Marubeni eyes Vale’s halted Rio Colorado potash project in Argentina

Marubeni eyes Vale’s halted Rio Colorado potash project in Argentina

Brazil’s Vale (NYSE:VALE), the world’s biggest iron ore producer, could soon be closing the last chapter of its mining incursion history in Argentina, as Marubeni Corporation is reportedly interested in acquiring the now halted $6 billion Rio Colorado potash project.

According to the pro-government newspaper Pagina 12 (in Spanish), the Japanese firm is seeking to enrol Chinese capitals and so make the potash endeavour in the province of Mendoza a profitable one.

Another option for Marubeni would be to partner with Vale on the massive project inactive since January last year and officially suspended in March of 2013.

Rio Colorado was set to be one of the biggest foreign capital investments in Argentina, turning Brazil’s neighbour into a top supplier of potash.

However, after spending $2.5bn and completing over 40% of the project Vale walked out on it, citing rampant inflation and exchange rate controls in Argentina as the main factors that made the project commercially unviable. It said the cost had almost doubled to $11bn from initial estimates.

Originally scheduled to begin production this year, the project included an 800km railway from the mine in Mendoza province to Bahia Blanca, an Atlantic Ocean port.

Rio Colorado mine life was expected to exceed 50 years with an average annual production estimated at 2.4 million tonnes in Phase 1 rising to 4.3 million tonnes per year in Phase 2.

Marubeni eyes Vale’s halted Rio Colorado potash project in Argentina

Vale’s decision to ditch its only major asset in Argentina left both governments unhappy. About 8,000 Argentine workers in three provinces were left out of jobs, while Brazil saw its goal of becoming self-sufficient in fertilizer by 2020 seriously jeopardized.

More than 90% of the country’s vast potash consumption comes from imports, leaving the country’s farms largely at the mercy of two producers: Russia’s Uralkali and Canada’s Potash Corporation of Saskatchewan.

Vale acquired Rio Colorado from mining giant Rio Tinto (LON:RIO) in 2009. The company can keep the concession for up to four years.