kevin stone minerals and metals sector, natural resources canada october 24, 2011

1

Potash DevelopmentAboriginal Entrepreneurs Conference and Tradeshow

Workshops Session 2 – Potash Development in Saskatchewan

Kevin StoneMinerals and Metals Sector, Natural Resources Canada

October 24, 2011

POTASH IN CANADA

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Canadian Potash

Potash is the No.1 commodity by production value among all minerals, valued at $5.7billion In 2010

Canada is the world’s largest producer, accounting for 30% of the world total in 2010

Canada is the world’s largest exporter, accounting for 37% of the world total in 2010

Canada has the world’s largest production capacity, accounting for 35% of the world total in 2011

Canada has the world’s largest potash reserves and reserve base, accounting for 60% of the world total based on the US Geological Survey

4

Potash Prices

Sources: NRCan, FERTECON

Potash Contract Prices (Muriate of Potash) January 2004 - October 2011

0

100

200

300

400

500

600

700

800

US$

per

tonn

e M

OP

Vancouver Baltic Black Sea

Contribution to Economy

Saskatchewan

Source: Saskatchewan Potash Producers Association

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Canada Potash Operations

Saskatchewan 10 New Brunswick 1

11 mining/milling

operationsin Canada

PotashCorp 6Mosaic 4Agrium 1Canpotex – Offshore Marketing

Conventional 9Solution 2

POTASH DEPOSIT

8

Saskatchewan Prairie Evaporite

1973 Provincial Estimate 107 000 Mt KCl (66 000 Mt K2O equivalent)

Ore grade: 42% KCl (25% K2O)Depth: 900-3000 metres

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USGS Estimate of Global Potash Reserves and Reserve Basemillion tonnes K2O, at the end of 2008

Canada, 11 000

Canada, 4 400

World Total, 18 000

World Total, 8 300

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

Reserves Reserve Base

mill

ion

tonn

es K

2O

Potash Reserves and Reserve Base

Source: USGS

USGS estimates total at 26,300 Mt K2O (8,300 Mt reserves and 18,000 Mt reserve base)Canada has 15,400 Mt (60% of the world total)

DEMAND FOR POTASH

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Potash Use About 95% of potash is used as a fertilizer in agriculture Smaller amounts are also used in manufacture of potassium-bearing

chemicals such as detergents, ceramics, and pharmaceuticals as well as water conditioners, de-icing salt, and etc

Global leading potash users are those economies with large agricultural sectors such as China, India, Brazil, the US, Indonesia and Malaysia In the US, more than 45% of potash is applied to produce corn In China, 50% of the potash is applied to produce fruits and vegetables, and

28% to produce rice In Brazil, more than 75% of the potash is applied to produce soybean, sugar

cane and corn In Malaysia and Indonesia, oil palm accounts for more than 70% of potash

consumed. All major consuming countries lack of potash resources and need to

import potash to support their agricultural production

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Major Potash Consumers

Sources: NRCan

Estimated Apparent Potash Consumption and Imports, 20109.3 9.1

7.3

8.2

5.2

6.76.1

2.2 1.9

6.1

2.2 1.9

0

1

2

3

4

5

6

7

8

9

10

US China Brazil India Indonesia Malaysia

Mt K

Cl

Apparent Consumption Imports

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World Potash Consumption

World Potash Consumption 1980-2010

0

5,000

10,000

15,000

20,000

25,000

30,000

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

000

tonn

es K

2O

Sources: IFA, NRCan

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Forecast Demand for Potash

Sources: IFA, NRCan

Forecast World Demand for Potash 2011-2016

44,167

53,65755,917 57,660 59,352 60,822 62,500

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2010 2011 2012 2013 2014 2015 2016

000

tonn

es K

Cl

PRODUCTION & PRODUCERS

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World Potash ProductionWorld Potash Production 2001-2010

