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ECONOMY | 14-06-2022 14:45

Investors circle idled Río Colorado mine as war reshapes fertiliser trade

Potential investors are hovering over a giant potash project in Mendoza Province at a time when Russia's invasion of Ukraine is reshaping the global fertiliser trade.

Potential investors are hovering over a giant potash project in Argentina's Mendoza Province at a time when Russia's invasion of Ukraine is reshaping the global fertiliser trade.

Companies from Europe, China and the Americas have expressed interest in the Río Colorado project, while provincial authorities are expected to call for formal bids later this year and award the contract in early 2023, said Emilio Guinazu, chief executive officer of PRC SA, which owns the asset.

Concerns over Black Sea fertiliser shipments have exacerbated persistent pandemic-related disruptions, driving further price increases and threatening crop yields. While investments are long-term decisions, the current situation has increased the project's relevance.

"There is a readjustment in the global fertiliser trade and people are looking for new sources," Guinazu said Monday in an interview on the sidelines of a mining conference in Toronto. "There is opportunity."

Mendoza Province, better known for its Malbec wine exports than its vast mineral wealth, seized Río Colorado after years of disputes with Vale SA. The Brazilian company pulled out in 2013 after spending US$2.2 billion to build nearly half of the mine.

Attracting investment to Río Colorado 16 years after the Rio Tinto Group first tried to develop it would be a big win in a country where onerous business rules, including capital controls, have scared off investors in the past, yet has recently seen significant spending on Argentine lithium deposits.

Río Colorado has the potential to produce 4.5 million metric tons a year, but that scale would require rail investment to get the potash to an Atlantic port and then export it to markets such as Brazil.

Interest from potential investors ranges from a 200,000 tonne project to a 1.5 million tonne project, with investments estimated at approximately US$1,000 per tonne. Mendoza is seeking to find an investor to take a majority stake and operate the mine.

Interested parties include mining firms with current fertiliser operations, miners looking to enter the fertiliser business and non-miners with a presence in Argentina, he said.

Guinazu and key provincial officials will meet this week in Toronto as part of the Prospectors and Developers Association of Canada conference. UBS Group AG is advising the provincial government in Mendoza on the Río Colorado process.

"The market is hot and we're watching it," he said.

by James Attwood & Jonathan Gilbert, Bloomberg

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