Exclusive: Brazil's Vale says signs accord to quit Argentine Potash project

Fri Apr 26, 2013 10:01pm EDT
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By Sabrina Lorenzi

RIO DE JANEIRO (Reuters) - Global miner Vale SA signed an agreement with the Argentine government on Friday that will allow the Brazilian company to leave the $6 billion Rio Colorado potash mining project, a company spokeswoman told Reuters on Friday.

The agreement could put an end to months of uncertainty for Vale (VALE5.SA: Quote) (VALE.N: Quote), which suspended work on the fertilizer project in December and announced its intention to pull out in March.

Under the terms of the agreement, Vale's existing concession at the mine remains in place for up to four years, the spokeswoman said. In the meantime, Vale is free to seek a buyer or partner for the venture.

Between December and March, Vale sought and failed to get the Argentine government to approve tax breaks to help ease rising costs related to surging Argentine inflation and the country's tightly controlled official exchange rate.

Vale said the inflation and exchange rate could make the project unviable.

People familiar with Vale's plans have said the company, the world's second-biggest miner, planned to sell the project in efforts to recoup the $2.2 billion it has already spent on the mine and on railway and port improvements needed to move the potash to market.

In a conference call with analysts and investors on Thursday, Vale said it is seeking new potash projects in Brazil and abroad to replace the Rio Colorado project.

Since approving plans to pull out and seek a buyer for the project, Vale and the Argentine government have been at loggerheads over the fate of at least 6,500 jobs at the Rio Colorado site.   Continued...

Vale's logo is pictured outside their central sales office in Saint-Prex near Geneva June 4, 2012. REUTERS/Denis Balibouse