Executives: Denita Stann – Senior Vice President-Investor and Public Relations Jochen Tilk – President and Chief Executive Officer Stephen Dowdle – President-PCS Sales Wayne Brownlee – Executive Vice President and Chief Financial Officer Raef Sully – President-PCS Nitrogen and Phosphate Mark Fracchia – President-PCS

Potash
Analysts: Andrew Wong – RBC Capital Markets Oliver Rowe – Scotiabank Chris Parkinson – Credit Suisse Stephen Byrne – Bank of America Adam Samuelson – Goldman Sachs Silcock – JPMorgan Vincent Andrews – Morgan Stanley Joel Jackson – BMO Capital Markets Jonas Oxgaard – Bernstein Don Carson – Susquehanna Financial Sandy Klugman – Vertical Research Partners Dan Jester –

Citi
Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Potash Corp Second Quarter 2017 Earnings Conference Call. At this time, all call-in participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session.

[Operator Instructions] I would like to remind everyone that this conference call is being recorded on Thursday, July 27, 2017 at 1 P.M. Eastern. I will now turn the conference over to Denita Stann, Senior Vice President, Investor and Public Relations. Please go ahead.

Denita Stann: Thank you, Sakshi.

Good afternoon, everyone, and thank you for joining us. Welcome to our second quarter earnings call. In the room with us today, we have Jochen Tilk, our President and CEO; Wayne Brownlee, our Executive Vice President and Chief Financial Officer; Stephen Dowdle, President of PCS Sales; Mark Fracchia, President of PCS Potash; Raef Sully, President of PCS Nitrogen and Phosphate; and Joe Podwika, Senior Vice President and General Counsel. I’d like to welcome all those who are listening in and remind people that we are live on our website. I would also like to remind everyone that today’s call may include forward-looking statements.

These statements are given as of the date of this call and involve risks and uncertainties. A number of factors and assumptions were applied in the formulation of these statements and actual results could differ materially. For additional information with respect to forward-looking statements, factors and assumptions, we direct you to our news release and our most recent Form 10-K. Also, today’s news release, which is posted on our website, includes a reconciliation of certain non-IFRS financial measures to their most directly-comparable IFRS measures. I’ll now turn the call over to Jochen for comments, and then we’ll go to questions.

Jochen Tilk: Thank you for joining our call. We appreciate your opportunity to discuss our performance and what we see ahead for our company. Strong potash demand continues in the second quarter leading to higher sales volumes and prices compared to the prior year. Canpotex shipments during the second quarter were 36% higher compared to the same quarter last year. This marks the fourth consecutive quarter of robust potash demand highlighting rising consumption and strong nutrient affordability in key markets.

In addition to higher spot market prices our manufactured cash cost of goods sold during the quarter of $59 per tonne was approximately 35% lower than our average over the past three years. This improved cost position is a reflection of our portfolio optimization efforts over the past 18 months including the ramp-up of our lowest cost Rocanville facility. These factors were the primary contributors to potash gross margin for the quarter of $213 million and first half of $373 million, surpassing 2016 totals. In nitrogen and phosphate, a weaker pricing environment kept gross margin for both the second quarter and first six months well below last year’s comparables. Stronger potash earnings along within $0.08 per share income tax recovery with the primary contributors to earnings of $0.24 per share for the quarter and $0.42 for the first half exceeding 2016 levels.

Ag commodity prices have been supported in recent weeks as dry conditions in certain regions of North America, great uncertainty about yield potential. For the second half of 2017, we anticipate rising consumption and affordability would continue to underpin strong potash demand. The value proposition of potash is evident in North America where our summer fill program was very well received with orders exceeding 1.2 million tonnes and we’re now fully committed in this market through the end of September. The summer fill program expires on July 14, and we have already taken orders at higher pricing levels for the fourth quarter delivery. With a strong order book heading into the fall application season we expect, total deliveries to this market would be in the range of 9.3 million tonnes to 9.8 million tonnes.

In Latin America, crop economics remain attractive and we expect shipments for the rest of the year at levels similar to 2016. With a very strong first half behind us, we anticipate record 2017 shipments of 12 million ton to 12.5 million tonnes. In India the reduction in potash subsidies had occurred – that occurred earlier in this year is expected to lead to modestly higher retail prices to farmers. Despite this, we believe good monsoon rains, agronomic need and increased acreage will support 2017 deliveries in the range of 4 million tonnes to 4.5 million tonnes, slightly above our previous estimate. And expect new contracts to be signed soon.

