Brazil's Vale SA plans to sell the Rio Colorado fertilizer project in Argentina to recoup the $2.2 billion it has invested in the suspended potash mine, railroad and port complex, a source with direct knowledge of Vale's plans told Reuters on Wednesday.
Vale on Monday decided to shut operations at the $6 billion project in Argentina's Mendoza province after failing to obtain tax concessions from the Argentine government. Vale asked for the concessions to help ease soaring costs it attributes to Argentina's rampant inflation and controlled exchange rate.
The planned sale comes only four years after Vale bought the project, then in the feasibility study phase, from global miner Rio Tinto Ltd . The Rio Colorado purchase was part of an $850 million deal that also included potash exploration rights near Regina, Canada, according to Rio Tinto.
In December, just before putting Rio Colorado workers on paid leave and suspending construction, Vale said it was seeking a partner to buy part of the project and help shoulder costs as it focused capital spending on its core iron ore business.
Vale is the world's largest iron ore producer. Potash is a form of potassium, one of the three main plant nutrients along with nitrogen and phosphorus. There are few major sources of the product in South America, where Brazil and Argentina are among the world's largest agricultural exporters.
Vale, the world's second-largest mining company, said it had completed 45 percent of the Rio Colorado project. The project is made up of a potash mine, 800 km (500 miles) of new and upgraded railway and a potash-loading terminal at Bahia Blanca, southwest of Buenos Aires.