MAC: Mines and Communities

World Bank poised to back Rio Tinto's flawed Mongolian mining project

Published by MAC on 2012-10-02
Source: Bank Information Center, London Mining Network, New York Times,

Critics claim that only a partial, inadequate and "flawed" social and environmental impact asessment has so far been performed on what, one day, might be the largest  copper-gold mine on the planet.

Despite this, the World Bank is reported to be seriously considering a US$2 billion lending and political insurance package to Rio Tinto in order to advance the project.

For earlier article, see:


World Bank and Others Poised to Invest in Rio Tinto's Flawed Mongolian Mining Project

Joint press release

24 September 2012

Ulaanbaatar, Mongolia - The World Bank Board of Directors has announced plans to consider a copper and gold mining project in the Mongolian South Gobi desert even though the Bank itself acknowledges that there is not enough water in the region to support the life of the Project.

Despite ongoing community opposition to Rio Tinto's Oyu Tolgoi mine and its associated facilities ("OT Project"), the World Bank is considering a financing package of US$900 million in loans and up to US$1 billion in political risk insurance for the OT Project in early November.

The OT Project has faced fierce community resistance in Mongolia for years.

The company's recently released Environmental and Social Impact Assessment ("ESIA") does little to alleviate concerns that the Project will destroy the fragile South Gobi ecosystem, as well as the traditional way of life for the nomadic herders who have lived in the region for centuries.

Richard Harkinson of the London Mining Network calls the ESIA "an elaborate and costly hoax, designed to avoid addressing the most controversial aspects of the OT Project."

As he explains, "the assessment only covers the construction phase of the Project, which is already over 94% completed. Rio Tinto, the Project manager, has not disclosed any plans for how it will manage the severe environmental impacts of the OT Project's operations, which will begin in a few months."

According to Jelson Garcia of the Bank Information Center, "The Bank should not even consider investing in the OT Project until an ESIA covering key stages of the Project, including operations and decommissioning or closure of the mine, has been disclosed and accepted.

"To approve the Project now, on the basis of an ESIA covering only the construction of the OT mine, would violate Bank policies and risk damaging its reputation."

Other investors currently considering the estimated US$13.2 billion Project, despite the woefully deficient ESIA, include the European Bank for Reconstruction and Development, the U.S. Export Import Bank, Export Development Canada, the Australian Export Finance and Insurance Corporation, Standard Chartered and BNP Paribas.

The lack of information in the ESIA about the true impacts of the OT Project is exacerbated by Rio Tinto's inadequate consultations with the most directly affected nomadic herders.

"Rio Tinto has not organized meaningful, participatory, and culturally appropriate public consultations with the affected herders," explains Sukhgerel Dugersuren, Executive Director of OT Watch, an organization working with affected herders.

"Although Rio Tinto organized one meeting on the ESIA in Khanbogd, it was deeply flawed and inaccessible. Notice was given only 2 days before the meeting, making it impossible for many affected herders to attend, given that they live between 20 and 60 kilometers from Khanbogd.

"Additionally, only 2 copies of the Mongolian translation of the ESIA were provided during the meeting, thus those attending were not able to review the document before the meeting. Instead of organizing further meetings, Rio Tinto intends to speak with affected herders individually. This tactic of talking to herders one-on-one tends to intimidate them, making it unlikely that they will raise their concerns about the Project."

Several herders have already experienced devastating herd loss and other impacts after being forced to resettle because of the OT Project. They have found Rio Tinto largely unresponsive to their concerns.

The long-delayed release of the ESIA, and the rapidly approaching date for the World Bank Board of Directors' consideration of the Project, gives concerned community members and the organizations assisting them little time to meaningfully comment on the details of the 2,000-page assessment.

Additionally, despite the voluminous nature of the document, it does not comprehensively address the destruction of pastureland, the diversion of the Undai River, the impacts of the mine's associated facilities, including the company's the company nearby international airport, being built on the herders' reserve pasture, and the 450 megawatt coal-fired power plant that will be built to provide power to the Project, or the cumulative and aggregate impacts of all projects in the region.

For more information, please contact:

Sukhgerel Dugersuren, Executive Director, OT Watch, +976 99 185 828
Jelson Garcia, Bank Information Center, +1 202 624 0622
Sarah McNeal, Bank Information Center, +1 202 624 0622
Richard Harkinson, London Mining Network, +44 7563 238179
Vladlena Martsynkevych, CEE Bankwatch Network, +380 44 353 78 42
Regine Richter, Urgewald, +49 3028482270
Sarah Singh, Accountability Counsel, +1 415 296 6761

Though Not Yet Open, a Huge Mine Is Transforming Mongolia's Landscape

By Kit Gillet

New York Times

13 September 2012

KHANBOGD, Mongolia - In the dry expanses of southern Mongolia, a handful of large blue buildings are clustered together, ringed only by a thin metal fence. A single plane sits on an airstrip, while power lines stretch off into the distance. They, along with the scattered flocks of sheep and goats, are almost the only things dotting the vast landscape.

"In the old days, all of the grasslands and valleys had herders and their animals," said Baanchig Oodoi, 61, who was raised in a herding family and has lived all her life in and around the town of Khanbogd.

"In recent years, herder numbers have gotten smaller," she said. "Many herders have moved to the town to work for the mining company."

Even before its scheduled opening next month, the work on the huge Oyu Tolgoi mine project already accounts for roughly 30 percent of Mongolia's annual economic output.