In China, we expect robust consumption for the second half driven by increased acreage for potassium intensive crops and nutrient affordability. Importantly, we are seeing a continued shift towards increased use of oil blends and compound fertilizers and with that increased demand from Canpotex’s diverse customer base. The rising needs of this evolving segment will be an important focus in China going forward. And were a key element of Canpotex’s Texas recently settled second half contract for 1.4 million tonnes. Factoring in first half deliveries Canpotex expects to ship approximately 2.1 million tonnes in 2017, representing a 500,000 tonne increase over 2016.

With contracts in China now in place, we anticipate strong deliveries for the balance of the year and have increased our estimate for total shipments to 15.5 million tonnes to 16.5 million tonnes. In other Asian markets healthy palm oil prices, improved moisture conditions and strong demand in the food crop sector are expected to support total shipments in the range of 9.0 million tonnes to 9.5 million tonnes, surpassing last year’s total when challenging weather conditions negatively impacted demand. As a result of these market dynamics, we have increased our global potash range to 62 million tonnes to 65 million tonnes for the year. With additional clarity in our order book, for the remainder of 2017 we have raised the lower end of our potash sales volume range and increased our gross margin range. For the year, we expect deliveries of 9.0 million tonnes to 9.4 million tonnes and gross margin of $650 million to $850 million.

In nitrogen, we expect the challenging price environment will weigh results for the balance of this year. I believe a low point in the market has been reached. We anticipate market conditions will begin to improve in 2018 as capacity additions decline, high cost capacities rationalized and trade flows adjust. In phosphate, we expect cost improvements compared to the prior year that a weaker pricing environment is anticipated to lead to a negative gross margin in 2017. On a combined basis, we now forecast nitrogen and phosphate gross margin of $150 million to $300 million.

With strength in potash being offset by a more subdued outlook for nitrogen and phosphate we have maintained our 2017 earnings projection of $0.45 to $0.65 per share including an estimated $0.06 per share in merger-related costs. From an operational standpoint, the second quarter was significant as we safely and successfully completed our Rocanville Canpotex capacity audit marking the final milestone of our multi-year potash expansion program. Total capacity achieved at Rocanville exceeded our expectations coming in at just over 6.5 million tonnes and increased our Canpotex sales allocation to approximately 55% effective July 1. I’d like to thank all of our Rocanville employees for their diligence and focus during the construction and ramp-up. We could not have achieved this result without their extraordinary efforts.

And a special thanks to Mark Fracchia, ahead of Potash for his leadership. Thanks Mark. With respect to our merger with Agrium, the second quarter marks an exciting milestone for both companies. From an integration planning standpoint teams from both companies continue to work on analyzing business processes, establishing best practices and developing full some plans to realize synergies. With this work under our belt, we remain confident in our ability to deliver another $500 million synergy target within 24 months of the merger closing.

During the quarter, we announced that up and closure of the merger, our new company will be called Nutrien. Our new name was inspired by our employees, who joined in the excitement and generated more than 4,000 potential names. Thank you to everyone, who contributed to this process and special congratulations to Jennifer Quesnel from our Lima, Ohio plant and Henry Hernandez from Agrium Borger, Texas nitrogen facility were the winners in the company naming contest. Nutrien represents the combination of two world class complementary companies that will occupy a unique position within our agriculture universe. One that we believe, we can create tremendous value for our many stakeholders.

From a regulatory standpoint, we continue to cooperate with the various enforcement agencies in their reviews and expect that the transaction will close late in the third quarter. To conclude, our merger and integration planning activities remain on-track and we believe potash market conditions will be supportive for the balance of the year. While nitrogen markets are currently in the pressure and could be for the remainder of 2017, we see this as transitory, as new capacity is absorbed. Most importantly, we believe reduced capital requirements to optimization of our world class potash assets, and our market responsive approach has positioned us for future success. Thank you for your time.

We look forward to taking your questions on our performance for the quarter and the outlook for our business.

Operator: Thank you. Ladies and gentlemen we will now conduct a question-and-answer session. [Operator Instructions] Your first question comes from Andrew Wong of RBC Capital Markets. Please go ahead.

Andrew Wong: Hi. Thank you. Just a question on SQM actually. A couple of weeks ago there was a report that Chinese private equity investors were interested in purchasing a stake in SQM. Have you received any interest in your SQM stake? And then just regarding your debt ratings and then debt metrics that the ratings agencies look at, how do the equity investments in general factor into the ratings? Thanks.

Stephen Dowdle: Yes. Good morning, Andrew. I’ll just comment on it, and then on the debt rating, I’ll turn it over to our CFO. First one is a simple response, now we’ve read that in the paper as you have and we have not been approached. On your second question Wayne Brownlee if you want to respond to that?

Wayne Brownlee: Yes.

The equity are holding two factor into our credit rating with SMP and probably with Moody’s as well. But SMP in particular focuses on it. At the end of June, our equity interest at a market value of about $4.6 billion, which more than offset our net debt of about $4.5 billion, so the ability to use those equity interests in terms of possible disposal factors into their view on the credit rating.

