Vale decides to suspend potash project in Argentina

11 March 2013 18:52  [Source: ICIS news]

Vale decides to suspend potash operation in ArgentinaHOUSTON (ICIS)--Unable to gain desired tax breaks for its $5.9bn (€4.5bn) Rio Colorado potash facility in Argentina, Brazil mining company Vale SA announced on Monday that it has informed the government that it is suspending implementation of the ambitious project.

On suspension since January, the project centred on the developing of a potash mine and related facilities in Mendoza that was expected to begin production in the second half of 2014, with initial output estimated at 2.4m tonnes.

The company held a board meeting on Monday. Citing the economic conditions within the country, it decided that the Rio Colorado was not in line with the company’s commitment to capital allocation and value creation.

Vale had been seeking the tax breaks from the government to help offset rising costs related to inflation and exchange rates. Analysts have speculated that without the tax breaks, and due to annual inflation rates within Argentina measured at about 25%, that the Rio Colorado operation could have ended up costing around $11bn.

In late 2012, company officials announced that 42% of the project site work had been completed, but that they expected to reduce the push for completion as Vale had cutback spending company-wide and had reduced the 2013 budget for Rio Colorado to $611m from $1.08bn.

Vale has been looking for a strategic partner since that decision was made, and according to Brazilian media reports there have been at least two ventures interested in joining forces to see the completion of the project.

One of the groups interested has been identified as Abu Dhabi’s Mubadala Development Company, an investment and development firm founded in 2002 to focus on managing long-term, capital-intensive investments for the United Arab Emirates.

The value of having an operation capable of producing significant supplies of potash would have been considerable for the ever-expanding agricultural industry within Brazil, as the country currently imports roughly 90% of its potash needs from foreign exporters in countries such as Russia and Canada.

The company said in a press release that it will honour the commitments made to previous concessions received from the government and that it is still searching for alternatives that would enhance the economic situation and allow for the resumption of the project.

($1 = €0.77)


By: Mark Milam



AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly

ICIS news FREE TRIAL
Get access to breaking chemical news as it happens.
ICIS Global Petrochemical Index (IPEX)
ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index