Meet the director of Mongolian office of The Nature Conservancy to hear about their work to solve the many environmental challenges faced by Mongolian, especially their urgent needs for coal as fuel and mining for jobs and revenue.
Minegolia?by Brenda Dominici Johnson
Mongolia’s mining industry and associated issues and implications are complex. There are over 40 non-Mongolian mining companies active in Mongolia. Following is a brief summary highlighting the two largest and most contentious mining projects in Mongolia and some of the major effects and concerns associated with them. The information is based on a multitude of articles, and publications.
Mongolia’s mineral wealth is estimated at 1.3 trillion dollars. However, the Mongolian government has struggled to develop its largest mining projects at Tavan Tolgoi and Oyu Tolglo due to political wrangling, changes in legislation and policy, and conflicts between local and national interests. The money generated by mining is expected to triple the national economy by 2020 and raise the living standards of Mongolia’s 2.9M population. But, there are concerns about whether profits will benefit the poor majority or go to the wealthy minority with political and financial influence. Furthermore, mining accounts for about 30% of the country’s GDP and over 80% of its exports. Countries that have sudden access to wealth because of a resource discovery can become victims of the “resource curse” which can ultimately lead to greater economic disparity and lower level of development. Additionally, there are other serious environmental and social issues that need to be addressed.
The Oyu Tolgoi (OT) copper and gold mine is a combined open pit and underground mining project located in the South Gobi region of Mongolia, approximately 550 km south of the capital, Ulaanbaatar, and 80 km north of the Mongolia-China border. The site was discovered in 2001.
In 2009, a long-term, comprehensive investment agreement was signed for the construction and operation of the Oyu Tolgoi complex. The agreement created a partnership between the Mongolian Government, which acquired a 34% interest in the project and Canadian Turquoise Hill Resources (a majority owned subsidiary of UK transnational Rio Tinto), which retained a controlling 66% interest in Oyu Tolgoi. Global miner Rio Tinto, which joined Turquoise Hill Resources as a strategic partner is managing the development of the complex. The Oyu Tolgoi mining project is the largest financial undertaking in Mongolia’s history. It is estimated that when this mine is fully operational, in 2020, it will produce 450,000 tons of copper and 330,000 ounces of gold a year. Oyu Tolgoi has been producing and exporting copper and gold concentrate since 2013. However, there is some concern that Mongolia will not receive royalties in the near term as development costs have increased, reaching over 10 billion by 2013 versus the original 4.6 bn projected. Deal terms stipulate that Ulaan Baatar does not share in the profits until Rio Tinto has recovered their investment.
Tavan Tolgoi (TT) (Five Hills) located in the Ömnögovi Province in the Gobi of southern Mongolia is one of the world’s largest untapped coking and thermal coal deposits. It has a total estimated resource of 6.4 billion tons, one quarter of which is high quality coking coal. The mine is divided into six sections: Tsankhi, Ukhaa Khudag, Bor tolgoi, Borteeg and southwest and eastern coalfields. Tavan Tolgoi is owned by Erdenes MGL (a government owned company) except for the Ukhaa Khudag section which is mined by the Mongolian Mining Corporation ( Hong Kong).
Tavan Tolgoi was initially discovered in 1945 and after Mongolia’s democratic transition in 1990/91, the government allowed foreign companies to explore the deposit. Since then the project has been off and on. The company initially winning the exploration rights subsequently gave them up due to financial concerns. In 2011 Mongolia’s National Security Council rejected a deal struck with U.S. giant Peabody Energy, China’s Shenhua and a Russian-Mongolian consortium, just two months after they were announced as winners. The latest impasse occurred within the last year when the parliament cancelled a deal with a consortium of foreign firms including Shenhua Energy (China) and Sumitomo Corp. (Japan). At the time losing bidders from Brazil, India and South Korea raised serious concerns and Japan went so far as to call the bidding process “extremely regrettable” (Bloomberg). The project cannot be moved forward without foreign capital. Tavan Tolgoi is located in an area without, roads, and railway needed to deliver the coal to its market and also lacks the power and water supplies it needs to support the operations.
