  |      |    | 12       |   |      |       | 445  |  |          |       | 421 |  |  |    | 6   |   |   | $      | 234.89 |  |   | $      | 220.87 |  |  |    | 6  | 
|                                | Fertilizer  solids  |                          |       | 186.9              |  |                            |       | 174.0 |  |      |    | 7        |   |      |       | 762  |  |          |       | 794 |  |  |    | (4  | ) |   | $      | 245.47 |  |   | $      | 219.08 |  |  |    | 12 | 
|                                | Feed                 |                          |       | 112.3              |  |                            |       | 110.7 |  |      |    | 1        |   |      |       | 362  |  |          |       | 452 |  |  |    | (20 | ) |   | $      | 310.82 |  |   | $      | 244.59 |  |  |    | 27 | 
|                                | Industrial           |                          |       | 121.9              |  |                            |       | 114.7 |  |      |    | 6        |   |      |       | 329  |  |          |       | 331 |  |  |    | (1  | ) |   | $      | 369.92 |  |   | $      | 346.60 |  |  |    | 7  | 
|                               
|                                |                      |                          | 525.6 |                    |  |                            | 492.4 |       |  |      | 7  |          |   |      | 1,898 |      |  |          | 1,998 |     |  |  | (5 | )   |   | $ | 277.04 |        |  | $ | 246.35 |        |  |  | 12 |   
|                                | Miscellaneous        |                          |       | 5.8                |  |                            |       | 6.7   |  |      |    | (13      | ) |      |       |     |  |          |       |    |  |  |    |    |   |   |        |       |  |   |        |       |  |  |    |   | 
|                               
|                                |                      |                          | 531.4 |                    |  |                            | 499.1 |       |  |      | 6  |          |   |      | 1,898 |      |  |          | 1,998 |     |  |  | (5 | )   |   | $ | 280.09 |        |  | $ | 249.69 |        |  |  | 12 |   
|Cost of goods sold              |                      |                          | 469.2 |                    |  |                            | 460.0 |       |  |      | 2  |          |   |      |       |      |  |          |       |     |  |  |    |     |   | $ | 247.32 |        |  | $ | 230.12 |        |  |  | 7  |   
|                               
|Gross margin                    |                      | $                        | 62.2  |                    |  | $                          | 39.1  |       |  |      | 59 |          |   |      |       |      |  |          |       |     |  |  |    |     |   | $ | 32.77  |        |  | $ | 19.57  |        |  |  | 67 |   
|                               



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

Highlights




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Gross margin of $28.9 million for the second quarter of
    2006 marked the best second-quarter gross margin for phosphate
    since 1999, driven by higher prices across virtually all
    products in response to continuing high input costs and
    reasonably tight supply/demand fundamentals.                                                                                                                                          
|
| |  | The feed and industrial segments once again proved their value
    as stable, higher-margin phosphate businesses.                                                                                                                                                                                                                                                                                                                             
|
| |  | Feed phosphate provided $14.9 million of phosphate gross
    margin for the quarter and $30.9 million for the first six
    months of 2006, capitalizing on higher prices even as volumes
    declined.                                                                                                                                                                                                                                       
|
| |  | Industrial phosphate, long the foundation of our phosphate
    business, added gross margin of $13.9 million for the
    second quarter and $28.7 million for the first half of
    2006. Within industrial, purified phosphoric acid was again the
    most profitable product, generating quarterly gross margin of
    $13.7 million and $28.0 million of first-half gross
    margin, representing 32 percent of net sales in each period.

|                                                 |  |                            |      |       |                          |             |      |          |              |   |         |   |             |   |            |   |          |  |   |      |   |  |   |      |   |  |   |       |   |  |   |      |  
|------------------------------------------------ |  | -------------------------- | ---- | ----- | ------------------------ | ----------- | ---- | -------- | ------------ | - | ------- | - | ----------- | - | ---------- | - | -------- |  | - | ---- | - |  | - | ---- | - |  | - | ----- | - |  | - | ---- | -
|Phosphate gross margin variance attributable to:
|                                                 |  |                            |     
|Dollars (millions)                               |  |                            |      |       |                         
|                                                 |  | Three Months Ended June 30 |      |       | Six Months Ended June 30
|                                                 |  | 2006 vs. 2005              |      |       | 2006 vs. 2005           
|                                                 |  |                            |     
|                                                 |  | Change in                  |      |       |                          |             |      |          | Change in    |   |        
|                                                 |  | Prices/Costs               |      |       |                          |             |      |          | Prices/Costs |   |        
|                                                 |  | Change in                  |      |       |                          | Total Gross |      |          | Change in    |   |         |   | Total Gross
|                                                 |  | Sales                      |      | Net   |                          | Cost of     |      | Margin   |              |   | Sales   |   | Net         |   | Cost of    |   | Margin  
|                                                 |  | Volumes                    |      | Sales |                          | Goods Sold  |      | Variance |              |   | Volumes |   | Sales       |   | Goods Sold |   | Variance
|                                                 |  |                            |     
|Fertilizer  liquids                             |  | $                          | 3.2  |       |                          | $           | 2.3  |          |              | $ | (3.4    | ) |             | $ | 2.1        |   |          |  | $ | 5.6  |   |  | $ | 8.6  |   |  | $ | (5.9  | ) |  | $ | 8.3  |  
|Fertilizer  solids                              |  |                            | (7.6 | )     |                          |             | 9.0  |          |              |   | (1.8    | ) |             |   | (0.4       | ) |          |  |   | (1.8 | ) |  |   | 19.4 |   |  |   | (19.8 | ) |  |   | (2.2 | )
|Feed                                             |  |                            | (0.6 | )     |                          |             | 11.3 |          |              |   | 2.1     |   |             |   | 12.8       |   |          |  |   | (8.5 | ) |  |   | 24.1 |   |  |   | 8.9   |   |  |   | 24.5 |  
|Industrial                                       |  |                            | (3.5 | )     |                          |             | 4.5  |          |              |   | (1.5    | ) |             |   | (0.5       | ) |          |  |   | (1.9 | ) |  |   | 8.1  |   |  |   | (3.9  | ) |  |   | 2.3  |  
|Other                                            |  |                            | (0.3 | )     |                          |             | (0.1 | )        |              |   | (6.8    | ) |             |   | (7.2       | ) |          |  |   | (0.6 | ) |  |   | (0.2 | ) |  |   | (9.0  | ) |  |   | (9.8 | )
|                                                 |  |                            |     
|Total                                            |  | $                          | (8.8 | )     |                          | $           | 27.0 |          |              | $ | (11.4   | ) |             | $ | 6.8        |   |          |  | $ | (7.2 | ) |  | $ | 60.0 |   |  | $ | (29.7 | ) |  | $ | 23.1 |  
|                                                 |  |                            |     

