2011 Annual Report

Although we are still early in our journey, we have already made good progress. For example:

• In the current environment, the largest opportunity is often site production, and our operational excellence process has already helped substantially. In Phosphates, our Four Corners mine has greatly improved the coordination between our mining and plant operations, substantially improving productivity, establishing standard operating procedures and conducting performance dialogues at all levels of the site. The net result — purely from productivity improvements — is in excess of 300,000 tons over historic levels, which reduces the need to purchase external phosphate rock.
• In Potash, our Carlsbad operation has increased K-Mag^® production by 14 percent since the launch of our operational excellence initiative, and our K1 operation at Esterhazy has increased production by 9 percent. Since our focus has been on improving the efficiency of our current assets, these increased volumes have been achieved with almost zero additional capital.
• Technical functional improvements have yielded similar results. For example, we have increased electricity generated by our phosphates chemical plants by over 12 percent and simultaneously increased transfers of internally generated electricity to our mines by approximately 50 percent. A focused effort on maintenance has nearly doubled productivity at many sites. A focus on water in Phosphates has identified an opportunity over the next five years to reduce process water inventory by 80 percent (eight billion gallons) and reduce our groundwater draw by 20 percent (six to seven million gallons per day).
• Company-wide functions have also contributed to the operational excellence effort. In procurement, we have leveraged our scale and applied leading-edge sourcing methodologies to capture over $30 million ($20 million in Potash and $15 million in Phosphates) in annualized savings, with additional significant savings expected in the coming years.
• Our efforts have also focused on capital productivity. By applying a more structured and disciplined portfolio approach to our capital, we were able to redeploy $35–$45 million from sustaining capital spend to opportunity projects ($20–$25 million in Phosphates and $15–$20 million in Potash), driving improved returns on invested assets. We plan to accelerate the shift from sustaining to opportunity capital over time.

And this is just the beginning for operational excellence improvements at Mosaic. Our journey will take several years and involve a fundamental shift in our mindsets and behaviors to become truly sustainable. Looking forward to 2012, we will make substantial improvements to cover the remaining operations and functions. In addition, we will complete the resourcing of our operational excellence teams in both Phosphates and Potash. Most importantly, we will continue to focus on hardwiring these improvement processes "in the line" at each site. This will require a focus on performance metrics-based discussions at each level in our organization and a capability-building effort focused on real-time problem solving.

We are making steady progress and are confident that this effort has momentum and will succeed, and that it will ultimately provide us a sustainable competitive advantage over our industry peers.