Potash Still Considered Buyable

Potash Corp. (POT) has leverage in higher fertilizer application rates, higher crop plantings, increasing demand for biofuels and rising crop prices. The company is located in low cost areas and its financials are solid. Hence, we rate the stock a Buy with a target price of $250. This is 18.9x our 2008 estimate.

Potash Corporation enjoys significant cost advantage with regard to raw materials. All potash produced by the company in Saskatchewan is in the area, where extensive potash deposits are found. Moreover, the company has lower cost nitrogen operations in Trinidad due to the long-term, lower-cost gas contracts with Natural Gas Company of Trinidad and Tobago Limited as well as a proximity to the U.S. market.

In response to the rising prices of potash products, the company has engaged in the expansion and development of projects that will raise annual operational capacity to capture a significant share of the growth in global demand.

On August 7, Potash Corporation announced that the unionized employees at its Allan Division, Cory Division and Patience Lake Division operations of Saskatchewan have started strikes after four days of mediation that failed to resolve the key contract issues, primarily centered on profit-sharing demands by the union. The striking employees are members of United Steelworkers (USW), and are responsible for underground mining operations, milling, and shipping activities on the surface.

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