MAC: Mines and Communities

Vale and Pan American Silver halt projects in Argentina

Published by MAC on 2013-01-28
Source: Bloomberg, Mining.com, MarketWatch, BrightWireNews (2013-01-28)

Two of the biggest foreign mining projects have been suspended in Mendoza and Chubut

After spending some $1.8 billion so far on construction, Vale suspended works at its $6 billion potash project in Argentina indefinitely. Vale is selling assets and cancelling projects as the company is set to post the lowest annual profit in three years.

State news agency Télam reported that the provincial government of Mendoza ordered Vale to re-initiate construction works at the mine site immediately, or they may well consider the mining concession to be "abandoned". [24 Jan 2013 - http://www.telam.com.ar/notas/201301/5705-emplazan-a-la-minera-vale-a-continuar-con-la-explotacion-de-potasio-en-el-sur-de-la-provincia.html]

Los Andes reported that some 4,200 workers went on holiday on 21st December, expecting to return to work last week. But they were told that the construction is suspended. [http://www.losandes.com.ar/notas/2013/1/23/paralizan-obra-potasio-colorado-tiempo-indefinido-692668.asp]

The Potasio Rio Colorado has always been backed by the Kirchner administration. Cristina Fernandez declared the project "of public interest" in 2008 (when it was then owned by Rio Tinto). But tensions between Vale and the government started when Argentina’s president ordered energy and mining companies to repatriate all their export revenue. [October 26, 2011 - http://www.ft.com/intl/cms/s/0/8c3670c6-fff6-11e0-8441-00144feabdc0.html#axzz2IxBfTFCe]

Other sources say Vale has concerns about the project development after Argentina expropriated 51% control of YPF from Repsol in May 2012. Since 2010 Vale had a deal with Repsol for the development of shale gas as energy source for the potash mine until 2027. A stable and long term gas supply is critical to the project's viability.

On June 2011, Mendoza's government suspended the project claiming Vale has not complied with previous agreements to hire and buy supplies locally.

At the same time, Canada's Pan American Silver has shelved work on its Navidad silver mine project in Argentina's Chubut province due to the local legislature's failure to overturn an open pit mining ban enforced in 2003 (Law 5001).

Jornada newspaper reported that some 70 workers fired by Minera Argenta occupied the communal building in the small towns of Gastre and Gan Gan, to demand the government find a solution to their predicament. [http://www.diariojornada.com.ar/61520/Politica/70_despedidos_de_la_mineria_tomaron_dos_comunas_rurales_y_hay_tension]

The company announced the closing of their offices in Puerto Madryn and Trelew, keeping only a small crew for care and maintenance at the mine site. They also announced that no support will be given to Racing de Trelew, the local football team, for the next season. [http://www.diariojornada.com.ar/60228/Deportes/Regreso_en_el_B]

In June 2012, the governor Martín Buzzi proposed a draft bill that, while raising the tax burden on mining, could see this project proceed.

On November 2012, over two thousand demonstrators marched in Rawson, the capital of Chubut province, against the opening of the meseta region to large-scale mining. Similar protests followed in Esquel and Trelew. No bill has been passed yet, but the uncertainty proved too much for Pan American in this case.

Pan American currently operates the Manantial Espejo silver mine in Santa Cruz province and owns the Calcatreu project in Río Negro.

Previous articles on MAC:

2012 To mine or not to mine - the burning question for Chubut

2011 Mendoza province suspends $4.6 bln Vale project, Argentina

Vale halts $6 billion potash project in Argentina

Cecilia Jamasmie

Mining.com

24 January 2013

Brazil's Vale, the world's third-largest miner, has suspended works at its $6 billion potash project in Argentina indefinitely, as it is set to post the lowest annual profit in three years, reported local newspaper Los Andes (in Spanish).

The article says the company confirmed that the suspension affecting its Rio Colorado potash project in the Argentine province of Mendoza since December last year will be maintained for an "indefinite period".

The province's minister of infrastructure and energy, Rolando Baldasso told Bloomberg that Rio Colorado would resume operating eventually, but after the company deal with "financial issues that are triggering an operational restructuring."

The project faced its first main setback in June 2011, when local authorities suspended works over claims that Vale had failed to meet requirements to employ and acquire supplies locally.

Last November, the company was reportedly looking for partners and investors to move ahead with Rio Colorado, with no luck.

Vale's CEO Murilo Ferreira has been selling assets and cancelling projects worth as much as $1.2 billion since the beginning of the year, as the miner scuffles to adapt to the latest slowdown across the iron ore and oil sectors, its main markets.

The Rio de Janeiro-based company, which is the world's number one iron ore producer, was severely hit by the slump in the commodity prices in 2012. Iron ore traded last year as high as $150 a tonne and as low as $87.50 a tonne, making it one of the worst performers in the international commodities market.

Since iron ore prices fell to a three-year low in September last year, Vale has given up on its Simandou iron ore development in Guinea and dropped non-core assets already in production, such as its coal operations in Colombia.

In addition, the company is planning to sell its Brazilian oil and gasfields, worth roughly $1 billion.

Vale is also said to be selling its Canadian Kronau potash project, after putting the $3 billion project on hold last August.


Vale Argentine Potash Project Suspended Indefinitely

Juan Pablo Spinetto & Pablo Gonzalez

Bloomberg

23 January 2013

Vale SA, the world's third-largest mining company, suspended works at its $6 billion potash project in Argentina indefinitely.

A suspension at the Rio Colorado potash project in the Argentine province of Mendoza since last month will be maintained, the Rio de Janeiro-based company said in an e-mailed reply to questions.