The Mining projects are estimated to have already generated more than 13,000 jobs (87% of which are held by Mongolians) and may have the potential to boost the national economy by a third. However, there is significant debate over how the profits should be shared. The “resource curse” is a real threat. Building an economy on minerals, commodities that fluctuate in price, can cause market and macroeconomic volatility. A crash in commodity price can threaten solvency. The money generated by the mineral wealth can also drive up the value of a currency making imports cheap but making it difficult for exports, hurting alternate existing industries such as cashmere, and inhibiting diversification of the economy.
One of the social implications of the dramatic mining expansion is the perception by the population that the wealthy and those in power will exploit the resources and withhold benefits from the poor and that corruption between and among government officials will divert money and influence decision making. For example, one such allegation asserts that “members of around two dozen influential families with ties to both ruling Mongolian Democratic Party and opposition Mongolian People’s Party stand to benefit the most from the deal through their ownership of shares in the Hong Kong-listed Mongolian Mining Corp.” (Associated Press)
Initially, under the Human and Development fund, a specific amount of outright cash was distributed to the people of Mongolia. But, that has since been eliminated and the Government says it will turn to providing health coverage, housing and free education. Another social outcome has been the growth of an illegal mining sector. The workers, known as “Ninjas” illegally dig for mineral treasure in private unauthorized areas, often in freezing temperatures. They are driven by the lack of other opportunity. It is estimated that there are up to 3oo,oo “Ninjas” currently in operation. The situation is akin to a “Wild West” kind of environment where ad hoc towns with shops serve provide a market for the Ninjas found treasures.
Many believe that in its enthusiasm for the mining expansion the government authorities are not paying sufficient attention to environmental issues and the monitoring of natural resources. Rio Tinto has a bad record of environmental management and a number of its mines, including Oyu Tolgoi, are routinely criticized by prominent international environmental groups.
Oyu Tolgoi mine is located in one of the driest areas in Mongolia. It is estimated that the water demand will triple in the coming two decades driven principally by mineral exploitation in the area. Herders believe that Oyu Tolgoi is draining the region’s water supply, since it uses more than a billion gallons of water a month. There is also substantial risk of acid rock drainage from waste rock stored on the surface and not deposited back into the mine. The areas of mining activity occupy territory traditionally used by nomadic herdsmen. Diverting already scarce water resources to mining could jeopardize their livelihoods. In the harsh conditions of the Gobi desert, herders have a very specific way of organizing summer pasture and its rotation, access to water, hay collection and hay storage. Obstacles that result in changes to open lands will negatively affect the livelihood of nomads. Herders complain that steel fencing around OT have blocked traditional herding corridors and access to natural drinking pools. In addition, dirt roads create excess dust and barriers to the animals. The TT deposit is rich in coking coal, needed for the production of steel. China is the world’s largest producer of steel and only a short distance away across the border. There is a nearly endless stream of trucks on their way to China creating more dust and barriers. As both projects expand there will be further encroachment on pasture lands for building of houses, airstrips, an airport and power plants needed to support mining activities and its workers.
Some Mongolian herders forced to resettle because of the Oyu Tolgoi expansion have experienced herd loss. In their view, they were forced to move to inferior locations without adequate time to select spots that would protect their animals from harsh winter storms. The minimal assistance provided at the time of resettlement was not sufficient. Furthermore, they believe they were forced to accept inadequate compensation based on their location in proximity to the mine, rather than the size of pasture taken away from them.
For centuries, Mongolia’s natural wealth has supported nomadic cultures—and they, in turn, have sustained the region’s animals and resources. That relationship has been a fundamental tenet of Mongolian life, even into the 21st century .But now, that way of life is in danger. Mongolia’s rich oil and mineral deposits are rapidly attracting the interest of developers. Resource extraction could benefit the country’s burgeoning economy, but it could also irreparably harm Mongolia’s irreplaceable habitats, from the Eastern Steppe’s grasslands to the Gobi Desert’s arid lands. The country’s need to develop and build infrastructure makes it urgent to protect Mongolia’s pristine habitats. (Nature Conservancy Mongolia). The conservancy asserts that roughly 16 percent of Mongolia’s 600,000 square miles have been leased to development interests for exploration. (Another 26 percent of that land is available for lease). This could leave the landscape fragmented and sever vital passageways for animal migration. It could also monopolize freshwater sources on which people and wildlife alike depend. The Nature Conservancy is one of the lead organizations working to address these issues. The organization employs its “Development by design approach” which uses science and planning methods, and works together with the Mongolian government, industry and local communities to create a blueprint for sustainable development.
