RIO DE JANEIRO (Reuters) - Global miner Vale SA signed an agreement with the Argentine government on Friday that will allow the Brazilian company to leave the $6 billion Rio Colorado potash mining project, a company spokeswoman told Reuters on Friday.
Under the terms of the agreement, Vale’s existing concession at the mine remains in place for up to four years, the spokeswoman said. In the meantime, Vale is free to seek a buyer or partner for the venture.
Between December and March, Vale sought and failed to get the Argentine government to approve tax breaks to help ease rising costs related to surging Argentine inflation and the country’s tightly controlled official exchange rate.
Vale said the inflation and exchange rate could make the project unviable.
People familiar with Vale’s plans have said the company, the world’s second-biggest miner, planned to sell the project in efforts to recoup the $2.2 billion it has already spent on the mine and on railway and port improvements needed to move the potash to market.
In a conference call with analysts and investors on Thursday, Vale said it is seeking new potash projects in Brazil and abroad to replace the Rio Colorado project.
Since approving plans to pull out and seek a buyer for the project, Vale and the Argentine government have been at loggerheads over the fate of at least 6,500 jobs at the Rio Colorado site.
Despite the suspension, an Argentine court ordered Vale to maintain work sites and continue paying its workers.
Brazilian president Dilma Rousseff said on Thursday, after meeting with Argentine President Cristina Fernandez in Buenos Aires, that she was confident Vale and Argentina would come to an agreement.
The Rio Colorado project includes an 800-km (500-mile) rail line from the mine in Mendoza province to Bahia Blanca, an Atlantic Ocean port.
Potash, a potassium salt, is a key fertilizer and is considered a strategic product for Brazil. While it is the world’s largest producer of coffee, orange juice, sugar and beef and the No. 2 exporter of soybeans, Brazil must import the vast bulk of its fertilizers, including about 90 percent of its potash.
Potassium is one of three key plant nutrients along with nitrogen and phosphorous.
Reporting by Sabrina Lorenzi.; Writing by Jeb Blount; Editing by Gary Hill and Lisa Shumaker