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Sales and Cost of Goods Sold


$6.8-million




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Higher feed prices implemented by the company contributed
    $11.3 million to the gross margin increase. Production
    cutbacks in the industry and increased demand from export
    markets raised realized prices for liquid fertilizer products,
    favorably impacting phosphate gross margin.                                                                                                                                                                                 
|
| |  | Overall sales volumes were down 11 percent. Challenged by
    the same customer buying patterns that affected other nutrients
    and due to the continued slow down in Brazil, solid phosphate
    fertilizer volumes were down 18 percent from last
    years second quarter. An 11-percent decline in feed
    phosphate volumes, caused by increased competition, only
    negatively impacted the change in gross margin by
    $0.6 million as lower-priced sales were reduced.
|
| |  | The unfavorable price variance in cost of goods sold was
    $11.4 million. Ammonia prices 12 percent higher and
    15 percent higher sulfur prices reduced gross margin by
    $3.5 million and $5.4 million, respectively, while
    higher depreciation charges further increased costs.                                                                                                                                                                                          





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Higher prices realized in the feed and fertilizer markets were
    supplemented by industrial price increases implemented during
    2005 that held through 2006. Additionally, higher cost rock at
    our Geismar facility was a factor for certain customers.                                                                                                                                                                                                                                                                                   
|
| |  | Sales volumes were relatively flat, though there was a change in
    product mix. Liquid phosphate fertilizer sales volumes improved;
    supply/demand fundamentals remained strong, as a new PhosChem
    sales contract with India, at higher prices, was recently
    signed. This was more than offset by a 20-percent decline in
    feed sales volumes resulting from the companys decision to
    remain firm on pricing.                                                                                                                 
|
| |  | The price variance in cost of goods sold negatively impacted the
    change in gross margin by $29.7 million. Higher raw
    material input costs more than offset the positive effect of
    operating rate efficiencies and change in product mix. The
    company benefited from operating rate efficiencies as our
    P2O5
    operating rate increased 7 percent; however,
    25 percent higher ammonia prices and 18 percent higher
    sulfur prices combined to reduce gross margin by
    $13.3 million and $12.1 million, respectively.

Expenses and Other Income


|                                  |  |                    |      |                  |  |        |      |        |  |      |       |      |  |        |      |        |  |   |      |  |  |   |       |   |  |   |        |   |  |  |     |  
|--------------------------------- |  | ------------------ | ---- | ---------------- |  | ------ | ---- | ------ |  | ---- | ----- | ---- |  | ------ | ---- | ------ |  | - | ---- |  |  | - | ----- | - |  | - | ------ | - |  |  | --- | -
|                                  |  | Three Months Ended |      | Six Months Ended
|                                  |  | June 30            |      | June 30         
|                                 
|                                  |  | Dollar             |      | %                |  |        |      | Dollar |  | %   
|Dollars (millions)                |  | 2006               |      | 2005             |  | Change |      | Change |  | 2006 |       | 2005 |  | Change |      | Change
|                                 
|Selling and administrative        |  | $                  | 47.9 |                  |  | $      | 54.9 |        |  |      | (7.0  | )    |  |        | (13  | )      |  | $ | 78.7 |  |  | $ | 84.2  |   |  | $ | (5.5   | ) |  |  | (7  | )
|Provincial mining and other taxes |  |                    | 14.5 |                  |  |        | 44.2 |        |  |      | (29.7 | )    |  |        | (67  | )      |  |   | 28.7 |  |  |   | 82.6  |   |  |   | (53.9  | ) |  |  | (65 | )
|Foreign exchange loss (gain)      |  |                    | 16.3 |                  |  |        | (6.1 | )      |  |      | 22.4  |      |  |        | n/m  |        |  |   | 13.9 |  |  |   | (12.0 | ) |  |   | 25.9   |   |  |  | n/m |  
|Other income                      |  |                    | 20.0 |                  |  |        | 13.9 |        |  |      | 6.1   |      |  |        | 44   |        |  |   | 51.2 |  |  |   | 33.9  |   |  |   | 17.3   |   |  |  | 51  |  
|Interest expense                  |  |                    | 20.7 |                  |  |        | 20.6 |        |  |      | 0.1   |      |  |        |     |        |  |   | 43.9 |  |  |   | 41.3  |   |  |   | 2.6    |   |  |  | 6   |  
|Income tax (recovery) expense     |  |                    | (1.1 | )                |  |        | 80.9 |        |  |      | (82.0 | )    |  |        | (101 | )      |  |   | 42.3 |  |  |   | 145.6 |   |  |   | (103.3 | ) |  |  | (71 | )
|                                 
|n/m = not meaningful              |  |                    |      |                  |  |        |      |        |  |      |       |      |  |        |      |        |  |   |      |  |  |   |       |   |  |   |        |   |  |  |     |  