Andrew Wong: And are you ever able to like borrow against it or did you ever look at free cash flow from it? Or how does that work?

Wayne Brownlee: Well. They do, but I mean the – frankly the earnings contribution, if we did it on an EBITDA multiple basis is less than what the market value is, and it’s not really factored into the valuation of Potash Corp as much.

So when you take a look at the debt, it is a direct offset that gets factored into their calculation.

Andrew Wong: Okay. Thank you.

Stephen Dowdle: Thanks Andrew.

Operator: The next question is from Ben Isaacson of Scotiabank.

Please go ahead.

Oliver Rowe: This is Oliver Rowe for Ben. Thank you for taking my question. You highlighted strong crop prices driven by the hot and dry weather driving consumption and some of these worries have now abided in some but not all of the higher crop prices have been conceded. Does that change your outlook at all or rather how sensitive is your outlook to farmer economics?

Raef Sully: Yes, really good question.

I think when you look at affordability and you look at our affordability in that switches crop prices over fertilizer prices. I think its 160% right now and averaged to 141% in the second half and you compare that to 2016 and prior years, you can see how affordable it is. Corn is just under $4 and I think soya is $10, $20 or something. So prices are still very good and to what extent the dry weather in some parts of U.S. and the wet weather in Ohio and Indiana will have an impact, I think we’ll have to see.

But I think overall estimates on high risks are down, about 5 bushes to 10 bushes of corn and about 4 bushes an acre on soya bean, so we’ll see how that translates. But sum it up, it does not change our view on the affordability of fertilizer and the prospect going forward.

Oliver Rowe: Thank you.

Raef Sully: Thanks Ben.

Operator: The next question is from Chris Parkinson of Credit Suisse.

Please go ahead.

Chris Parkinson: Thank you. Can you just talk a little bit more an update – updated views on ammonia, specifically out of Trinidad and how you believe trades will evolve, between the Kerbian and NOLA, the other new opportunities that evolved over the last couple of few quarters? And then anything on gas availability and contract discussions? Thank you.

Wayne Brownlee: Thanks, Chris thanks for your very good questions. We’ll split up here, we have got Steve and Raef on standby on the gas availability and also on the change of trade pattern.

Just the introductory comment on ammonia, you and I and I think we’ll all know how volatile it is. We have gone from 240 to 190 and so we see these – relatively mass gems on Tampa and other parts. And it goes both ways, so when you look at the outlook, I think it would greatly depend on the number of factors, one is how will current producers respond. I would be convinced; I would think that the some shutdown suspensions that will occur at the current price. And then the second question is how long will they last? When would it kick in? So in that sense ammonia would be bound – range bound.

And I think that’s what we really project, we take conservative view and then think for as long as it takes for incremental capacity to be absorbed by demand. We’re going to see a range bound for those two reasons. That’s my introductory comment and I turn it over to Steve on the trade pattern. And Stephen, if you can hand it over to Raef on the gas availability.

Stephen Dowdle: Sure, very briefly, the trade patterns likely to – they are still evolving.

But basically, likely to see less Trinidad ammonia going into NOLA and traveling further to Europe, North Africa and perhaps even Asia, so that will be a change. And part of the reason relating to – often does just described, when you have ammonia producers in certain parts of the world, just going up, going down. Consumers, purchasers of ammonia are really looking for very reliable suppliers, supply that they can count on is not going to be going up and down, depending on what’s happening in the market prices. So this is still evolving and I think it will be fully revealed, the new trade patterns will be fully revealed, during calendar year 2018. Raef?

Raef Sully: So, Chris let me just talk about availability first, there are three or four smaller projects that have been coming on line this year.

All of them have either started or on track to be tied into the system over there. Part of the disruptions that we have had in the first half has been tieing those new developments. We believe, we will start to see a reduction in curtailments through the end of the third quarter into the fourth quarter. There are other projects coming on line in the next two or three years, let’s say that situation improve. That has been brought around, because the government, there the NCC has agreed contract renewals with the upstream producers.

So it’s reasonably positive outlook on supply, you may have noticed BP had its Angling product sanctioned and that will be a large project in the next two or three years. So we expect to see the curtailments start to decline towards the end of this year. And over the next two or three years, we expect to see them less than they are today and improving back to previous levels. In terms of our negotiations, I guess all I can tell you is they have started. And I think what I can say is we are proceeding reasonably well and we hope to have resolution, later this quarter.

Chris Parkinson: Thank you for the detail.

Raef Sully: Thanks Chris.

Operator: The next question is from Stephen Byrne of Bank of America. Please go ahead.

Stephen Byrne: Hi thanks.

