Vale to restart Argentine potash project

Brazilian miner Vale SA is planning to restart its Rio Colorado potash project in Argentina after a long delay but at a lower predicted capacity than initially targeted, a local government spokesman said on Wednesday.

Vale put its Rio Colorado project in the western province of Mendoza on hold in 2012, having already invested $2.2 billion, as prices for the key crop nutrient crashed and after the former government refused to offer tax concessions to mitigate soaring costs.

However, Vale is now looking to invest $1.5 billion to restart construction in coming months, a spokesman at Mendoza's energy ministry said.

To ensure profitability, Vale told the local government that it was cutting forecast capacity for the project to 1.3 million tonnes annually from a previous goal of 4 million tonnes, the spokesman said.

Vale did not immediately respond to a request for comment.

Mendoza's Energy Secretary Emilio Guinazu discussed Rio Colorado's restart at a press conference on Tuesday, local media reported, adding that original plans to build an upgraded railway to transport the potash had been scrapped and the company would now use trucks.

Vale's efforts to jump-start the venture come as Argentina's new center-right government tries to create a more business-friendly environment for mining companies.

Prices for potash have been falling since 2012, hit by bloated capacity, the breakup of a cartel, and weak currencies in major consumers like Brazil and India.

Last month, Argentina's mining minister told Reuters that Vale did not want to sell Rio Colorado, and was looking to bring in a partner to contribute investment.