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$3.0-million $6.0-million








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the quarter ended June 30, 2006, we reduced our
    consolidated effective income tax rate from 33 percent to
    30 percent for the 2006 year. The impact of this
    change on prior periods, as applicable, was reflected during the
    quarter. The change was primarily attributable to two factors
    that occurred during the quarter. First, the Province of
    Saskatchewan enacted changes to the corporate income tax,
    reducing the rate from 17 percent to 12 percent over
    the next three years. Second, we revised our estimated
    allocation of annual income before income taxes by jurisdiction
    as a result of a decrease in expected potash operating income in
    Canada.
|
| |  | During the second quarter of 2006, the Government of Canada
    enacted changes to the federal corporate income tax and the
    corporate surtax. The federal corporate income tax rate will be
    reduced from 21 percent to 19 percent over the next
    four years and the federal corporate surtax will be reduced from
    1.12 percent to nil in 2008. The impact of this change on
    the companys future income tax liability was recognized
    during the quarter.                                                                                                                                                                                                                                     

34



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| |   |                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Income tax refunds totaling $15.8 million were recorded,
    $3.5 million of which was recognized during second-quarter
    2006, relating to a recent Canadian appeals court decision
    (pertaining to a uranium producer) which affirmed the
    deductibility of the Saskatchewan capital tax resource surcharge.



LIQUIDITY AND CAPITAL RESOURCES


Cash Requirements




Contractual Obligations and Other Commitments


|                                               |  |                        |         |               |  |              |       |              |  |              |       |  |  |   |         |  |  |   |         | 
|---------------------------------------------- |  | ---------------------- | ------- | ------------- |  | ------------ | ----- | ------------ |  | ------------ | ----- |  |  | - | ------- |  |  | - | ------- | 
|                                               |  | Payments Due By Period
|                                               |  | Dollars (millions)    
|                                              
|                                               |  | Total                  |         | Within 1 year |  | 1 to 3 years |       | 3 to 5 years |  | Over 5 years
|                                              
|Long-term debt                                 |  | $                      | 1,258.1 |               |  | $            | 401.0 |              |  | $            | 0.5   |  |  | $ | 600.7   |  |  | $ | 255.9   | 
|Estimated interest payments on long- term debt |  |                        | 349.3   |               |  |              | 87.7  |              |  |              | 118.4 |  |  |   | 118.4   |  |  |   | 24.8    | 
|Operating leases                               |  |                        | 694.7   |               |  |              | 84.9  |              |  |              | 142.8 |  |  |   | 132.4   |  |  |   | 334.6   | 
|Purchase obligations                           |  |                        | 880.6   |               |  |              | 121.7 |              |  |              | 208.6 |  |  |   | 179.2   |  |  |   | 371.1   | 
|Other commitments                              |  |                        | 43.5    |               |  |              | 16.5  |              |  |              | 18.6  |  |  |   | 8.4     |  |  |   |        | 
|Other long-term liabilities                    |  |                        | 864.4   |               |  |              | 41.4  |              |  |              | 78.4  |  |  |   | 68.4    |  |  |   | 676.2   | 
|                                              
|Total                                          |  | $                      | 4,090.6 |               |  | $            | 753.2 |              |  | $            | 567.3 |  |  | $ | 1,107.5 |  |  | $ | 1,662.6 | 
|                                              

Long-term Debt


back-to




35



---



##### Table of Contents





Operating Leases






Purchase Obligations








Other Commitments




Other Long-term Liabilities






Capital Expenditures






36



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Sources and Uses of Cash




|                                                |  |                    |        |                  |  |        |        |      |  |      |     |        |  |   |        |   |  |   |        |   |  |  |     |  
|----------------------------------------------- |  | ------------------ | ------ | ---------------- |  | ------ | ------ | ---- |  | ---- | --- | ------ |  | - | ------ | - |  | - | ------ | - |  |  | --- | -
|                                                |  | Three Months Ended |        | Six Months Ended
|                                                |  | June 30            |        | June 30         
|                                               
|                                                |  | %                  |        |                  |  | %     
|Dollars (millions)                              |  | 2006               |        | 2005             |  | Change |        | 2006 |  | 2005 |     | Change
|                                               
|Cash provided by operating activities           |  | $                  | 141.2  |                  |  | $      | 348.3  |      |  |      | (59 | )      |  | $ | 128.7  |   |  | $ | 470.0  |   |  |  | (73 | )
|Cash used in investing activities               |  | $                  | (127.1 | )                |  | $      | (167.0 | )    |  |      | (24 | )      |  | $ | (375.9 | ) |  | $ | (217.4 | ) |  |  | 73  |  
|Cash (used in) provided by financing activities |  | $                  | (57.1  | )                |  | $      | (237.0 | )    |  |      | (76 | )      |  | $ | 283.0  |   |  | $ | (288.2 | ) |  |  | n/m |  