Your potash shipments for 2017 are in the 3% to 8% above 2016 on a global basis. How would you assess demand for potash to be in 2017 versus 2016?

Raef Sully: Well, so in the 62 million tonne to 65 million tonne range, in the same range, so if you take the mid point of that, that approximates demand.

Stephen Byrne: Sorry, I meant overall consumption, do you see that delta year-over-year being driven by any changes in inventory levels or do you think it’s reflective of end user consumption?

Raef Sully: So in 2016, it was approximately 60 million tonne and then in 2017 62 million tonne to 65 million tonne, so if I take the mid point, that dealt of 3 million tonne. And your question is, how do you explain that? In our view, and Stephen and I will team tag in that. But really is a demand story, very different in 2016.

I can tell you, it is not an inventory story at all. In our view, in fact, when you look at inventories around the globe they were lower. But they have not massively changed, compared to 2016. China was very, very similar, India similar, Brazil probably a little bit more in domestic inventory recently. But not fundamentally different, so, in our view it is a demand story and when you look at the factors, they are all a little different.

In United States, is mostly affordability, our crop prices are okay, and fertilizer prices are in a range where they are affordable. You look at China, certainly there is a story, where we see more NPK applications. So we see more demand for potash, granular potash for NPK manufacturing. You look at India, we expect demand to be a bit stronger, because of good fundamentals. The monsoon has been good and certainly Brazil, I think we know the story, even though crop prices will be a little bit lower there now, with an outstanding harvest of the safrinha.

But overall it has been an excellent year in Brazil, so to us it’s demand story, more than anything around the globe, for the factors I’ve just highlighted. Stephen you wanted…

Stephen Dowdle: I think you’ve covered it, basically all the major markets, which are more visible, but also some of the less visible markets that are correlated in the other category. We see demand in those markets also being strong, which is related to just basic demand for food production, whether it be in Africa, or whether it be in Central America, some of the markets that we don’t highlight. But demand in those markets is also demand for potash is also being supported in those markets too. And that of course, all adds up into that 62 million tonne to 65 million tonne estimates for global consumption.

Raef Sully: Yes, it’s a good point, when you look at one of our charts that we provide, Slide number 10 where we show the demand in specific region. And you look at Latin America, as a whole, of course biggest part there is Brazil. But there are many other countries involved. And our estimate for 2017 is 12 million tonnes to 12.5 million tonnes and the previous record in 2014 was 11.7 million tonnes of shipment. So it is not just Brazil, but it is other parts of South America that are having a very good year.

Stephen Byrne: Okay. Thank you. And I have another demand outlook question for you only with nitrogen. And in the U.S. market, there seems to be a continuing trend towards purchases and application of nitrogen to be closer to the planting season and even a shift to mid season applications.

And leading to less anhydrous applications in the fall and more UAN in the mid season, is that trend a net positive or net negative for you, as you look out from, say a product availability perspective and pricing?

Stephen Dowdle: We don’t really view it either as a net positive or a net negative. With our portfolio, we see the five application of ammonia, not really being significantly different in the markets that we serve. But overall, yes, that is a trend and it is authoring the way that I think ammonia and UAN are being marketed and being positioned in the market. And some of that is really related to the – before our movement trying to be as responsible about fertilizer applications, putting the product, the right product in the right place, at the right time and the right amount. And this is environmental stewardship, and it’s also proving to be quite effective and quite economically efficient for the growers to apply nitrogen in that way.

So, yes, that trend may, it certainly continue and also being supportive by the new domestic nitrogen production, some of which is right in the heart of the corn belt and the growing geographies. So it kind of makes people look at their nitrogen sources a little bit differently. And I think those things are supporting the kind of trends that you just mentioned.

Raef Sully: Thanks Steve. I appreciate, I was going to highlight to you – and I really appreciate you brought in, because this is certainly a program that’s very much supported by the members of TFI and other associations.

And of course, we supported very much, as a company. And that changes the application pattern, because obviously certain parts of timing suggest when anhydrous ammonia are to be applied or not to be applied. I mean the whole concept of artist to minimize losses of lights in the ground and phosphate for that. And that may change the application pattern, but I think for the long that will be for the better, for two reasons either losses or minimized which is good for the farmers and the environment. And that means that as demand continues and grows that we benefit from that as well.

Stephen Byrne: Thank you.

Raef Sully: Thank you very much.

Operator: The next question is from Adam Samuelson of Goldman Sachs. Please go ahead.

Adam Samuelson: Yes, thanks.

Good afternoon everyone, maybe question on Canpotex and market share, you took your global shipment forecast up 1 million tonnes for the market. But your own shipment forecast dealing with the low end up by 100,000 tonnes. Is the delta there, increases in consumption and in areas where Canpotex doesn’t participate, whether that is farmers of the Union Bangladesh et cetera or is it – can talk to that. And then second can you talk about your own inventory levels, your production exceeded sales by about 450,000 tonnes this quarter. And must be back to where they were last summer which was an area where for the market it was a little problematic and can you talk about that? Thanks.

