Canpotex Exporting Potash to International Markets Feb 2007
Company Overview Operational since 1972, sells Saskatchewan potash to markets outside Canada and the United States over 140 million tonnes since inception Private company owned by Saskatchewan potash producers, all large integrated fertilizer companies
Company Overview Canpotex potash sales currently in the range of 8 million metric tons a year Major markets include Australia, Brazil, China, India, Indonesia, Japan, Korea, and Malaysia Sales are made on a CFR and FOB basis Corporate offices located in Singapore, Hong Kong, Tokyo, Saskatoon, and Vancouver Competitors include potash producers in Russia, Belarus, Israel, and Germany Overall market share of 32-33% in international markets
Canpotex Sales Volume Historical Perspective 9 Million MT KCL 8 7 6 5 4 3 2 1 0 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07E Sales Volume Volume Trend Line
Potash Supply/Demand 95% of the world s potash is used as fertilizer, and 5% is used in industrial value-added processes Demand fundamentals are simple... Increasing population Economic growth More-and-more food Less-and-less land Spreading urbanization Equals Fertilizer!
Potash Supply/Demand The Province of Saskatchewan has the world s largest reserves of recoverable potash 10 mine sites with virtually an unlimited supply of high-grade ore Saskatchewan s geographic location presents biggest logistical challenge distance from international markets 1,600 kilometers to tidewater rugged Canadian landscape and often-extreme seasons
Logistics Overview Ocean Transportation 55-60% of potash sales are made on a CFR basis, where Canpotex hires and manages the vessel through to the port of discharge Canpotex s strategy includes long-term vessel arrangements minimizes impact of a volatile ocean freight market Canpotex Redemption II
Logistics Overview Inland Transportation By design, Canpotex manages and directs the inland portion of the potash journey ensures product is delivered to the load port to meet sales requirements Terminal Operations Canpotex performs terminal handling and load port services for its potash deliveries through Port of Vancouver and Port of Portland A variety of export corridors provide maximum flexibility for potash deliveries to Canpotex customers
Canpotex Export Corridors Vancouver and Portland Thunder Bay Daily communications among Canpotex offices, railways, terminals, and vessels ensure prompt, efficient handling and delivery.
Inland Transportation Canpotex has an exclusive partnership with CP Rail various routing options access to U.S. rail partners
Rail Access to Vancouver and Portland Neptune Alberta Sask. 200,000 MT storage B.C. C.P. Saskatoon Regina Portland B.N. Vancouver U.P. Kingsgate B.N. Sweetgrass 100,000 MT storage
Inland Transportation Commodity shipments through North American West Coast ports continue to increase Railways are under pressure to increase corridor capacity to satisfy growth in commodity markets Strong partnerships are more important than ever: Vision... recognizing the need to grow Cooperation... common understandings Commitment... ongoing investments
Inland Transportation CP has invested several billion dollars over the past 15 years improved service to Vancouver and Portland through cooperation among rail providers (CP/CN, CP/UP) Canpotex investments have been ongoing history of investing during the slow times Logistics Objective Limit Risk and Increase Capacity
Inland Transportation Capital Investments 1999 $115 Million (US) Canpotex rolled out its fleet of new railcars designed specifically to carry potash more efficiently 2004 $85 Million (US) Canpotex commissioned 1,300 additional potash railcars for immediate delivery 2005 $18.5 Million (US) With an additional 250 potash railcars commissioned in June, the Canpotex fleet totals over 3,500 railcars
Terminals Neptune Terminals Located at Vancouver, B.C. Joint venture company comprised of bulk-commodity handlers including Canpotex Bulk Terminals Limited (a Company affiliate) Owned and operated by Neptune Bulk Terminals (Canada) Ltd. utilized since 1972 handles 70-80% of Canpotex shipments 200,000 MT storage capacity
Terminals Neptune Terminals Capital Investments 1992 $30 Million (Cdn) Addition of a dedicated potash storage shed, a state-of-the-art reclaimer, and a second dumper pit 2000 $18 Million (U.S.) Development of Berth #3 resulted in additional terminal loading capacity, with a new conveyor system and new shiploader 2003/2005 Expanded use of Berth #3 capitalized on flexibility of storage facilities to minimize delays, with simultaneous loading from both warehouses and installation of cascade chutes on shiploaders
Portland Bulk Terminals Open for Business 1997
Terminals Portland Terminals Located at Portland, Oregon Portland Bulk Terminals, L.L.C. is wholly owned by Canpotex built to facilitate handling of specialty grade products, and provide an alternative to loading at Vancouver Operated by Kinder Morgan Bulk Terminals, Inc. handles 20-30% of Canpotex shipments 100,000 MT storage capacity
Terminals Portland Terminals Rationale Catalysts for Canpotex s decision to diversify its terminal operations two major strikes in 1995 caught Canpotex in the middle of a peak shipping season, and shipments were diverted to Port of Longview projections of economic growth in large potash consuming countries, particularly China and Brazil Logistics Objective Limit Risk and Increase Capacity
Terminals Portland Terminals Rationale A thorough study narrowed the choices to three sites, and Portland was selected: Much of the needed infrastructure already in place Presented a controlling position at an attractive price Site allowed room for future expansion Would operate in a separate jurisdiction Would require introduction of U.S. rail suppliers
Terminals Portland Terminals Capital Investments 1997 $50 Million (US) Canpotex celebrated the opening of its new bulk-handling terminal facility at Portland, Oregon 1999 $12 Million (US) Canpotex commissioned a number of operational enhancements to the terminal 2006 $15 Million (US) est. Canpotex began Phase 1 of a new expansion plan to accommodate expected increases in potash demand
Terminals Portland Terminals Phase 1 expansion currently underway includes installation of a third loop track (completed) extension of existing shed with a capacity gain of 45,000 MT installation of cascade chutes in the shed extension Completion expected Q4 2007
Lessons of the Past In 2003/2004, increased volumes caught all commodity shippers off guard logistics systems were under pressure from every angle First shift was a shift in attitude we had to become Masters of our own destiny Second shift was a shift to action Canpotex investments made in railcars and terminals Canpotex commitments made in rail freight contracts and ocean freight contacts
11 10 9 8 7 6 5 4 3 2 1 Million MT KCL Planning for the Future Canpotex Sales Forecast 0 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07E 09E 11E Sales Volume Volume Trend Line Est Nov 2006
Planning for the Future Canpotex initiatives currently on the table Neptune Terminals Phase 1 extend dedicated potash storage shed storage capacity gain of up to 90,000 MT Neptune Terminals Phase 2 replace the multi-purpose shed storage capacity gain of up to 90,000 MT Portland Terminals Phase 2 replicate existing system (storage building, dumper pit, loop track, berth and shiploader) storage capacity gain of up to 115,000 MT
Planning for the Future Canpotex initiatives under review Additional railcars Additional long-term vessel commitments Greenfield terminal sites Prince Rupert Cherry Point Logistics Objective Limit Risk and Increase Capacity
Future Key Drivers to Watch Increased volumes pressure on the supply chain Increased vessel sizes demands of the market and economies of scale