South Gobi is a critical habitat for at least six endangered and threatened species found nowhere else in the world. Two protected areas are located in close proximity to Oyu Tolgoi and are included in the mine’s area of impact. Rio Tinto maintains that it in order to compensate for the loss of habitat a biodiversity offset strategy has been released. However, environmental groups and NGOs are not convinced. They are stressing that the company did not consider avoiding, minimizing or mitigating the damage and went directly to offsetting. They urge the company to develop a strong, detailed, long-term species conservation and habitat protection plan, including a rigorous monitoring strategy. They are of the opinion that the current mitigation strategies described are too general and are not based on empirical data and therefore is called into question.
One of the greatest threats to nomadic wildlife is the existing and planned roadways and railway needed to transport coal to China and Russia. While today most of the coal is exported to China, there are plans to build a 1,500 km rail link to Russia, from where coal can be sent to Far East Ports via the Trans-Siberian railway. This will give Mongolia access to Japan, Korea and Taiwan. Nomadic wildlife is distinct from migratory wildlife. Mongolian Ungulates move unpredictably without predictable summer or winter locations due to the unpredictable and harsh climate which drives changes in vegetation, forage and water sources. As a result, these species require vast expanses of land in order to survive. Although there are many species that will be impacted, the four ungulates most affected are the Mongolian gazelle, Goitered gazelle Khulan and Saiga antelope. These species and their habitats will see a huge transformation as a result of railway expansion.
One of the main issues is that the current standards require barbed wire fencing along both sides of the railway line, while neglecting to require the construction of wildlife passages such as underpasses and overpasses. Currently, thousands of animals die each year attempting to cross the rails. The map of the planned railway expansion would divide the country into at least 10 segments. Without a change in standards, the damage to ungulates will be far reaching. The existing Ulaanbaatar Railway alone has restricted the range of Khulan to the western part of Mongolia and has decimated the small population that had remained in Eastern Mongolia. The standards that would need changes are MNS 6060: 2010 Requirements on Railway Strip Land and MNS 6229: 2010 General Technical Requirements to include sections on the right of wildlife to cross railway barriers, among others. (Wildlife Conservation Society Mongolia).
The WCS provides technical assistance and support to “Implementing wildlife-friendly measures in infrastructure planning and design in Mongolia.” Since 2013 it has been instrumental in the creation of national and international workshops: “Mitigating the impact of linear infrastructure on the movement of wildlife and “Road and railway crossings in Mongolia.” The first workshop culminated in the creation of the Joint Ministerial Working Group to address this issue within the legal framework, and to oversee other supporting activities. In the second workshop, the joint efforts of WCS, the Ministry of Road and Infrastructure (MRT), the Ministry of Environment and Green Development (MEGD), WWF, and the Institute of Biology was able to congregate a meeting consisting of railway companies, environmental impact assessment companies, government agencies, and civil society. The government agencies and the railway companies came to a common understanding that the movement of wildlife in Mongolia needs to be accommodated if we want to maintain healthy populations of the affected species. Thus, the infrastructure companies promised their willingness to cooperate on these issues while the ministries and other concerned organizations showed that they were committed to carrying out the necessary work to make uninhibited movement a real possibility. The new standard still needs to be ratified, and the fence removal project still needs to be implemented, but tangible progress has taken place to ensure that Mongolia’s infrastructure does not stop our wildlife from thriving. (Wildlife Conservation Society). I was unable to discern if, in facts laws have been ratified subsequently.
What does the future hold? At the end of June, 2016 elections were held in Mongolia and the Mongolian People’s Party (MPP) won an 85 percent majority in parliamentary elections sweeping them back to power and ending four years of rule by the Democratic Party’s (DP). Next year the nation will hold presidential elections. The MPP has pledged to introduce investor and miner friendly policies. Moreover, the MPP’s parliamentary majority means they will be in a position to govern without the need to form a coalition government, thereby avoiding political compromise. In fact, almost all anti-mining populists were ousted from parliament. Proponents of mining and investment purportedly anticipate a healthier business environment. It remains to be seen if it will be an environment that also values the preservation and protection of the millennium old nomadic-herding way of life, protects Mongolia’s abundant and rare wildlife, and supports the economic improvement of those in poverty.