MAC: Mines and Communities

Argentina: Mendoza Government okays potash mine, ignores objections

Published by MAC on 2009-09-14
Source: Provincial Environmental Council

Just a couple of months after being declared a project of "national interest" by Argentinian president Cristina Fernandez, Rio Tinto's Rio Colorado potash project was sold to Vale in January this year.

Now, the government of Mendoza province has granted an environmental permit for the project, ignoring serious objections made by the Provincial Environmental Council.


Press Release on Potasio Rio Colorado EIS

20 August 2009

Mendoza - The undersigned communicate to the citizens of Mendoza and Argentina their concern about the authorization for Brazilian Company Vale's mining project Potasio Rio Colorado, following approval of the Environmental Impact Statement (EIS), granted by the provincial authorities on August 14.

In 2008, in accordance with Decree 820-06, the Secretary of the Environment called on the Provincial Environmental Council (assessment organ of the executive branch, following provincial law 5,961) to participate in the project's Environmental Impact Evaluation, an invitation that the prior administration had omitted sending. On December 22, 2008, the Provincial Environmental Council emitted its Sectorial Report, concluding that:

"The Potasio Rio Colorado project implies a rapid extraction of non-renewable potassium resources and a significant contribution to the depletion of Argentine natural gas to meet an external demand without considering long-term internal needs, in conditions that permit Mendoza to capture only a very small part of the the value generated.

"Even in its improved version after the proposal [of relocation], the resulting salt deposit will constitute an enormous passive risk, virtually in perpetuity. The analysis of other viable alternatives for the salt residue have not been sufficiently analysed nor have they been submitted to the evaluation of entities of the Center for Environmental Studies and investigations.

"As such, the report for this project, Potasio Rio Colorado, is negative."

The Provincial Environmental Council recognizes that, with the relocation of the residual salt pile (120 million tons), the risk of contaminating the Colorado river is reduced, but not eliminated, and the Environmental Impact Statement includes some of the Council's recommendations.

Furthermore, executing the Potasio Rio Colorado project will require 1 million cubic meters of natural gas per day, equal to the combined residential, commercial, and government use for the entire province of Mendoza, or one third of the natural gas imported from Bolivia. The proven natural gas reserves in the country will only last eight more years. In the short and long term the scarcity and importation of natural gas, and energy prices for Argentines, will continue to increase. The strong contribution of the Potasio Rio Colorado project to the depletion of our natural gas will accentuate this trend, harmful to Argentine homes, productive activities, and sustainable development.

If we add the amount of energy required, the total consumption of the Potasio Rio Colorado project is equivalent to the electricity generated by the four Nihuiles plants plus Los Reyunos, or to 83% of the generation of Atucha I, or to the metered electricity of the entire province of Tucuman. The Potasio Rio Colorado project will employ 386 people in Mendoza, but with the same energy use that the mine will require, Mendoza's industry today creates jobs for 16,100 workers. The government has not expressed its motives for ignoring these objections from the Provincial Environmental Council.

Much has been said about the 40 million dollars this project could contribute annually to the treasury of Mendoza, but this amount represents less than 4% of the more than 1 billion dollars per year that the mine will generate for its owners. For these reasons, we express our firm rejection of the project, and we exhort the National Energy Secretary to not grant the natural gas and electricity permits required for the Potasio Rio Colorado project.

Please distribute widely.


Argentina Province OKs Vale's Potash Mine Environmental Plan

Dow Jones

18 August 2009

BUENOS AIRES--Argentina's Mendoza province has approved Vale S.A.'s plans to develop the massive Rio Colorado potash mine, a spokesman for the Mendoza Environment Secretariat said Tuesday. The approval of the environmental impact statement was granted on Friday, allowing the Brazilian mining giant to move to the construction phase.

Vale bought the Rio Colorado project, in addition to the Regina exploration potash assets in Canada, from debt-strapped Rio Tinto PLC at the end of January for $850 million.

Rio Tinto's plans called for a $900 million investment to develop the Argentine mine, which it expected to have online by 2013.

Rio Colorado would make Argentina the largest potash exporter in Latin America and the fifth-largest exporter of the fertilizer in the world, according to the Mining Ministry. Most exports are expected to go to Brazil to meet the demand of expanding soybean cultivation in potash-poor soil in the south.

Once built, the Rio Colorado mine is expected to produce 2.4 million metric tons of potash per year within three to five years of coming on line. The mine has estimated reserves of 100 million tons of potash, with a productive life of at least 50 years.

Rio Colorado received approval for its water-use proposal from the Mendoza province legislature earlier this year and has obtained other key permits. However, a number of additional permits and agreements are needed to construct the mining and refining operation, as well as necessary rail, port and power infrastructure.

In addition, the mine is seeking assurances over tax stability and a reliable power source.

Potasio Rio Colorado would pay export taxes of 5%, the current defined default rate.

In addition, mines in Argentina pay a royalty of 3% on gross output, with tax credits given for development costs. The tax structure was implemented in 1993 under a national mining law that also guaranteed tax stability for 30 years.

However, recent changes to that tax stability have spooked a number of companies and caused them to hold off until they obtain assurances from the government that the rules won't be changed down the road.

Last year, customs agents began demanding new 5%-10% export taxes on shipments from Rio Tinto's Borax Argentina SA, Procesadora de Boratos Argentinos SA, Minera del Altiplano FMC and Xstrata PLC's Minera Alumbrera Ltd. The companies sued, and Xstrata received a lower-court judgment invalidating the tax. The federal government has appealed the verdict.

Another hurdle Vale faces is ensuring that its high power needs will be met.

The mine will require more than one million cubic meters of natural gas per day and 60 to 65 megawatts of online electricity, Rio Colorado project director Kevin Fox said recently.

Argentina has faced chronic natural gas shortages since early 2004, leading government planners to restrict shipments to industrial users and switch power generators over to more costly fuel oil. "That is, right now, probably our greatest uncertainty ... whether we'll be able to obtain long-term agreements for long-term energy supply for the project," Fox said.

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