Brazil’s Vale risks losing concession on $6bn potash project

25 January 2013 23:44  [Source: ICIS news]

MEDELLIN, Colombia (ICIS)--The Argentine province of Mendoza told mining giant Vale on Friday that it must restart activity at the $6bn (€5bn) Rio Colorado potash project in central Argentina or the concession could be considered abandoned.

The provincial government said the Brazilian company has five days to respond with a timeline for the resumption of work at the site.

The announcement follows Vale’s admission this week that project workers had not returned after the Christmas break, fuelling speculation the company had suspended the project.

“This decision was taken to safeguard jobs and protect mineral resources,” the Mendoza government said in a statement.

The project, which would make Argentina the third largest potash exporter in the world, has been dogged by uncertainty since Vale bought the site from Rio Tinto in 2009.

In June 2011, Mendoza province halted operations at the project due to Vale’s failure to meet state requirements relating to the hiring of local employees.

Concerns were then raised after Argentina’s sudden takeover of Spanish-controlled oil producer YPF in 2012.

And in December Vale announced it would cut the 2013 budget for the project from $1.08bn to $611m.

Vale released a statement on Thursday denying the project had been suspended.  

“The company has extended the year-end holiday break for workers, while it analyses variations in the economic fundamentals of the project,” Vale said.

Vale did not immediately return a call requesting for additional comment.

($1 = €0.75)

By: Simon West

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