|                                        |  |          |          |              |  |        |          |   |  |  |     |  
|--------------------------------------- |  | -------- | -------- | ------------ |  | ------ | -------- | - |  |  | --- | -
|                                        |  | June 30, |          | December 31, |  | %     
|Dollars (millions) except ratio amounts |  | 2006     |          | 2005         |  | Change
|                                       
|Current assets                          |  | $        | 1,124.0  |              |  | $      | 1,110.8  |   |  |  | 1   |  
|Current liabilities                     |  | $        | (1,447.4 | )            |  | $      | (1,096.1 | ) |  |  | 32  |  
|Working capital                         |  | $        | (323.4   | )            |  | $      | 14.7     |   |  |  | n/m |  
|Current ratio                           |  |          | 0.78     |              |  |        | 1.01     |   |  |  | (23 | )





$110.8-million $79.5-million






| |   |                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In February 2006, we acquired an additional 10.01-percent
    interest in the ordinary shares of Sinofert for cash
    consideration of $126.3 million. The purchase price was
    financed by short-term debt. In the second quarter of 2005, we
    acquired 1 million additional shares in APC for
    $18.6 million and 21 million additional shares in ICL
    for $74.9 million.

37



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##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our spending on property, plant and equipment increased
    $56.7 million and $113.7 million as compared to the
    same three-month and six-month periods last year, largely due to
    major capital expansion projects in potash. These activities,
    totaling $131.1 million for the quarter and
    $251.1 million for the first half of 2006, were also
    financed by our short-term credit facilities.





Principal Debt Instruments


|                           |  |               |         |             |  |           |         |           |  |   |       |  |  |   |       | 
|-------------------------- |  | ------------- | ------- | ----------- |  | --------- | ------- | --------- |  | - | ----- |  |  | - | ----- | 
|                           |  | June 30, 2006
|                          
|                           |  | Total         |         | Amount      |  | Amount    |         | Amount   
|Dollars (millions)         |  | Amount        |         | Outstanding |  | Committed |         | Available
|                          
|Syndicated credit facility |  | $             | 750.0   |             |  | $         |        |           |  | $ | 556.5 |  |  | $ | 193.5 | 
|Line of credit             |  |               | 75.0    |             |  |           |        |           |  |   | 19.3  |  |  |   | 55.7  | 
|Commercial paper           |  |               | 750.0   |             |  |           | 556.5   |           |  |   |      |  |  |   | 193.5 | 
|US shelf registration      |  |               | 2,000.0 |             |  |           | 1,250.0 |           |  |   |      |  |  |   | 750.0 | 

$750.0-million debt-to debt-to




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Outstanding Share Data




Off-Balance Sheet Arrangements




Guarantee Contracts




back-to


39



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Derivative Instruments


marked-to


over-the






40



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Long-term Fixed Price Contracts




QUARTERLY FINANCIAL HIGHLIGHTS


|                               |  |          |       |           |  |   |              |  |               |  |          |       |           |  |   |              |  |               |   |         |  |  |   |       |  |  |  |   |       |  |  |   |       | 
|------------------------------ |  | -------- | ----- | --------- |  | - | ------------ |  | ------------- |  | -------- | ----- | --------- |  | - | ------------ |  | ------------- | - | ------- |  |  | - | ----- |  |  |  | - | ----- |  |  | - | ----- | 
|                               |  |          |       |           |  |  
|Dollars (millions)             |  | June 30, |       | March 31, |  |   | December 31, |  | September 30, |  | June 30, |       | March 31, |  |   | December 31, |  | September 30,
|except per-share amounts       |  | 2006     |       | 2006      |  |   | 2005         |  | 2005          |  | 2005     |       | 2005      |  |   | 2004         |  | 2004         
|                               |  |          |       |           |  |  
|Sales                          |  | $        | 928.7 |           |  | $ | 861.6        |  |               |  | $        | 930.5 |           |  | $ | 938.0        |  |               | $ | 1,057.3 |  |  | $ | 921.4 |  |  |  | $ | 866.6 |  |  | $ | 815.7 | 
|                               |  |          |       |           |  |  
|Gross margin                   |  |          | 253.4 |           |  |   | 203.5        |  |               |  |          | 242.2 |           |  |   | 279.5        |  |               |   | 344.8   |  |  |   | 258.5 |  |  |  |   | 197.3 |  |  |   | 189.4 | 
|                               |  |          |       |           |  |  
|Net income                     |  |          | 175.1 |           |  |   | 125.5        |  |               |  |          | 117.1 |           |  |   | 130.3        |  |               |   | 164.2   |  |  |   | 131.3 |  |  |  |   | 100.1 |  |  |   | 75.2  | 
|                               |  |          |       |           |  |  
|Net income per share  basic   |  |          | 1.69  |           |  |   | 1.21         |  |               |  |          | 1.11  |           |  |   | 1.20         |  |               |   | 1.50    |  |  |   | 1.18  |  |  |  |   | 0.91  |  |  |   | 0.69  | 
|                               |  |          |       |           |  |  
|Net income per share  diluted |  |          | 1.65  |           |  |   | 1.19         |  |               |  |          | 1.09  |           |  |   | 1.17         |  |               |   | 1.46    |  |  |   | 1.15  |  |  |  |   | 0.88  |  |  |   | 0.68  | 
|                               |  |          |       |           |  |  





RELATED PARTY TRANSACTIONS




CRITICAL ACCOUNTING ESTIMATES


10-Q.






