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Find CIBC research on Bloomberg, Reuters, firstcall.comand cibcwm.com CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada M5J 2S8 (416) 594-7000

Equity ResearchIndustry Update

August 25, 2008 Chemicals & Fertilizers

Global Potash Supply -- A Focus OnSaskatchewan Exploration

The Race Is On!

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This report examines the global potash supply situation with a focus on theburgeoning Saskatchewan junior potash exploration industry. Greenfieldpotash has become topical due to soaring potash prices as the potashindustry contends with a short supply situation.

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We prefer potash solution mining over conventional mining due to lowerengineering risk and a shorter construction time period, thus capturing thebenefits of higher potash prices. Based on our calculations, solution mineshave a greater net asset value compared to conventional mines.

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The benefits of mining potash in Western Canada include lower political riskcompared to other potash production regions (e.g., the Congo andArgentina) and hosting the world's richest potash deposits (Canada has over50% of the world's known potash reserves).

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Companies involved in Saskatchewan solution mine potash explorationinclude Potash One and Rio Tinto; conventional underground explorersinclude BHP, Athabasca Potash, Western Potash, Raytec, Potash North,Agrium and Potash Corp.

All figures in Canadian dollars, unless otherwise stated.

CIBC World Markets does and seeks to do business with companies covered inits research reports. As a result, investors should be aware that the firm mayhave a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making theirinvestment decision.

See "Important Disclosures" section at the end of this report for importantrequired disclosures, including potential conflicts of interest.See "Price Target Calculation" and "Key Risks to Price Target" sections at theend of this report, or at the end of each section hereof, where applicable.

Sector Weighting: Market WeightJacob Bout, CFA Kevin Chiang

Global Potash Supply -- A Focus On Saskatchewan Exploration - August 25, 2008

Executive Summary

This report examines the global potash supply situation with a focus on theburgeoning Saskatchewan potash exploration industry. After years of contendingwith chronic oversupply in the potash industry, greenfield potash has becometopical due to soaring potash prices as the potash industry deals with a shortsupply situation. We believe the race is on to develop a new greenfield mine inSaskatchewan.Saskatchewan is likely where we will see the majority of greenfield potashexpansions given that it has the world’s richest and largest potash deposits andthe most stable political environment in the potash industry. From a valuationperspective, we believe that a solution greenfield potash project makes moresense than a conventional underground deposit, as the reduced constructioncosts and time to construction allow a solution project to be first out of the gate,thus capturing a longer portion of cyclically robust potash prices. At this point,we believe it unlikely that potash prices will peak prior to 2012–2013.We estimate that the break-even potash price for a solution mine is US$200/tand for a conventional underground mine US$235/t. A Saskatchewan greenfieldpotash mine requires a potash price of US$435/t to earn a 15% internal rate of return (IRR) for solution mining and US$580/t for a conventional undergroundmine. At current potash prices of US$1,000/t, both options create attractivereturns on capital.Companies involved in Saskatchewan greenfield solution potash explorationinclude Potash One (KCL–V) and Rio Tinto (RTP–NYSE) and conventionalunderground explorers include BHP Billiton (formerly Anglo Potash) (BHP–NYSE),Athabasca Potash (API–TSX), Western Potash (WPX–V), Raytec (RAY–V), PotashNorth Resource (PON–V), Agrium (AGU–SO) and Potash Corp (POT–SO).

Table Of Contents

Why Invest In The Exploration Of Potash Now? ....................................4

Prefer Solution Mining Over Conventional Mining ..................................7

What To Look For In Potash Exploration Companies ............................10

Why Locate Greenfield Potash Mines In Western Canada?...................13

Disadvantages Of Locating Potash Mines In Western Canada ..............14

Overview Of Public Companies Involved In Exploration ......................15

Appendix 1: Potash In Canada..............................................................25

Appendix 2: Geology.............................................................................26

Appendix 3: Worldwide Deposits..........................................................31

Appendix 4: Potash Processing.............................................................41

Appendix 5: Potash Demand.................................................................49