Agrium Potash Operations in Brazil

1
Agrium Corporation Fertilizer Production in
Brazil

• Eric Balsley
• Russ Dunlap
• Dave Jaggard
• Brad Patt
• Jordana Weiss

2
Price of Potash

• Competition in Brazil
• Distribution Conglomerates
• Canpotex (70 of dsn)
• Large Mining Companies
• Vale Own potash mines, Brazilian
• BHP Billiton - capacity
• Existing Potash Companies
• Cargill (Mosaic) and Bunge

• Brazilian Market
• Currently imports 90 of potash (1st)
• Largest in world
• Worlds 3rd largest potash reserves
• Self sufficient in 10 years
• 1.8B/year potential market
• 4.1 growth rate (3rd)

• Agrium Potash
• 5 of global potash supply
• Concerns Moving Forward
• Overreliance on Canpotex for intl. dsn.
• Distance from growing markets
• N.A market growth slowing
• Growing organic sector

3
Financial Considerations

• MACRO-ECONOMIC CONDITIONS

Inevitable demand profit impact
4
Political Considerations

• Federal Republic, robust checks balances (1988-
  )
• Respected world citizen, WTO IMF member
• Socialist/populist leanings

RISK DESCRIPTION ASSESSMENT
Expropriation Risk Agrarian land expropriation in 1960s-70s Stability of current government mitigates risk adequately
Labor Market Risk 2/3 Rule Terminations costly difficult Payroll tax relatively high Hire carefully Support ops from global HQ when possible
Property Rights Protection Contracts considered secure Legal system unreliable Include arbitration/mediation provisions in contracts
Regulatory Risk Possible market interference -Price controls -Special treatment Work cooperatively transparently with government
5
Market Entry Recommendation

• Produce fertilizer in Brazil via JV
• Focus on large-scale wholesale market
• Joint Venture Characteristics
• Leverage Agriums capabilities in manufacturing
  logistics
• Partner with other multinational (BHP,
  Cargill/Mosaic)
• 30 share in 0.9-1.1B investment in mining
  production
• Risk assessment
• Financial political risks moderate manageable
• Domestic entry aligns with government
• Preserves Agrium presence in Brazil
• JV model spreads risk overcomes holdup problems

6
Q A