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RECENT ACCOUNTING CHANGES


Changes in Accounting Policies






Recent Accounting Pronouncements


Canada


Comprehensive Income, Equity, Financial Instruments and
Hedges






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



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Stripping Costs Incurred in the Production Phase of a
Mining Operation




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


EIC-162 EIC-162


United States








43



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RISK MANAGEMENT










OUTLOOK


year-to






44



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10-year








45



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FORWARD LOOKING STATEMENTS


10-Q, 10-Q,





ITEM
3.       QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Commodity Risk






10-percent


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Interest Rate Risk








Foreign Exchange Risk









ITEM 4.       CONTROLS
AND PROCEDURES






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PART II.       OTHER
INFORMATION







ITEM
4.       SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS






|                          |  |     |            |         |  |           |   |  |  |  |           | 
|------------------------- |  | --- | ---------- | ------- |  | --------- | - |  |  |  | --------- | 
|                          |  | For |            | Against |  | Withheld*
|                          |  |     |            |         |  |          
|Frederick J. Blesi        |  |     | 87,281,009 |         |  |           | 0 |  |  |  | 70,699    | 
|William J. Doyle          |  |     | 87,252,962 |         |  |           | 0 |  |  |  | 98,746    | 
|John W. Estey             |  |     | 82,854,187 |         |  |           | 0 |  |  |  | 4,497,521 | 
|Wade Fetzer III           |  |     | 82,854,682 |         |  |           | 0 |  |  |  | 4,497,026 | 
|Dallas J. Howe            |  |     | 87,196,609 |         |  |           | 0 |  |  |  | 155,099   | 
|Alice D. Laberge          |  |     | 87,151,547 |         |  |           | 0 |  |  |  | 200,161   | 
|Jeffrey J. McCaig         |  |     | 82,855,784 |         |  |           | 0 |  |  |  | 4,495,924 | 
|Mary Mogford              |  |     | 87,281,902 |         |  |           | 0 |  |  |  | 69,806    | 
|Paul J. Schoenhals        |  |     | 82,799,133 |         |  |           | 0 |  |  |  | 4,552,575 | 
|E. Robert Stromberg, Q.C. |  |     | 87,046,664 |         |  |           | 0 |  |  |  | 305,044   | 
|Jack G. Vicq              |  |     | 87,281,001 |         |  |           | 0 |  |  |  | 70,707    | 
|Elena Viyella de Paliza   |  |     | 87,067,853 |         |  |           | 0 |  |  |  | 283,855   | 










|  |                                                                                  
|- | ---------------------------------------------------------------------------------
|* | Number of withheld votes is based upon proxies received prior to
    the Meeting.




ITEM
6.       EXHIBITS


(a)       EXHIBITS


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

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|        |  |                                                                                                                                                                                                                                                                                                        
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                        
|Number  |  | Description of Document                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                        
|4(d)    |  | Syndicated Term Credit Facility Third Amending Agreement between
    The Bank of Nova Scotia and other financial institutions and the
    registrant dated as of September 20, 2005, incorporated by
    reference to Exhibit 4(a) to the registrants report
    on Form 8-K dated September 22, 2005.
|4(e)    |  | 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(f)    |  | 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(g)    |  | 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(h)    |  | Form of Notes relating to the registrants offering of
    $600,000,000 principal amount of 7.75% Notes due
    May 31, 2011, incorporated by reference to Exhibit 4
    to the registrants report on Form 8-K dated
    May 17, 2001.                                                                
|4(i)    |  | Form of Note relating to the registrants offering of
    $250,000,000 principal amount of 4.875% Notes due
    March 1, 2013, incorporated by reference to Exhibit 4
    to the registrants report on Form 8-K dated
    February 28, 2003.                                                          