43,099 44,14446,420

51,83654,344

48,795

55,400 54,164

31,877

53,302

0

10,000

20,000

30,000

40,000

50,000

60,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 p

000

tonn

es K

Cl

Sources: IFA, NRCan

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Potash Producing Countries

Sources: IFA, NRCan

Potash Production by Country 2010

663

670

740

1,005

1,418

1,943

3,256

3,908

4,936

8,705

10,214

15,568

0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000

Brazil

UK

Spain

USAChile

Jordan

Israel

ChinaGermany

Belarus

Russia

Canada

World total production 53.03 Mt KCl in 201053.86 Mt KCl 2008

12 countries produce potash in 2010

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Producing Companies

Source: NRCan, IFA

Global Potash Producers 2010 Production Capacity

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000

LAOSUZBEKISTAN

VALE (BRAZIL)INTREPID (US)

SQM (CHILE)AGRIUM (CANADA)

APC (JORDAN)CHINA

ICL (ISRAEL, SPAIN, UK)K+S (GERMANY)

BELARUSKALI (BELARUS)MOSAIC (CANADA, US)

URALKALI (RUSSIA)POTASH CORP (CANADA)

000 tonnes KCl

CAPACITY DEVELOPMENT

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Forecast Capacity Increase - World

Source: IFA, NRCan

Forecast Increases of World Production Capacity and Capability, 2011-2016

68 7077

8290

95

129

6671 75

8187

100

0102030405060708090

100110120130

2010 2011 2012 2013 2014 2015 2016

mill

ion

tonn

es K

Cl

Capacity Capability

Actual

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Forecast Capacity Increase - Canada

Source: NRCan

Produciton Capacity Increase Forecast (Canada)

24.4

30.8 32.334.334.8

38.336.8

40.8

0

5

10

15

20

25

30

35

40

45

2010 2015 2017 2020

mill

ion

tonn

es K

Cl

Producers Expansions Incl BHP Incl BHP & K+S

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Forecast Demand-Supply Balance

Sources: IFA, NRCan

Forecast World Demand and Supply Balance (Production Capability) 2011-2016

44,167

53,657 55,917 57,660 59,352 60,822 62,50067,995 65,727

70,89875,057

80,50787,242

100,000

0

20,000

40,000

60,000

80,000

100,000

2010 2011 2012 2013 2014 2015 2016

000

tonn

es K

Cl

Potash Demand Potash Supply (Capability)

POTASH & ABORIGINAL PEOPLE

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Benefit for Aboriginal People

Potash mining provide high paying jobs which will improve quality of life for Aboriginal people

Potash mining provide jobs for life which will provide stable employment for Aboriginal people

Global demand for potash is forecast to continue to grow with the highest growth rate among three essential nutrients

Saskatchewan’s massive potash deposit will support a long term production

Saskatchewan is in the unique position to capture the global wave and benefit from it

Potash will bring economic benefits for Aboriginal people in Saskatchewan, the province, Canada, and all Canadians

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Encanto

Encanto Potash Corporation was created to work with First Nations in Saskatchewan to develop potash resources on their lands

The exploration has been advancing well

Source: Encanto

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Challenges of New Entry

High capital cost to build a new potash mine Current estimate is between $1.5 and $2 billion to build a 1-Mt

capacity potash mine Longer lead times for new mines

3-5 years for sufficient exploration work for a mine construction decision

Minimum 5 years to build a conventional underground mine Minimum 4 years to build a solution mine Minimum 7 up to 10 years for a new mine coming on stream

Rising cost of construction materials, labour, equipment, supplies and energy

A long time to recoup the investment

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Summary

Global demand is forecast to continue to grow with the highest growth rate among three essential nutrients

Canada is in the unique position to capture the global wave and benefit from it

Potash will bring economic benefit back to Canada and Canadians

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Contact

Kevin StoneSenior Commodity AnalystMinerals and Metals SectorNatural Resources Canada

580 Booth Street, Ottawa, Ontario K1A 0E4Phone: 613-992-5199Fax: 613-943-8450Email: Kevin.Stone@NRCan-RNCan.gc.ca