PotashCorp is criticizing a report on its possible US$38.6-billion hostile takeover by BHP Billiton as too optimistic, saying it underestimates just how much government revenue would be lost if the Anglo-Australian mining giant succeeds.

The Saskatoon-based fertilizer company (TSX:POT) said the worst-case scenario outlined in the report is much more likely than the Conference Board of Canada made it out to be.

The Conference Board study, done for the province and released Monday, found that the province could lose as much as C$5.7 billion in taxes and royalties if a successful bidder chose to run PotashCorp's operations at full tilt.

But the study also said it's unlikely that BHP would do this "because it would not be the best way to maximize the return on their investment."

However, PotashCorp questioned that assumption, saying BHP has indicated otherwise.

"The report chose to assume that BHP would not operate full out in direct contradiction of previous BHP public statements," PotashCorp said in a news release Tuesday.

BHP chief executive Marius Kloppers has hinted that the company might pull out of potash export cartel Canpotex, which sets production levels to control pricing, if it acquires PotashCorp.

This would allow the company to run its operations at full capacity, lowering potash prices and the province's royalty revenues.

PotashCorp encouraged the province to be open to competing bids, as long as the bidders commit to remaining in Canpotex -- jointly owned by PotashCorp, Agrium Inc. (TSX:AGU), and Mosaic Co. (NYSE:MOS) -- and honour the company's current growth strategy.

"The company believes and told the Conference Board that such assurances would be integral to any alternative expressions of interest. The Conference Board chose to ignore PotashCorp's position in its report," the company said.

The caveat that any suitor agree to remaining in Canpotex would appear to disqualify the Chinese, who have previously been tapped as the most likely alternative to a BHP-led takeover. China is interested in securing a cheap supply of potash for its growing agriculture industry, and the Conference Board said they would be more likely to pull out of Canpotex to keep prices low.

The Conference Board report appeared to indicate that there will be little short-term benefit to Canada if BHP's bid is successful, saying the province will lose at least $2 billion in revenues over a decade and that there would be little or no net effect on employment until at least 2026.

However, it also emphasized that the only major downside would be the loss of government revenue.

The Saskatchewan government will consider the report's findings before it provides its views on the takeover offer to Ottawa. Under the Investment Canada Act, the federal government needs to determine if the bid is of net benefit to Canada before it can be approved.

Federal Industry Minister Tony Clement said Monday he would extend the 45-day review of the deal under the act by another 30 days.

PotashCorp has said that BHP's US$130 per share bid undervalues the company. CEO Bill Doyle has predicted that other bidders would come forward but so far no white knight has emerged.

PotashCorp is suing BHP in a U.S. court for allegedly misleading investors on the key facts of its takeover bid, but BHP has asked the court to throw out the case.

Shares in Potash Corp. of Saskatchewan fell $2.10 to $145.60 Tuesday afternoon on the Toronto Stock Exchange.