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

49



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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Number  |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10(h)   |  | Esterhazy Restated Mining and Processing Agreement dated
    January 31, 1978, between International Minerals &
    Chemical Corporation (Canada) Limited and the registrants
    predecessor, incorporated by reference to Exhibit 10(e) to
    the F-1 Registration Statement.                                                                                                                                                                                                                                                                      
|10(i)   |  | Agreement dated December 21, 1990, between International
    Minerals & Chemical Corporation (Canada) Limited and
    the registrant, amending the Esterhazy Restated Mining and
    Processing Agreement dated January 31, 1978, incorporated
    by reference to Exhibit 10(p) to the registrants
    report on Form 10-K for the year ended December 31,
    1990.                                                                                                                                                                                 
|10(j)   |  | Agreement effective August 27, 1998, between International
    Minerals & Chemical (Canada) Global Limited and the
    registrant, amending the Esterhazy Restated Mining and
    Processing Agreement dated January 31, 1978 (as amended),
    incorporated by reference to Exhibit 10(l) to the
    registrants report on Form 10-K for the year ended
    December 31, 1998 (the 1998 Form 10-K).                                                                                                                                                
|10(k)   |  | Agreement effective August 31, 1998, among International
    Minerals & Chemical (Canada) Global Limited,
    International Minerals & Chemical (Canada) Limited
    Partnership and the registrant assigning the interest in the
    Esterhazy Restated Mining and Processing Agreement dated
    January 31, 1978 (as amended) held by International
    Minerals & Chemical (Canada) Global Limited to
    International Minerals & Chemical (Canada) Limited
    Partnership, incorporated by reference to Exhibit 10(m) to
    the 1998 Form 10-K.
|10(l)   |  | Potash Corporation of Saskatchewan Inc. Stock Option
    Plan  Directors, as amended January 23, 2001,
    incorporated by reference to Exhibit 10(bb) to the
    registrants report on Form 10-Q for the quarterly
    period ended June 30, 2001.                                                                                                                                                                                                                                                                                                  
|10(m)   |  | Potash Corporation of Saskatchewan Inc. Stock Option
    Plan  Officers and Employees, as amended
    January 23, 2001, incorporated by reference to
    Exhibit 10(aa) to the 2000 Form 10-K.                                                                                                                                                                                                                                                                                                                                                        
|10(n)   |  | Short-Term Incentive Plan of the registrant effective January
    2000, as amended March 10, 2005, incorporated by reference
    to Exhibit 10(x) to the registrants report on
    Form 10-K for the year ended December 31, 2004 (the
    2004 Form 10-K).                                                                                                                                                                                                                                                                                         
|10(o)   |  | Long-Term Incentive Plan of the registrant effective January
    2003, incorporated by reference to Exhibit 10(y) to the
    2002 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                           
|10(p)   |  | Resolution and Forms of Agreement for Supplemental Retirement
    Income Plan, for officers and key employees of the registrant,
    incorporated by reference to Exhibit 10(o) to the 1995
    Form 10-K.                                                                                                                                                                                                                                                                                                                                             
|10(q)   |  | Amending Resolution and revised forms of agreement regarding
    Supplemental Retirement Income Plan of the registrant,
    incorporated by reference to Exhibit 10(x) to the
    registrants report on Form 10-Q for the quarterly
    period ended June 30, 1996.                                                                                                                                                                                                                                                                                   
|10(r)   |  | Amended and restated Supplemental Retirement Income Plan of the
    registrant and text of amendment to existing supplemental income
    plan agreements, incorporated by reference to
    Exhibit 10(mm) to the registrants report on
    Form 10-Q for the quarterly period ended September 30,
    2000.                                                                                                                                                                                                                                           
|10(s)   |  | Form of Letter of amendment to existing supplemental income plan
    agreements of the registrant dated November 4, 2002,
    incorporated by reference to Exhibit 10(cc) to the 2002
    Form 10-K.                                                                                                                                                                                                                                                                                                                                                   
|10(t)   |  | Supplemental Retirement Benefits Plan for U.S. Executives
    dated effective January 1, 1999, incorporated by reference
    to Exhibit 10(aa) to the Second Quarter 2002 Form 10-Q.                                                                                                                                                                                                                                                                                                                                                                   
|10(u)   |  | Forms of Agreement dated December 30, 1994, between the
    registrant and certain officers of the registrant, concerning a
    change in control of the registrant, incorporated by reference
    to Exhibit 10(p) to the 1995 Form 10-K.                                                                                                                                                                                                                                                                                                             
|10(v)   |  | Form of Agreement of Indemnification dated August 8, 1995,
    between the registrant and certain officers and directors of the
    registrant, incorporated by reference to Exhibit 10(q) to
    the 1995 Form 10-K.                                                                                                                                                                                                                                                                                                                                  

50



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|        |  |                                                                                                                                                                                                                                                                                                                              
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                              
|Number  |  | Description of Document                                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                              
|10(w)   |  | Resolution and Form of Agreement of Indemnification dated
    January 24, 2001, incorporated by reference to
    Exhibit 10(ii) to the 2000 Form 10-K.                                                                                                                                                                       
|10(x)   |  | Resolution and Form of Agreement of Indemnification 
    July 21, 2004, incorporated by reference to
    Exhibit 10(ii) to the Second Quarter 2004 Form 10-Q.                                                                                                                                                               
|10(y)   |  | Chief Executive Officer Medical and Dental Benefits,
    incorporated by reference to Exhibit 10(jj) to the 2004
    Form 10-K.                                                                                                                                                                                              
|10(z)   |  | Second Amended and Restated Membership Agreement dated
    January 1, 1995, among Phosphate Chemicals Export
    Association, Inc. and members of such association, including
    Texasgulf Inc., incorporated by reference to Exhibit 10(t)
    to the 1995 Form 10-K.                                                      
|10(aa)  |  | International Agency Agreement dated January 1, 1995,
    between Phosphate Chemicals Export Association, Inc. and
    Texasgulf Inc. establishing Texasgulf Inc. as exclusive
    marketing agent for such associations wet phosphatic
    materials, incorporated by reference to Exhibit 10(u) to
    the 1995 Form 10-K.
|10(bb)  |  | Deferred Share Unit Plan for Non-Employee Directors,
    incorporated by reference to Exhibit 4.1 to the
    registrants Form S-8 (File No. 333-75742) filed
    December 21, 2001.                                                                                                                                         
|10(cc)  |  | Potash Corporation of Saskatchewan Inc. 2005 Performance Option
    Plan and Form of Option Agreement, incorporated by reference to
    Exhibit 10(nn) to the registrants report on
    Form 10-Q for the quarterly period ended March 31,
    2005.                                                                        
|10(dd)  |  | Potash Corporation of Saskatchewan Inc. 2006 Performance Option
    Plan and Form of Option Agreement, incorporated by reference to
    Exhibit 10(dd) to the registrants report on
    Form 10-Q for the quarterly period ended March 31,
    2006.                                                                        
|10(ee)  |  | Medium Term Incentive Plan of the registrant effective January
    2006, incorporated by reference to Exhibit 10(dd) to the
    registrants report on Form 10-K for the year ended
    December 31, 2005.                                                                                                                   
|11      |  | Statement re Computation of Per Share Earnings                                                                                                                                                                                                                                                                               
|31(a)   |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                 
|31(b)   |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                 
|32      |  | Certification pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                 