Vale Chief Executive Officer Murilo Ferreira is selling assets and canceling projects as the company is set to post the lowest annual profit in three years. Photographer: Jin Lee/Bloomberg

Vale Chief Executive Officer Murilo Ferreira is selling assets and canceling projects as the company is set to post the lowest annual profit in three years. Vale is in talks with a potential partner for the Rio Colorado project, Roger Downey, head for fertilizers and coal, said on Dec. 12. Last month the company cut the 2013 budget for the project to $611 million from $1.08 billion last year.

"The project isn't canceled," Rolando Baldasso, Mendoza province's minister of infrastructure and energy, said in an e- mailed response to questions. "There are financial issues that are triggering an operational restructuring."

Vale declined 0.2 percent to close at 39.50 reais in Sao Paulo. The stock has dropped 3.4 percent this year.

Partners Sought

Los Andes newspaper reported earlier today that the project was suspended for an indefinite period and it won't be reopened until Vale gets a partner. Vale is currently holding talks with two multinational companies seeking to seal a partnership, the Mendoza City-based newspaper said, citing an unidentified company official.

Brazil's only potash producer, Vale said in October it has spent $1.8 billion on Rio Colorado and completed 41 percent of the project. The venture includes the developing of a mine in Mendoza, the renovation of 440 kilometers (273 miles) of railway trucks and the construction of a 350 kilometer-long railway spur to transport the potash to a terminal in the port of Bahia Blanca, in Buenos Aires' province, for its export.

With the capacity to produce 4.3 million metric tons of potash, the project would make Argentina the world's third- largest exporter of the crop nutrient, President Cristina Fernandez de Kirchner said in July after signing agreements with Vale to proceed with the project.



Vale could lose Argentina potash concession

The provincial government of Mendoza said Friday it ordered Vale to present a new timeline for the Rio Colorado project or the concession could be considered abandoned.

Reuters

28 January 2013

BUENOS AIRES (Reuters) - Brazilian miner Vale SA could lose its concession on the roughly $6 billion Rio Colorado potash project if it does not comply with an order to provide a new timeline within five working days, Argentina's Mendoza province said on Friday.

On Thursday, Vale, the world's second-largest mining company, said it extended vacation for workers at the Mendoza-based site, which began on Dec. 22, and did not have a date for work to resume.

In a statement on Friday, Mendoza's provincial government said it ordered Vale to present a new timeline for the project or the concession could be considered "abandoned."

Mendoza said it was taking this action to safeguard jobs on the project and protect the province's mineral resources.

Vale declined to comment, a press office spokeswoman in Brazil said.

The company said previously the project was not suspended but it had extended vacation time while it "analyzes variations in the project's economic fundamentals."

In early December, Vale cut estimated 2013 capital spending by 24 percent after a global slowdown and a drop in iron ore prices led the company to rethink expansion. Two months before, it said it planned to sell underperforming assets to control costs and boost profit.


Pan American Silver suspends Argentina project

Shane Romig

http://www.marketwatch.com

21 December 2012

BUENOS AIRES--Pan American Silver Corp. (PAAS, PAA.T) has shelved work on its Navidad silver mine project in Argentina's Chubut province due to the local legislature's failure to pass a regulatory plan for mines and a proposed bill that could sharply raise taxes on the industry.

"We've suspended new investment in Navidad until we have legislation in Chubut that will allow us to develop the project," Pan American Silver Argentina's business director, Ricardo Zarandon, said.

Chubut provincial Gov. Martin Buzzi has sponsored legislation that would slap a new 5% net smelter-return royalty on top of the current 3% royalty. The bill would also require the provincial government-owned resource company, Petrominera, receive no less than 4% of total mineral sales.

In July, Pan American warned it would suspend further investment in Navidad if the legislation becomes law.

High inflation and "the increased provincial participation will render the Navidad project uneconomic at any reasonable estimate of long-term silver prices," Pan American said in a statement at the time.

No bill has been passed yet, but the uncertainty proved too much for Pan American to move forward with Navidad.

According to the company's website, Pan American spent $45 million in 2011 and $37.5 million in 2010 on developing Navidad.

Pan American currently operates the Manantial Espejo silver mine in Argentina's Santa Cruz province, where the governor is also seeking to tap the mining industry to plug a wide budget gap.

Earlier this year, Santa Cruz Gov. Daniel Peralta proposed legislation that would see provincial mining company Fomicruz take a 10% equity stake in current and future mines without compensation, and increase royalties to 8% of the value of mineral output.

While it isn't clear if the bill will be passed, the cash-strapped province's repeated attempts to secure more tax revenue out of the mining industry threaten a decade-long investment boom that has made Santa Cruz home to the bulk of Argentina's gold mines.

Other Companies with Santa Cruz operations include AngloGold Ashanti Ltd., McEwen Mining Inc., Hochschild Mining PLC , Mirasol Resources Ltd. and Minera IRL Ltd.


Local government of Chubut refuses to approve legal framework for large mining projects

BrightWire News

22 December 2012

Minera Argenta, a subsidiary of Pan American Silver, has announced it will not carry out the silver and lead project "Navidad", located between the communities of Gan Gan and Gastre in Chubut, Argentina.

The company will close its offices in the cities of Puerto Madryn and Trelew, and other companies will do the same, after the Chubut government rejected a draft bill permitting large-scale mining projects.

The government's decision was influenced by strong opposition from Chubut residents.

The "Navidad" project was expected to exploit 632 million ounces of silver and around 3 billion pounds of lead, making it one of the largest undeveloped silver deposits in the world.

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