Wayne Brownlee: Yes, I think Canpotex, if I understand your question, right this is all in various parts of world and you look around. I think there is bits and pieces of improved shipment. And I would look at from a point of market share. I think I look at it from a point of demand growth in these. I mean it goes back to the point we made earlier.

And I think on average it kind of, it works out that way. Bigger demand in China, we see that. And then in South America were – and in Southeast Asia Malaysia, Indonesia where Canpotex had increase in shipment. On our own inventory, it’s, I think we, we started up with a very low inventory and I should say that worked very well for us is, was the Rocanville audit, we didn’t really have the same traditional production volumes that we would normally see in the context of that. So I think that would extremely well for us to manage our inventory.

We are in good shape now and obviously we’ll have to look at the second half a little bit, how demand develops. But I think we got it all sorted out very well. And so, no issues there, if your point was whether that is something to be concerned about absolutely not. Stephen I don’t know if you wanted to add anything and Mark, if you want to speak to our inventory a little bit more to Adam’s question.

Mark Fracchia: So the only thing I would add, the inventory levels that we are seeing right now at the producer level they are just slightly below, where they were last year.

So we don’t see anything untoward in those numbers at all.

Stephen Dowdle: And I would add that, in addition to that traditionally we do our maintenance shutdowns during the third quarter and we are doing that in three of our facilities. So that will help turn down that inventory, as we head into the to second half.

Adam Samuelson: All right. That’s helpful color.

Thank you.

Stephen Dowdle: Does that address Adam or…

Adam Samuelson: Yes, that’s helpful.

Stephen Dowdle: Okay. Thank you.

Operator: The next question is from Jeff Zekauskas of JPMorgan.

Please go ahead. Silcock: Good afternoon it’s Silcock for Jeff. How are you? When Canpotex signed it’s potash contract in July of last year. How many tonnes was contract for and at the end, how many of those tonnes that you ship in calendar 2016 and how much of your ship in calendar 2017?

Wayne Brownlee: Good morning. So you are referring to the China contract, I assume?
Silcock: Correct, yes.

Wayne Brownlee: Yes, let me just give you the numbers that we said before. So we are consistent there and that’s for 2000, I may not answer all parts of your questions, and then we will go from there. But in 2017, in the first half, we shipped approximately 700,000 tonnes, because the second half is 1.4 million and total year estimate is 2.1 million. So that’s 2017 and in the same period of the year earlier, so that’s 2.1 million. It was 1.6 million.

So 2016 total contract, total shipments, I should say, total shipments, to be clear. 1.6 million 2017 estimated total shipments 2.1 million. And then the contract signed was 1.4 million for the second half of 2017. Silcock: All right, so it sounds like the majority of the tonnes that were signed in the second half of 2016 were shipped in the first calendar half of 2017, is that right?

Wayne Brownlee: Sometimes we’ve shipped in the first half. Silcock: Okay.

Mark Fracchia: And the other word I’m caution about trying to drill down so precisely on China and on the contracts, because one of the things that and one of the strategies that Canpotex has pursued is we know that there is a more demand in China. And China is growing, and Canpotex has been focused on how to meet that demand and one of the strategies that Canpotex has pursued, is that to diversify its customer base. Canpotex now has around 10 different customers. So whereas in the past you could really focus on a China contract when you had maybe one major customer in China, now it is a little different and so to – try and drill down on what were the exact contracts and with whom and when they were shipped, it is a little – I think more difficult, I think the point is that we really see some demand in China needs to be unleashed and it is unleashing and that market is growing, which is a very positive thing. And as you have more customers in China, demand in Potash, we think that this demand is going to continue to accelerate.

And there is just additional data points I think that we highlighted to one when you look the domestic market, it has been very stable. I think, it is up about $30 and it has been quite consistent. So that would suggest that the channels are pretty tight and supporting that is China sold and the few smaller producers pretty much matched out. I think this is a known fact and but it is confirmed this year, in particular, where demand has increased and that has to be satisfied to imports and that domestic productions is around 7.5 million tonnes. So we assume that incremental demand will come to imports.

There’s a couple of other factors that support that, if you look at port inventories right now, they are down about by 1.5 million tonnes – so it started 2 million tonnes. So that is another fact that I would suggest that demand is picking up since some of the inventories have been depleted. Silcock: And I also have a nitrogen question, when you allocate your nitrogen results, year-over-year where there any unusual items that you had this year, you didn’t have last year. And that if I look at the shipments, I think tonnage shipments are incrementally higher and price has not evolved that much. And I understand that gas prices are high year-over-year.

