22 March 2013 21:44 [Source: ICIS news]
HOUSTON (ICIS)--Brazilian mining company Vale said on Friday that it intends on abiding by an Argentine court ruling, which ordered the company not to dismantle its suspended Rio Colorado potash mine project.
In a decision handed down late on Thursday, a lower court in the Mendoza region ruled in favour of an injunction filed by the country’s primary construction workers union, UOCRA, with the stipulation that Vale abstain from dismantling installations and removing machinery and other work implements.
The court specified that the action could not be physical or legal in nature and any such violations would result in significant monetary penalties.
For its part, Vale said that as far as “Argentina ordering Vale not to dismantle installations at the project, Vale will always comply with court orders and will always seek to defend its rights”.
This is the second action taken by the Argentine government in response to the company’s decision to shutter the $5.9bn (€4.5bn) facility. Last week they were ordered to keep its approximately 6,500 employees and subcontractors on the job at the potash mine.
The mandatory conciliation on employment, which is in effect until 11 April, not only forced Vale to maintain its workforce but return jobs to anyone who had already been dismissed.
On suspension since January the Rio Colorado project centered on the development of a potash mine, which was expected to begin production in the second half of 2014 with initial output estimated at 2.4m tonnes.
The company earlier this month 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 estimated that because of annual inflation rates within Argentina, which have been measured at around 25%, that the Rio Colorado could have a price tag in the range of $11bn.
Vale followed that decision a few days later by revealing that in order to recover the $2.2bn already invested, it was considering selling the ambitious project, which was expected to eventually generate 4.3m tonnes of potash a year and have a life span exceeding 50 years.
Vale had been seeking a reported $3bn in tax breaks to help offset rising costs related to inflation and exchange rates but were denied.($1 = €0.77)
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