Argentina suspends $4.6 bln Vale potassium project

BRASILIA, June 18 Sat Jun 18, 2011 2:58pm EDT

BRASILIA, June 18 (Reuters) - The Argentine province of Mendoza has suspended a $4.6 billion potassium project of Brazilian mining giant Vale (VALE.N)(VALE5.SA), saying it has not complied with local regulations.

The project could convert Argentina into one of the world's top 5 potassium producers.

The government of Mendoza, a province in the far west of Argentina, said in a statement posted on its website on Friday that Vale did not comply with a local labor law and failed to provide sufficient information on its investment plan.

"As government, we need a series of data to be able to act as watchdog and ensure the compliance of agreed requirements, such as purchases and hiring of local workers," the Mendoza government said in its statement.

"If the miner arrives in Mendoza without understanding this concept, it shouldn't carry out this type of project," the statement said.

The suspension would be lifted as soon as Vale complied with the requirements, the Mendoza government said.

Vale was not available to comment on Saturday but in a statement on Friday denied any irregularities and said it would provide any additional information required.

The Rio Colorado project, which is scheduled to start operations in the second half of 2013, has an initial production capacity of 2.4 million tonnes of potassium per year and a total cost of around $4.6 billion. (Reporting by Hugo Bachega; Writing by Raymond Colitt; Editing by Bill Trott)

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