The sheer scale of the mineral wealth to be found here - an estimated 41 million pounds of copper and 21 million ounces of gold - on the dusty edges of the Gobi Desert has long attracted mining executives from around the world. Now, after a decade-long effort, Canada's Turquoise Hill Resources, in a joint venture with the Mongolian government, is about to start pulling the mine's riches from the ground.

"This single mining project is one of the main reasons for the amazing economic growth in the country," said Dale Choi, an analyst at Origo Partners, a private equity company that advises investors on China and Mongolia.

Mongolia's gross domestic product grew 17.3 percent last year, and a further 16.7 percent in the first quarter of this year, the latest payoff from the roughly $6 billion spent on developing the isolated site close to the Mongolian-Chinese border over the past few years.

"In terms of the basic infrastructure, there were no decent roads, no electricity, no water, no air transport coming in, and the work force we needed was nowhere near the mine," said Cameron McRae, chief executive of Oyu Tolgoi, at his office in the capital, Ulan Bator, which is about 375 miles from the mine. "Basically we have had to provide everything from scratch."

The economic impact of Oyu Tolgoi is visible on the streets of Khanbogd, the town nearest to the site. The population of Khanbogd, a frontierlike outpost where most residents still live in traditional nomadic tents, has grown from just 2,000 a decade ago to over 7,000 today, not including the 10,000 workers housed at the mine itself.

The dusty roads are now crisscrossed with cars and vans, as well as the shuttle buses filled with workers traveling from their nearby camp to the mine and back.

Electricity is now available to households for set periods throughout the day, and the mine has promised residents 24-hour electricity soon. Still, life is harsh for many here, with no running water and only five doctors working at the town's small, one-story hospital, the same number as before the influx of people.

"We are looking at the moment at how we can help develop Khanbogd town so it is something better than it currently is, and somewhere where it is attractive for our employees to live," Mr. McRae said.

The development is inexorably altering the area, for good and ill.

"The high level of respiratory illness in the southern Gobi is due to the influence of the mining companies, as well as to the influx of people into the region and the subsequent increase in building projects," said Narantsetseg Logii, a doctor at the Health Sciences University of Mongolia.

In fact, the mine is altering the entire country. Once it reaches full production, which is expected to be in 2018, the operation will be among the top three copper-gold mines in the world and is expected to account for more than a third of Mongolia's economic output.

"It will be a huge source of employment," Mr. Choi said, "and will help to improve the living standards of the whole country."

Some residents in and around Khanbogd fear this nationwide improvement will come at their expense, especially those who continue to herd animals in the dry expanse and who rely, like generations before them, on a delicate relationship with nature.

"We've been here for a long time," said Altangerel Uudeg, 31, a local herder who was in the process of moving her family and livestock away from the area near the mine. "The herds are moving all across the land and so are the trucks. It's very chaotic."

"We don't have much rain here, and all the water is being sucked up by the big mine for their production," she added. "Our 1,000 sheep are left thirsty."

Battsengel Lkhamdoorov, 40, a former herder whose animals also once roamed the land the mine sits on, has struggled since being relocated, and he even tried working for the mine at one point.

"We don't need money from mining," he said. "What we need is water and land."

Investors shrug news of fresh Mongolia bid for control of Oyu Tolgoi as Turquoise Hill climbs 15%

Frik Els

9 September 2012

Investors in Turquoise Hill Resources (previously Ivanhoe Mines) nearing completion of its Oyu Tolgoi project in Mongolia drove up the company's share price 15% last week, despite news that a group of the country's lawmakers wants to grab a bigger stake of the massive coper-gold mine.

After a 6.6% surge in huge volumes on Friday, Vancouver-based Turquoise Hill - controlled by Anglo-Australian giant Rio Tinto - ended the week at $9.10 a share on Toronto's big board up from three-year lows of $7.90 at the open on Tuesday (Canadian markets were closed on Monday).

The buying was kicked off by news that Turquoise Hill and Aluminum Corp. of China (Chalco) had terminated an agreement that would have seen Chalco take control of Turquoise Hill subsidiary SouthGobi - a Mongolian coal producer.

Mongolian politicians had been vigorously opposed to the Chalco deal given sensitivities inside the country over Chinese influence over the landlocked nation of less than three million people.

But on Thursday Reuters reported that a group of influential parliamentary backbenchers in a petition had called for the enforcement of a parliamentary resolution that gives the Mongolian government majority ownership of Oyu Tolgoi from the current 33%.

It is not the first time Mongolian politicians had tried to rework the 2009 deal that only allows a bigger stake for the state 30 years after the project goes into operation (Oyu Tolgoi - turquoise hill in the local language - has an estimated life of mine of almost twice that).

In October last year shares in the then Ivanhoe Mines plunged on news that the Mongolian government wants to rework the deal to gain a 51% stake.

At the time Rio and Ivanhoe took a tough stance however and after some desperate negotiations Mongolia backed off.

After recent elections that installed a more nationalistic government the outcome could be different this time around. According to a report in Mining Journal the country's new mining minister Davajav Ganhuyag is one of the politicians in favour of upping Mongolia's stake in the project set to go into commercial production in the first half of 2013.

Rio is in the process of putting together a finance package of an additional $3.5 billion - $4 billion on top of the $6 billion already spent to take Oyu Tolgoi to full production status, but a research report leaked earlier this year indicated final overall costs could come in at as much as $13 billion.

Turquoise Hill - a favourite of resource investors - is now valued at $9.1 billion and has been been on a wild ride since hitting an all time high above $28 in January last year affording it a peak market cap of $20 billion.

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