MercoPress. South Atlantic News Agency

Argentina eases pressure on potash project timetable but denies fiscal incentive

Mendoza governor Perez said “he will support any initiative so that work doesn't remain paralyzed”

Argentine authorities backed away from a recent ultimatum for Brazilian mining giant Vale to submit a new timeline for its 6 billion dollars Rio Colorado potash mine, giving the company more time to find a solution for the imperiled project.

Work at Rio Colorado has been suspended since Dec. 22, and Vale has repeatedly declined to specify when or if the project is likely to resume. Mendoza Governor Francisco Perez last month gave Vale a February 4 deadline to present a working plan and threatened to revoke the company's concession if it failed to do so.

The date came and went without a word from the governor or Vale, which cut its 2013 budget for Rio Colorado amid a company-wide austerity effort and is seeking to avoid further project delays and cost overruns of the sort that has plagued big mining firms in recent months.

However, Governor Perez met this week with Argentine Planning Minister Julio De Vido and representatives from Vale, and the authorities accepted a request by the company to make a decision by the end of this month, the governor's press office said.

Mendoza's Los Andes newspaper reported that Vale Chief Executive Murilo Ferreira participated in the meetings, though this could not be immediately confirmed.

According to the press office, Mendoza's government is “of course going to support any initiative so that work doesn't remain paralyzed.” One possibility involves Vale teaming up with other investors.

But Argentine President Cristina Fernandez turned down a request by Vale to cut or defer taxes in exchange for maintaining Rio Colorado's timeline. Los Andes quoted Mr. Perez as saying a fiscal incentive for Vale “would imply a very significant loss of money” for the government.

Scheduled to begin operating in late 2014 with potash-production capacity of 4.3 million metric tons per year, Rio Colorado comprises a mining system, significant railroad works and construction of a maritime terminal in Argentina. Vale budgeted 611 million dollars in investments for the project in 2013.