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SIGNATURES






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





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

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



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

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

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EXHIBIT INDEX


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



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|Number  |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|10(a)   |  | Sixth Voting Agreement dated April 22, 1978, between
    Central Canada Potash, Division of Noranda, Inc., Cominco Ltd.,
    International Minerals and Chemical Corporation (Canada)
    Limited, PCS Sales and Texasgulf Inc., incorporated by reference
    to Exhibit 10(f) to the registrants registration
    statement on Form F-1 (File No. 33-31303) (the
    F-1 Registration Statement).

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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Number  |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10(b)   |  | Canpotex Limited Shareholders Seventh Memorandum of Agreement
    effective April 21, 1978, between Central Canada Potash,
    Division of Noranda Inc., Cominco Ltd., International Minerals
    and Chemical Corporation (Canada) Limited, PCS Sales, Texasgulf
    Inc. and Canpotex Limited as amended by Canpotex S&P
    amending agreement dated November 4, 1987, incorporated by
    reference to Exhibit 10(g) to the F-1 Registration
    Statement.                                                                                        
|10(c)   |  | Producer Agreement dated April 21, 1978, between Canpotex
    Limited and PCS Sales, incorporated by reference to
    Exhibit 10(h) to the F-1 Registration Statement.                                                                                                                                                                                                                                                                                                                                                                                 
|10(d)   |  | Canpotex/PCS Amending Agreement, dated as of October 1,
    1992, incorporated by reference to Exhibit 10(f) to the
    registrants report on Form 10-K for the year ended
    December 31, 1995 (the 1995 Form 10-K).                                                                                                                                                                                                                                                                                                                              
|10(e)   |  | Canpotex PCA Collateral Withdrawing/PCS Amending Agreement,
    dated as of October 7, 1993, incorporated by reference to
    Exhibit 10(g) to the 1995 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                     
|10(f)   |  | Canpotex Producer Agreement amending agreement dated as of
    January 1, 1999, incorporated by reference to
    Exhibit 10(f) to the registrants report on
    Form 10-K for the year ended December 31, 2000 (the
    2000 Form 10-K).                                                                                                                                                                                                                                                                                                            
|10(g)   |  | Canpotex Producer Agreement amending agreement dated as of
    July 1, 2002, incorporated by reference to
    Exhibit 10(g) to the registrants report on
    Form 10-Q for the quarterly period ended June 30, 2004
    (the Second Quarter 2004 Form 10-Q).                                                                                                                                                                                                                                                                                        
|10(h)   |  | Esterhazy Restated Mining and Processing Agreement dated
    January 31, 1978, between International Minerals &
    Chemical Corporation (Canada) Limited and the registrants
    predecessor, incorporated by reference to Exhibit 10(e) to
    the F-1 Registration Statement.                                                                                                                                                                                                                                                                      
|10(i)   |  | Agreement dated December 21, 1990, between International
    Minerals & Chemical Corporation (Canada) Limited and
    the registrant, amending the Esterhazy Restated Mining and
    Processing Agreement dated January 31, 1978, incorporated
    by reference to Exhibit 10(p) to the registrants
    report on Form 10-K for the year ended December 31,
    1990.                                                                                                                                                                                 
|10(j)   |  | Agreement effective August 27, 1998, between International
    Minerals & Chemical (Canada) Global Limited and the
    registrant, amending the Esterhazy Restated Mining and
    Processing Agreement dated January 31, 1978 (as amended),
    incorporated by reference to Exhibit 10(l) to the
    registrants report on Form 10-K for the year ended
    December 31, 1998 (the 1998 Form 10-K).                                                                                                                                                
|10(k)   |  | Agreement effective August 31, 1998, among International
    Minerals & Chemical (Canada) Global Limited,
    International Minerals & Chemical (Canada) Limited
    Partnership and the registrant assigning the interest in the
    Esterhazy Restated Mining and Processing Agreement dated
    January 31, 1978 (as amended) held by International
    Minerals & Chemical (Canada) Global Limited to
    International Minerals & Chemical (Canada) Limited
    Partnership, incorporated by reference to Exhibit 10(m) to
    the 1998 Form 10-K.
|10(l)   |  | Potash Corporation of Saskatchewan Inc. Stock Option
    Plan  Directors, as amended January 23, 2001,
    incorporated by reference to Exhibit 10(bb) to the
    registrants report on Form 10-Q for the quarterly
    period ended June 30, 2001.                                                                                                                                                                                                                                                                                                  
|10(m)   |  | Potash Corporation of Saskatchewan Inc. Stock Option
    Plan  Officers and Employees, as amended
    January 23, 2001, incorporated by reference to
    Exhibit 10(aa) to the 2000 Form 10-K.                                                                                                                                                                                                                                                                                                                                                        
|10(n)   |  | Short-Term Incentive Plan of the registrant effective January
    2000, as amended March 10, 2005, incorporated by reference
    to Exhibit 10(x) to the registrants report on
    Form 10-K for the year ended December 31, 2004 (the
    2004 Form 10-K).                                                                                                                                                                                                                                                                                         
|10(o)   |  | Long-Term Incentive Plan of the registrant effective January
    2003, incorporated by reference to Exhibit 10(y) to the
    2002 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                           
|10(p)   |  | Resolution and Forms of Agreement for Supplemental Retirement
    Income Plan, for officers and key employees of the registrant,
    incorporated by reference to Exhibit 10(o) to the 1995
    Form 10-K.                                                                                                                                                                                                                                                                                                                                             

