Vale venture in Argentina in limbo

A $5.9bn potassium project in Argentina has gone into limbo after authorities in Mendoza province suspended development, alleging that Vale, the Brazilian miner, had failed to meet requirements to hire and buy supplies locally.

The project, which includes the construction of a railway and a port on Argentina’s Atlantic coast to transport potassium, is still in its initial planning phase. In its first-quarter earnings report, Vale said it had pushed back the planned start of production to the first quarter of 2014 from the second half of 2013.

The company expects the project to have a nominal annual capacity of 2.1m tonnes of potash. A second phase would increase capacity to 4.3m tonnes.

The Mendoza government said on its website that the decision had been taken “because of insufficient information supplied regarding the plan and the level of investment … The sanction will be lifted when the company complies with the request”.

Walter Vázquez, hydrocarbons undersecretary, said the government needed to be able to “count on certain data to be able to monitor compliance with requirements established in the accord, such as ‘buy Mendoza’ and hiring locally”.

The province has stipulated that 75 per cent of the labour for the project should be from Mendoza. It says Vale did not meet this level in 2010 and could not explain why.

“If the miner comes to Mendoza without understanding this concept, it should not do this type of project,” he said.

Vale has faced hurdles with other parts of the project, including questioning of the planned location of a port in the province of Buenos Aires. Local authorities want Vale to switch to a new site where energy company YPF is planning a regasification terminal to make port dredging more cost-effective.

Vale released a statement expressing its “permanent disposition to collaborate with the local [Mendoza] authorities in favour of the growth and the economic and social development of the province”. It added that it would freeze work on the Río Colorado project until authorised to resume activities.

A spokesman said the company had pledged to provide the required proof that it had complied with all requirements.

Mendoza approved a work plan for 2010 and part of 2011 but maintains that Vale has supplied insufficient information, according to Pablo Gudiño, the province’s environment secretary. “We’re not asking for justification, we’re asking for them to comply. They are not complying in the information and contracting,” he said.