In Mongolian gold mine, a vein of hostility
“Where do you draw the line between terrorism and the right to protect my land? This is not terrorism. This is my right to protect my home and my land.” SUKHGEREL DURGENSON OF THE ENVIRONMENTAL GROUP OYU TOLGOI WATCH
ULAN BATOR, MONGOLIA— Odgerel Tsagaan, a clerk at a cashmere shop in Mongolia’s frigid, bustling capital, received a text message on her cellphone in late January from the recently installed prime minister, asking her advice on the country’s economic woes.
It wasn’t a prank: After notching the world’s fastest GDP growth in 2011 — 17.5 per cent — the economy in this resource-rich but sparsely populated nation has slowed sharply, expanding 6.9 per cent last year. With slumping global commodity prices, a weakened currency and plunging foreign investment — down 70 per cent from 2013 to 2014 — the government has been at a loss to reverse the slide.
So Prime Minister Saikhanbileg Chimed took a page from TV talent shows and offered Odgerel and the nation’s 3.3 million other cellphone subscribers two options: Push ahead with more foreign investment in the mining sector, or pursue an austerity program, slashing public spending.
“The question was so general, I didn’t know how to respond,” said Odgerel, 28. “Both seemed like bad choices. I don’t think either will help ordinary people much and prices just keep going up.” Canadian connection Odgerel wasn’t the only one flummoxed; only about 10 per cent of those polled answered the unscientific, non-binding, four-day poll.
According to the government, 56 per cent of respondents said they favoured additional foreign investment. That was enough for the prime minister to claim a mandate and propose an amendment to the country’s minerals law to try to jump-start stalled projects.
Chief among them is part two of the giant Oyu Tolgoi gold and copper mine in the Gobi Desert, which is being developed with Vancouver-based Turquoise Hill Resources, a subsidiary of the Anglo-Australian company Rio Tinto. Turquoise Hill Resources owns 66 per cent of the mine, with the Mongolian government holding the remainder.
The amendment would let the state swap its ownership stakes in strategic deposits like the one at Oyu Tolgoi in return for royalty payments down the road from mine developers. Otherwise, as part owner, Mongolia would have to pony up a substantial portion of the $5-billion construction cost for Phase 2 at Oyu Tolgoi. Mongolia and Rio Tinto have been at loggerheads over how to pay for the expansion.
The stakes are high: Oyu Tolgoi’s open-pit mining phase is already operating, but the underground sec- ond part is where an estimated 80 per cent of the deposit’s total estimated value lies. The International Monetary Fund has calculated that Oyu Tolgoi could account for as much as one-third of Mongolia’s gross domestic product in 2021if it reaches full production by then. Environmental objections But as a small nation sandwiched between China and Russia — one that threw off communism for democracy in 1990 — Mongolia has many citizens who remain wary of ceding ownership stakes to foreign players.
Adding to the anxiety is nagging environmental concern about Oyu Tolgoi and other projects, and complaints that nomadic herders and others affected by the mines haven’t been adequately compensated.
Sukhgerel Durgenson of the environmental group Oyu Tolgoi Watch called the prime minister’s text-message tactic “totally unethical and undemocratic,” and charged that his moves to cut spending in December frightened the public into voting against austerity.
“I wanted to give a third opinion, but there was no option for that,” she said. “I want to know, how do you want to move forward with mining? How are you going to resolve the outstanding issues?”
On top of efforts to push Oyu Tolgoi’s expansion, Sukhgerel said she was concerned about the government’s recent announcement that it plans to resume granting mining exploration licences for tens of thousands of square kilometres, after cancelling 106 such permits in 2013 amid concern about corruption. “We don’t know what chaos that will create; there is no capacity to monitor it.”
Suggesting, a bit ominously, that the battle could escalate beyond the parliament, she said, “There are groups that believe instead of just showing arms, they should have used them . . . Where do you draw the line between terrorism and the right to protect my land? This is not terrorism. This is my right to protect my home and my land.
“I’m not the type that likes to support the groups that like to use force, but if they decide to push ahead with (the amendment), I wouldn’t mind joining them. And I wouldn’t mind bringing the local communities to join them.” ‘Trial and error’ Julian Dierkes, a sociologist at the University of British Columbia who follows Mongolian politics and mining closely, said there is no strong, coherent movement for “resource nationalism” in Mongolia, though some of the government’s sharp and sudden changes to mining regulations over the last decade have come in response to concern about state-owned Chinese companies entering the country.
Overall, he said, Mongolia simply lacks experience with megaprojects and suffers from an information gap vis-a-vis multinational mining companies, leading to policy swings. “Some of this is just trial and error” on the part of Mongolian policy-makers, he said.
Saikhanbileg announced earlier this month on local television that his cabinet had decided to proceed with the second phase at Oyu Tolgoi after two years of often bitter negotiations.
Saikhanbileg said Mongolia and Rio Tinto had reached agreement “in principle” and that an official announcement would come soon after final details were worked out.
However, there was no immediate confirmation from Rio Tinto.
Dierkes points out that with copper prices depressed, it’s unlikely the company will be in a rush to expand the mine: “I don’t think they want to spend $5 billion right away.”
But with elections coming up in 2016, Saikhanbileg has only a year and a half to show results. So the clock is ticking on getting some big project underway, whether it’s at Oyu Tolgoi, the giant Tavan Tolgoi coal deposit or another mine.