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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                              
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                              
|Number  |  | Description of Document                                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                              
|10(q)   |  | Amending Resolution and revised forms of agreement regarding
    Supplemental Retirement Income Plan of the registrant,
    incorporated by reference to Exhibit 10(x) to the
    registrants report on Form 10-Q for the quarterly
    period ended June 30, 1996.                                                         
|10(r)   |  | Amended and restated Supplemental Retirement Income Plan of the
    registrant and text of amendment to existing supplemental income
    plan agreements, incorporated by reference to
    Exhibit 10(mm) to the registrants report on
    Form 10-Q for the quarterly period ended September 30,
    2000.                 
|10(s)   |  | Form of Letter of amendment to existing supplemental income plan
    agreements of the registrant dated November 4, 2002,
    incorporated by reference to Exhibit 10(cc) to the 2002
    Form 10-K.                                                                                                                         
|10(t)   |  | Supplemental Retirement Benefits Plan for U.S. Executives
    dated effective January 1, 1999, incorporated by reference
    to Exhibit 10(aa) to the Second Quarter 2002 Form 10-Q.                                                                                                                                         
|10(u)   |  | Forms of Agreement dated December 30, 1994, between the
    registrant and certain officers of the registrant, concerning a
    change in control of the registrant, incorporated by reference
    to Exhibit 10(p) to the 1995 Form 10-K.                                                                                   
|10(v)   |  | Form of Agreement of Indemnification dated August 8, 1995,
    between the registrant and certain officers and directors of the
    registrant, incorporated by reference to Exhibit 10(q) to
    the 1995 Form 10-K.                                                                                                        
|10(w)   |  | Resolution and Form of Agreement of Indemnification dated
    January 24, 2001, incorporated by reference to
    Exhibit 10(ii) to the 2000 Form 10-K.                                                                                                                                                                       
|10(x)   |  | Resolution and Form of Agreement of Indemnification 
    July 21, 2004, incorporated by reference to
    Exhibit 10(ii) to the Second Quarter 2004 Form 10-Q.                                                                                                                                                               
|10(y)   |  | Chief Executive Officer Medical and Dental Benefits,
    incorporated by reference to Exhibit 10(jj) to the 2004
    Form 10-K.                                                                                                                                                                                              
|10(z)   |  | Second Amended and Restated Membership Agreement dated
    January 1, 1995, among Phosphate Chemicals Export
    Association, Inc. and members of such association, including
    Texasgulf Inc., incorporated by reference to Exhibit 10(t)
    to the 1995 Form 10-K.                                                      
|10(aa)  |  | International Agency Agreement dated January 1, 1995,
    between Phosphate Chemicals Export Association, Inc. and
    Texasgulf Inc. establishing Texasgulf Inc. as exclusive
    marketing agent for such associations wet phosphatic
    materials, incorporated by reference to Exhibit 10(u) to
    the 1995 Form 10-K.
|10(bb)  |  | Deferred Share Unit Plan for Non-Employee Directors,
    incorporated by reference to Exhibit 4.1 to the
    registrants Form S-8 (File No. 333-75742) filed
    December 21, 2001.                                                                                                                                         
|10(cc)  |  | Potash Corporation of Saskatchewan Inc. 2005 Performance Option
    Plan and Form of Option Agreement, incorporated by reference to
    Exhibit 10(nn) to the registrants report on
    Form 10-Q for the quarterly period ended March 31,
    2005.                                                                        
|10(dd)  |  | Potash Corporation of Saskatchewan Inc. 2006 Performance Option
    Plan and Form of Option Agreement, incorporated by reference to
    Exhibit 10(dd) to the registrants report on
    Form 10-Q for the quarterly period ended March 31,
    2006.                                                                        
|10(ee)  |  | Medium Term Incentive Plan of the registrant effective January
    2006, incorporated by reference to Exhibit 10(dd) to the
    registrants report on Form 10-K for the year ended
    December 31, 2005.                                                                                                                   
|11      |  | Statement re Computation of Per Share Earnings                                                                                                                                                                                                                                                                               
|31(a)   |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                 
|31(b)   |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                 
|32      |  | Certification pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                 

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