(Potash story updated with the latest details on BHP Billiton's attempts to win regulatory approval of its bid from the Canadian government.)

SASKATOON, Saskatchewan ( TheStreet) -- Potash ( POT) gave itself some ammunition Thursday in its struggle either to scamper away from takeover pursuer BHP Billiton ( BHP) or force the mining giant to pay up.

Potash reported third-quarter earnings that exceeded Wall Street expectations, but the company's managers also made a boldly optimistic prediction about Potash's profit next year -- an increase in guidance that the company undoubtedly hopes will force investors to revalue the stock higher.

>>Potash vs BHP: The Fertilizer War From A to Z

In early trading Thursday, at least, that wasn't the case. Potash shares were falling 4% to $143.31 on heavy volume.

The downward move likely had to do with increasing concern that the Canadian federal government has grown more circumspect about approving BHP's bid for Potash.

A report in the Globe & Mail newspaper Thursday morning points out that Ottawa officials appear to be swayed more and more by arguments against foreign ownership of crucial natural resources -- this despite Canada's recent history of letting big overseas concerns buy out independent Canadian miners. (See: Vale's ( VALE) acquisition of Inco, 2006.)

Uncertainty surrounding the politics of the takeover has investors nervous that Ottawa might scuttle any deal, no matter the price that BHP offers.

Ottawa's Investment Canada, the federal agency with jurisdiction over the takeover bid, is scheduled to release its decision next Wednesday, Nov. 3.

BHP Billiton had been drawing criticism for making its bid for Potash too late. That's because a serious run-up in crop prices this summer and fall has made farmers flush and eager to load up on fertilizers. The crop rally has lifted the stocks of agriculture companies across the board, including Potash's, with the effect of making BHP's $130-a-share offer look naïve by comparison.

Many analysts believe BHP will need to hike its bid to $170 or more, given the recent commodities-markets craziness.

Potash took an almost triumphant tone in its press release. "Given our expectation that current conditions represent the front end of an escalation in demand and pricing for our products, we are providing 2011 earnings guidance in the range of $8.00-$8.75 per share," the company said in the "Outlook" section of its third-quarter press release.

That's considerably higher than the current consensus target among sell-side analysts, who had on average been calling for a profit in 2011 of $7.59 a share.

Unsurprisingly, BHP Billiton merited no direct commentary by Potash in its earnings release. Indirectly, the Anglo-Australian miner's presence was written all over the document.

"As we have demonstrated in the past, we have an unmatched ability to move quickly to capture value when demand and prices are on the upswing," Potash CEO Bill Doyle said in his prepared statement. Translation: See, shareholders? Look at our fat profits. BHP either's got to step up and make us all rich, or go back to Melbourne.

Doyle went on in a similar vein -- "This is our time to demonstrate how our patient, long-term approach delivers returns for all stakeholders" -- with a message that also seemed geared toward Saskatchewan, the government of which recently issued a report that called a BHP takeover of the fertilizer company a bad deal for the region.

As for the quarter ended in September, Potash reported third-quarter profit of about $403 million, or $1.32 a share. Analysts on average were expecting $1.16 a share.

Revenue, too, beat the consensus target, coming in at $1.58 billion compared with estimates of $1.3 billion.

The year-year-year comparisons were healthy: Potash said its profit jumped 62% and its revenue 43% from the same period in 2009.

-- Written by Scott Eden in New York

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