Vale ordered by Argentina to keep workers employed at potash mine

15 March 2013 21:53  [Source: ICIS news]

HOUSTON (ICIS)--The Argentina government on Friday ordered Brazilian mining company Vale to keep its employees on the job at the potash mine in response to the company’s announcement that it will suspend and possibly sell the Rio Colorado project.

Labour minister Carlos Tomada announced that the government has issued a mandatory conciliation that will, in effect, force Vale to maintain its workforce, as well as return jobs to any employee who has already been dismissed. Tomada said the ruling will last until 11 April and is the first part of steps that will be undertaken by Argentina to rectify the situation.

On suspension since January, the project centered 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.

Vale on Monday decided that the Rio Colorado, citing the economic conditions within the country, was not in line with the company’s commitment to capital allocation and value creation. Vale had been seeking the tax breaks to help offset rising costs related to inflation and exchange rates.

Initially projected to cost $5.9bn, Vale realised that due to annual inflation rates within Argentina, which have been measured at around 25%, the Rio Colorado could have had a price tag in the range of $11bn.

The company followed that decision later in the week by revealing that in order to recover the $2.2bn already invested, it was considering selling the project, which was expected to generate 4.3m tonnes of potash a year.

While Vale expressed itsviewpoint that it was in its best interest to first suspend the project and then begin looking for a financial exit, the decision immediately earned the disapproval of the Argentina government, which publicly accused Vale of breach of contract and using the situation to force the country to concede the tax breaks.

By: Mark Milam
+1 713 525 2653

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