VALE has suspended work at its $5.9bn potash project in Argentina indefinitely as the world’s biggest producer of iron ore cuts back investment to the lowest level in three years.
The Rio de Janeiro-based company confirmed on Wednesday that workers at its Rio Colorado project had still not returned after a Christmas break, adding that the project had been put on hold for an “indefinite period”.
The projValeect in Argentina’s Mendoza province was first thrown into limbo in June 2011 when local authorities temporarily suspended works over allegations that the Brazilian company had failed to meet requirements to hire and buy supplies locally.
The sudden nationalisation of YPF last year also raised doubts over the future of Rio Colorado, which had been expected to start producing 2.4m tonnes of potash per year from 2014.
More recently, the project has become a target of Vale’s cost-cutting efforts. Last month, the company cut the 2013 budget for the project to $611m from $1.08bn last year. Roger Downey, Vale’s coal and fertilisers executive director, also said Vale was slowing its operations at Rio Colorado and looking for a potential partner at the mine.
However, Vale and local authorities in Argentina have made it clear there is no intention to cancel the project altogether.
The move comes as the Brazilian company slashes investments by $1.2bn this year to the lowest level since 2010, as it struggles to adjust to the recent slowdown across its main markets.
The price of iron ore, which accounts for about 90 per cent of Vale’s profits, slumped to a three-year low in September last year as growth slowed in China and steelmakers across Europe and the US curtailed purchases.
As part of its retrenchment, Vale has dropped its vast Simandou iron ore development in Guinea from its investment plan and disposed of non-core assets already in production, such as its Colombian thermal coal operations.
Vale also has been looking to sell its stakes in oil and gasfields in Brazil, estimated to be worth around $1bn.