But I was surprised, how low the gross margin was? So are there any unusual items that you encourage somehow in the quarter?

Jochen Tilk: No, not really. They weren’t, the oil and gas prices are up to – they are up over – I think 1.20 1 MMBtu, so not in significantly compared to last year. But there was nothing, how to do ODM, look at my colleagues here and everyone is shaking their heads. So nothing that we know here. Silcock: Okay.

And thanks very much.

Jochen Tilk: Thank you very much, Silcock.

Operator: The next question is from Vincent Andrews of Morgan Stanley. Please go ahead.

Vincent Andrews: Thanks, just a question on the U.S.

market, vis a vie the strength in the international stock markets, last couple of years, we were talking a lot about an increase in foreign imports into the U.S. and that bring some pressure on price. It is sort of there is been some improvement in the international markets. Are you seeing less foreign competition in the U.S. market, has that played out?

Wayne Brownlee: Yeah, it’s – I think it’s to answer that is really economics one, when you look at Brazil right now, 265 to 270 CFR on the long tonne.

And you look at Midwest 245 on the short tonne, up 20 in the fall. And that kind of answers that, because there is a premium right now in South America. And so you would expect that’s where people have the option and go in. And you see that in the imports and markets may balance out, but I think right now that’s the situation.

Vincent Andrews: Okay.

And just as a follow-up, given the shipments strength and sort of it sounds like the continuity as expectations, have you guys given any thought as to any changes to your own production plans?

Wayne Brownlee: Say that again, production…

Vincent Andrews: I was just curious, if you are thinking about your go-forward production plans has been moved into 2018 and beyond are you thinking about making more potash. It appears to be stronger than you think.

Wayne Brownlee: In the context, well we have the flexibility, let me put it this way, whether or not, we do or not. But obviously, if demand continues and I can tell we are cautiously optimistic that this is the trend that will most definitely carry over into 2018. Then we’ll have the flexibility.

As you know right now, the range is from 9 million tonnes to 9.4 million tonnes. We have operation capability of 10.1 million tonnes, which means we do have give or take an extra million tons in our flexibility. And we can adjust for that and if the demand trend continues, as we have seen it then we’ll definitely have flexibility to respond to that.

Vincent Andrews: Okay, thanks very much.

Wayne Brownlee: Thank you very much.

Operator: Next question is from Joel Jackson of BMO Capital Markets. Please go ahead.

Joel Jackson: Hi. So following up on that question you raised your full-year shipment guidance for potash by 50,000 tonnes. But you now see that global demand will be 1 million tonnes higher, so why isn’t potash corp gaining any of the additional demand.

Who is gaining the share and what will that look like into 2018 as new mines come on and demand grows?

Raef Sully: Well, and you are referring to members outside of Canpotex, Joel right?

Joel Jackson: Well, I am asking you raise little shipment guidance for potash by 1 million tonnes.

Raef Sully: Yes.

Joel Jackson: But they have only raised 50,000 tonnes, so [indiscernible] who is gaining the million, who is gaining your proportional share of the 1 million tonnes?

Raef Sully: Yes, we – I can’t tell you obviously who would do that and would gain a share and I think that’s at a level of resolution, which probably goes a little deeper at that point in time then, that we talk about.

Joel Jackson: But why are you gaining a good 1.5 million, what is going on?

Raef Sully: Well, we keep our market share, as you all along and we will go out in the market, we maintain our market share, we service our customers and we see demand going up. We will maintain our market share long the line.

Joel Jackson: But you are not getting – I don’t like keep going – but you are not getting your market share as the extra million tonnes. I mean, I’m asking the same question, I just continue that you have the extra flexibility to ramp up the demand growth becomes strong. But you’re not pursuing it or gaining it. I am just confused. I know it is the same question, I am just confused.

Raef Sully: We will maintain our market share, maybe clear on that one. And however the math works out and I think can’t reconcile the year. But that’s always been our approach to the market. I’ll let you Stephen, we’ll chip in a bit more in that.

Stephen Dowdle: The other comment that I will make sure is that, this question is more appropriate, when we were looking back on 2017.

And then we can drill down into the details. We’ve given a range here and I wouldn’t – you are looking at the bottom end of our range. Well, it is a range, we’ll see how it all turns out and then we can analyze it and say, who will loss or who gain market share. But that kind of a question is always better looking in the rear view mirror, rather to the windscreen, before we even get there.

Joel Jackson: Thanks guys.

Stephen Dowdle: Thanks Joel.

Operator: The next question is from Jonas Oxgaard of Bernstein. Please go ahead.

Jonas Oxgaard: Good morning, Jochen.

Jochen Tilk: Fine, Jonas.

