theweekthatwas

The past week was packed full with potash/fertilizer industry news. First we had Potash Corp. of
Saskatchewan (POT) eclipsing the $200 benchmark, culminating in POT becoming the largest company
in Canada by market capitalization. The very next day, Intrepid Potash (IPI), an IPO we have been
talking about for some time, debuted on the New York Stock Exchange finishing up 58% for the day.
This is on top of raising the number of shares offered in the IPO as well as the pricing of the issue by
roughly 50%. Thursday before the open, POT released blowout earnings while also providing higher
guidance on future earnings (quarterly and yearly).

The whole industry was winded by Thursday, and many of the stocks ended the day down, even though
Potash Corp. reported those stunning numbers. We speculated in a previous article that they would
need to blow away numbers past the already inflated expectations which had arisen after The Mosaic
Company (MOS) reported their earnings earlier this month. It is no secret that the last run-up in share
prices for the industry is due to some short squeezes, so it would not surprise us if Thursday's sell-off
was in part due to some short sellers re-entering their positions. The $200 puts were popular when POT
crossed over, so it would not surprise us if the 'Big Boys' were playing/hedging their bets.

This morning CIBC World Markets maintained their "sector outperform" for Potash Corp. of
Saskatchewan. CIBC raised their price target to $275 from $260 while also raising their EPS estimates
for 2008 and 2009. CIBC sees EPS in 2008 in the range of $10.22-10.47 and EPS in 2009 from
$13.80-18.22. For the record POT sees earnings in 2008 from $9.50-$10.50, so one could read
between the lines and reason that POT will raise earnings estimates again next quarter- 'under promise
and over deliver'.

We found some interesting notes in the earnings release, which really blew our mind. We knew that
Potash controlled most of the world's potash production and held large stakes in many other producers
around the world, we had no idea that these stakes amounted to $26.50/share, or roughly $8.6 billion
total. If you take this out of the share price, the P/E of Potash Corp. becomes that much more attractive.
The company's production estimates for 2008 came in lower than the numbers we use, however their
future numbers for 2012 will come in about one million tonnes KCl above our numbers. The company
believes that they can get production up to "15.7 million tonnes KCl by the end of 2012." By 2015 they
expect to raise their production in Saskatchewan by another 1.5 million tonnes a year.

This indicates that the company's production base will increase by 65% by 2012, which is mind boggling
when you consider that in four years a $60 billion plus mining company is going to increase their mined
production by over half with the possibility of increasing revenues over that time by 100% (and maybe
200% if current prices hold and/or increase in their market segments).