MercoPress. South Atlantic News Agency

Suspended potash project top officials left Argentina following union threats

According to Sao Paulo media, Vale Argentina CEO Sergio Leite and other officials faced an “exalted” environment

Top officials from the Brazilian mining company Vale which suspended a 6 billion dollars potash development project in Argentina left the country for Sao Paulo last Friday following “on instructions from the security department” of the corporation, according to reports in the Brazilian press.

Reports from O Estado de Sao Paulo and the financial newspaper Valor Economico indicate that the president of Vale in Argentina, Sergio Leite and another top official left Argentina based on a detailed report on “the prevalent exalted feelings and even unions’ threats“.

The Mendoza media speculates that this could be the reason for the absence of Leite to a conciliation meeting asked by the company and which was to take place last Friday morning at the Labour ministry in Buenos Aires.

On that day the Ministry of Labour enacted the compulsory conciliation four days after Vale announced the suspension of the potash project in Rio Colorado because of “macroeconomic conditions in the current context”.

The Rio Colorado project is Argentina’s largest investment in years and besides developing the mine included a railway to a port especially built to ship the mineral. It would have made Argentina one of the world’s leading producers and exporters of potash which is used as potassium fertilizer for agriculture.

In Mendoza lawmakers belonging to the ruling coalition aligned with Cristina Fernandez presented a bill before the provincial legislative modifying labour rules incorporating new sanctions to companies that do not abide regulations such as banning them from bidding for government financed projects or registering as government suppliers.

Meanwhile Vale sources revealed that the company may try to develop other potash projects in Brazil and Canada: the options are Carnalita in the north-eastern state of Sergipe and the Kronau mine in Canada.

Brazil’s giant agriculture sector and one of the world’s main food exporters needs the potassium fertilizer. Currently it imports 90% of its potash needs from Canada, Jordan and Russia, and in Brazil’s long term planning it was counting with the Rio Colorado project.

Vale, the world’s No. 2 miner, said on March 11 the Rio Colorado project was no longer economically viable inn the current macroeconomic environment in Argentina but the Argentine government argues Vale is demanding unrealistic tax breaks for the project.

Vale, which considers the project suspended, has invested 2.2 billion dollars in Rio Colorado to date and has completed work on 40% of the mine, railway and port.

The company last year rented mining assets in Sergipe from state-run oil company Petrobras for a 30-year period with the goal of developing Carnalita, but has so far made little progress.

Vale’s former Chief Executive Murilo Ferreira said last August that Vale was reconsidering the Kronau project in Canada, which requires an investment of 3 billion dollars in its initial phase.