Jonas Oxgaard: I was wondering, I know you can’t talk much about the merger stuffs, but we haven’t got an approval from a single entity yet. How can you be so confident in a late Q3 close, I mean it’s two months away.

Jochen Tilk: Yes, Jonas for your question, I mean first of all I do have to contradict you, we did get approval from two agencies. So we did get approval from Brazil and Russia. We are still working, continue to work with MOFCOM in China TC in India The Federal Trade Commission in the United States.

And the Competition Bureau in Canada, the reason why we have, reason for confidence is that it is not a black box. It is not that we submitted a document locked away and then haven’t heard anything that we, as you would imagine we’re interacting and it has been a back and forth with them. And we have been answering questions, in some cases we have been personally interviewed, we traveled to India, we travel to China to speak with the authorities and person. But our confidence is based on, is the progress we made today and the feedback that we have received today. So it’s not out of context thence not without information.

And based on the feedback the interactions and the responses that we’ve submitted we’re confident that we can close this transaction by the end of the third quarter.

Jonas Oxgaard: Okay, fantastic. And if you don’t mind, can I also ask about the phosphate segments. We now have negative gross margin again. How are you thinking about the future of that business?

Stephen Dowdle: Yes.

It’s been a tough business for us, no question. And obviously when you’re a U.S. based producer, you are somewhat disadvantaged in comparison to some others – obviously North Africa, Morocco or even Russia, we’re great to hire and costs are lower. And in addition to that ammonia and phosphate prices mapped out have been lowered and recovered somewhat domestically. But we do see international competition and then the liquid fertilizer segment, which is a big segment for us because we produce a lot of liquid fertilizer it has been weak in 2017 and even weaker than last year.

So that does not answer your question, but it response to the reasons. And what we look for is of course, as we’ve been lowering our costs as we’re improving our operations, we’re looking at a recovery in the market and we expect that to happen. While we’re subdued in conservative on the phosphate outlook we certainly believe that it will be strengthen and that should reset our economic liability in the phosphate assets.

Jonas Oxgaard: Okay. Thank you.

Operator: The next question is from Don Carson of Susquehanna Financial. Please go ahead.

Don Carson: Thank you. Question on your potash production outlook. Rocanville you hit your 6.5 million tonne design capacity, you’re going to – I think you said, you do 5 million tonnes this year.

But if you go forward I assume you want to run Rocanville flat out. So if you’re going to have shipments around 9.5 million tonnes with some growth does that mean that you have the opportunity to shutdown some of your smaller mines permanently.

Stephen Dowdle: Yes, I think right now. First of all, thanks for the question Don. Obviously we’ve been optimizing for quite some time.

And I think we’ve gotten to a tremendous milestone, I can’t remember exactly but I think Rocanville it was over 40% year-to-date, so Rocanville already a big contributor to our total production. And yes, we do want to run as much as we can but also keep in mind we want to be diverse in our production facility, we want to have some support and security, so that we have reliability. I think one of the things we’re well known for is that we are a very strong shipper that our logistics are excellent. And part of that is to have multiple sources, so that you never have an issue. So there are multiple thoughts that go into that equation.

The other thing I’ll like to point out, when you look at our quarter right now, our costs were $82, I think that’s an outstanding achievement. It was lower than the average of the last three years, and that’s lower than the targets that we had set in 2013. How much more we could possibly achieve by doing that is questionable. So to answer your question, I think right now we’re in good shape. And we have no intention to make any significant changes anything at this point in time, I think we’re supported by the numbers, I just quoted suggests that we’ve reached a pretty good spot.

It doesn’t mean that we won’t continue our operation improvements, operational excellence, efficiencies are important programs that we have and we’ll continue along the line. But I think we are already in good spot.

Don Carson: I had two follow-up on the comments you made on nitrogen, you said, you think that the low point has been reached. So do you think that Q3 will represent the drop in nitrogen pricing? And I know, it’s always difficult to call the exact drop. But how do you see kind of the shape of the curve as we move into fourth quarter and 2018?

Jochen Tilk: Are you ask me to look into crystal ball and yes, I share the view, which is our collective view but still has an element of subjectivity.

I think when ammonia hits 190 and a lot of people are below the cost curve. You have to assume it’s a low point because it’s not sustainable. People have higher production costs in some parts of the world and they can continue. And that would lead to an increase. However, having said that, who knows, you can predict it.

But I think from a trend perspective it is a consistent view. Stephen, I don’t know if you want to add something to Don’s question.

Stephen Dowdle: This year is really a year of adjusting to new production particularly in the U.S. And we talked about the change in trade patterns in Trinidad ammonia, we’re seeing the same thing in urea, we’re seeing the same thing in UAN. I think we need to keep in mind that, we have pretty consistent growth in nitrogen consumption in that 2%, 2.5%.

