Vale, labour to mediate over cancelled Argentina potash project

19 April 2013 21:27  [Source: ICIS news]

HOUSTON (ICIS)--Argentina’s Labour Ministry said on Friday it has commenced a mandatory mediation session between Brazilian mining company Vale and workers at the suspended Rio Colorado potash mine project in the western province of Mendoza.

As part of the decision to force the mining titan and its workforce to participate in mediation, the agency has ordered that Vale cannot dismiss or layoff any employees for 30 days. The company presently has approximately 6,500 employees and subcontractors on the job.

The Labour Ministry said mediation will last no more than 10 days and that any agreement reached between the two parties will be subject to its final approval. Vale cannot take further action against the employees, who have been ordered not to stage strikes or other job disruptions.

“Its purpose is to find a mechanism of negotiation between social actors which preserve all jobs,” said the Labour Ministry. “Within the framework of social peace, corporate social responsibility and job retention, the parties must propose and analyse measures to overcome the crisis or mitigate its effects.”

Vale had no comments. In the past, it has said that it would abide by all court rulings within Argentina.

This is the second reprieve for Vale employees as Labour Minister Carlos Tomada announced in March that the government had issued a mandatory conciliation that forced Vale to maintain its workforce through 11 April as well as return jobs to any employee who had already been removed.

On suspension since January, the Rio Colorado project centered on the developing 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 project was expected to eventually generate 4.3m tonnes/year of potash and have a life span exceeding 50 years.

The company in March 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 due to annual inflation rates within Argentina, which have been measured at around 25%, the Rio Colorado could have a price tag in the range of $11bn. The company followed that decision a few days later by revealing that in order to recover the $2.2bn already invested, it was considering selling the project.

Vale had been seeking a reported $3bn in tax breaks to help offset rising costs related to inflation and exchange rates but was denied the relief by Argentina, which has since accused Vale of breach of contract and using the situation to force the country to concede on the issue of taxes.

By: Mark Milam
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