Argentina’s Mendoza province is reported to be in talks with some of the world’s top fertilizer producers to revive its stalled Rio Colorado potash project.
Province officials have spoken to several would-be partners to get the half-completed Rio Colorado into production, and have inked non-disclosure agreements with five of the biggest potash producers, according to a Bloomberg report, citing the Director General of the now Mendoza province-owned PRC SA, Emilio Guinazau.
Mendoza wants to find an investor that would take a majority stake and get the mine operating within 18 months. According to the report, citing Mendoza Governor Rodolfo Suarez on Twitter, the province recently called for bids from banks to advise it in its search.
Mendoza took over the project last year after Brazil’s Vale SA completed the handover of the asset to the provincial government, after years of wrangling between the two parties. Vale had pulled the plug on the Rio Colorado potash project in 2013 after spending some $2.2 billion to build almost half the mine (GM Jan. 28, 2013). It acquired the potash project in February 2009 from Rio Tinto Plc (GM Feb. 9, 2009).
The original plans for the project envisaged an initial 2.1 million mt/y capacity, with a second phase increasing that to 4.35 million mt/y, as well as the construction of a railway spur of 350 km to transport the potash to Argentina’s Bahia Blanca port.
However, according to this week’s Bloomberg report, citing Guinazau, a more likely scenario for the project would be for an annual output of 1 million mt, which could be transported by truck. This scenario would need an investment of some $1 billion, he said.
According to the Bloomberg report, Mendoza is prepared to scale down the project still further, simply to get it operational. According to Guinazau, an investment of $200 million would produce enough potash for the Argentinian market and nearby neighbor Uruguay.
Vale also looked at scaling down the potash project. Under the terms of a deal with Mendoza province in September 2016, which gave the Brazilian mining major six months to re-engineer the project, Vale in late 2016 hired Canadian engineering company Hatch to conduct a new prefeasibility study on the project, aimed at scaling down the development. The new proposal also included potentially abandoning the plan for the rail line to Bahia Blanca, and using trucks to transport the potash (GM Jan. 9, 2017).
Argentina has struggled to attract new mine investment to the country in recent years due to stiff environmental opposition to new mining development and onerous business rules, including capital controls, which have scared off potential investors.
However, Guinazau believes “a window of opportunity” has begun to open because potash prices are rallying along with other fertilizers on the back of strong demand from farmers and a raft of supply disruptions, according to the Bloomberg report.