In 2017 our estimate is that on a global scale, we saw capacity grow by almost 6 million tonnes and consumption grow by just under 4 million tonnes. And so that can speak to that weakness. Now, we look forward into 2018 and we see consumption growing more than capacity is growing by more than 1 million tonnes. So I think the trend as we look forward, we can see that trend being supported by a little better SND balances. And I think that’s why we kind of think we’re floating around the bottom right now.

Raef Sully: Yes, I know it’s really I mean – some of the big new producers like Weaver are up now they’re running, I think they’ve got – planned plenty of capacity. And so these big capacities that we anticipate come online, and we don’t see nearly the number of projects and therefore the capacity come online in the near future and that should offset that trend and then hopefully reverse it.

Don Carson: Thank you.

Operator: The next question is from Sandy Klugman of Vertical Research Partners. Please go ahead.

Sandy Klugman: Thank you and good afternoon. So you’re falls work with 11% sequentially on a per unit basis. Could you help us think about the components of the higher costs breaking it down between the lower operating rates you saw during the quarter and lower material costs. And then with ammonia prices falling pretty precipitously in Q3, the company is working to take cost out of the segment. How should we think that the second half phosphate outlook from a cost perspective?

Stephen Dowdle: Thanks for the questions.

So there are two costs questions on, one on phosphate and one on the – I think on nitrogen. Raef can you, would you like to comment on those?

Raef Sully: I would. So I think part of the cost problem is being reduced production, this year we haven’t seen as much demand as we would like. The production has been down as a result and that’s because we’ve got a lot of fixed costs, we’re seeing the unit costs to come up a little bit. Into the back half of the year, we hope we can run facilities pretty much that capacity, as you know, we started granulation on White Springs which is soaking up some of our P205 capacity, so we have seen the situation improve.

Sandy Klugman: Okay, great. Thanks. And then with regard to the changing trade patterns in nitrogen, when you look at the recent capacity additions in the Midwest, do you expect the supplies eventually compete in Western Canada and the Pacific Northwest where you’ll have a pretty substantial footprint following the Agrium merger?

Raef Sully: Yes, it’s really good and relevant question. Stephen?

Stephen Dowdle: Usually, looking at what we’ve seen so far is those change in trade patterns has really lead to more exports out of NOLA. I mean that’s really been the biggest impact we’ve seen more urea exports, we’ve seen more UAN exports.

So year-to-date, as I said, we’re just really in a period where these new trade patterns are evolving and it’s fresh. Whether we would see some of the Midwest nitrogen be traveling overland by train. Those economics in general, we can’t and don’t compete with movements of products by ocean. So I don’t think that that’s really going to be a significant impact. I think that it’s the export deep sea exports that will come out of NOLA will probably be the biggest impact of the changing trade pattern that what we’ve seen in the past.

Sandy Klugman: Thank you very much.

Denita Stann: You will have time for just one more question.

Operator: The next question is from P.J. Juvekar with Citi. Please go ahead.

Dan Jester: Thanks. Good morning, everyone. It’s Dan Jester on for P.J. Just one last one on nitrogen, urea exports that China been very close so far this year. So I’m wondering if you can comment, and what’s your expectation are for that in the back of the year.

And you touched on this briefly earlier but are you seeing actual shutdown in the urea space, any color that you have on China shutdown would be helpful too. Thank you.

Stephen Dowdle: Yes. Good morning, Dan. So on the imports, don’t know for certain but when you extrapolate the numbers I think they just come out over 4 million tonnes perhaps 4 million tonnes to 5 million tonnes in terms of imports and that compares to what was it – over 8 million tonnes last year, so a little over half which is obviously very significant drop in urea export.

And the trend that seems to continue, when we saw it in the first half – will they continue big question mark but it has so far. So that’s what we’re thinking – it would come out. And then the question is really what happens in 2018. To your second question in terms of you urea shutdowns and are you asking specifically in China or are you asking globally?

Dan Jester: Both could be wonderful but China certainly – anything specific?

Raef Sully: Yes. I mean, the operating rates are certainly down.

So the answer is yes, there are shutdowns. And the question is always, that shutdown is a suspensions, will they come back up or are they permanent and that’s a big question. To the extent they’ve done for environmental reasons and cost reasons. They ought to be permanent but then again that may not be the case. So there are certain plants are not running anymore.

But I think the big question is how permanent are those closures and is there any chance it might come back, if there’s a price recovery. And then again, then you are in a range bound environment. Yes, Stephen says, I answered the question. So he’s good.

Dan Jester: Okay.

Thank you very much.

Raef Sully: Thank you, Dan.

Denita Stann: Thanks, Dan. And thank you everyone. If you have further questions this afternoon, please don’t hesitate to give us a call at the office.

Have a great day.

Operator: This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.