The Pesos 25.5bn ($US 5bn) Río Colorado mine was expected to generate an output of 2.4 million tonnes in its first phase, with production ramping up to 4.3 million tonnes in the second phase of the project.

Vale said in a statement that it has decided to halt the project because of the current unfavorable economic climate.

Potasio Río Colorado, the Vale subsidiary developing the mine, awarded a contract at the end of 2011 to build the rail link to the mine site near the town of Zapala, and construction was due to be completed by the first quarter of 2014. Ferrosur Roca was also awarded the concession to operate trains from the mine to the port of Bahia Blanca near Buenos Aires.