MAC/20: Mines and Communities

Central Asia update

Published by MAC on 2007-06-10

Central Asia update

10th June 2007

The world's biggest steel producer, Arcelor Mittal, has been condemned for permitting appalling conditions at the company's mines in Kazakhstan.

A tangle of political and financial affiliations underscores recent protests against a new gold mining project in Kyrgyzstran, according to one reporter. And it's underlined by a decade of unresolved issues surrounding operations by the state's biggest gold miner, Kumtor.

UK's richest man in slave labour row

The Times (London)

10th June 2007

by Mark Franchetti in Shakhtinsk, Kazakhstan, and Robert Winnett

WORKERS employed by Lakshmi Mittal, Britain's richest man, are accusing the billionaire of cashing in on "slave labour" conditions after scores have died in accidents in his mines.

Coalminers working in Mittal's Kazakh mines claim his firm is endangering their lives by using dangerous, outdated equipment and by cutting corners. More than 90 have died in the mines since 2004.

Miners claim that conditions are worse than in Soviet times and say they would rather work in Siberian mines.

This weekend Arcelor Mittal, his company, said health and safety was a "top priority" and that it intended to invest £63m improving safety at the mines.

Miners face 'suicide mission' working for Mittal's empire

The criticisms were made by miners and widows of some of those who have died at Mittal's mines in Kazakhstan, which he has owned since 1996.

Last September a gas explosion killed 41 in the Lenina mine. Two years earlier an explosion in the neighbouring Shakhtinskaya mine claimed the lives of 13.

"We are being treated by Mittal's people as little more than slave labour," said Sergei, a Lenina miner. "Conditions are far worse than they were in Soviet times. The danger is so high that when I go to work I often feel I'm on a suicide mission.

"I lost eight close colleagues in the [2006] explosion. Since then nothing has been done to improve safety. We are all just waiting for the next accident to happen. It's so tough here that many are leaving to work in mines in Siberia." Other Mittal miners said that some of the machinery and equipment dated back to the 1970s. "Absolutely nothing has changed since the explosion," said Yuri, another Lenina miner.

Alarm systems used to detect gas levels are said to be faulty and outdated. Ventilation pipes are made of a rubber fabric that often tears and which miners stitch up by hand with metal wire. Unlike in the West, Mittal's Kazakh miners still use shovels for some work and are made to drag 260lb steel beams to shore up the mineshafts.

Mittal, whose family's wealth is valued at £19 billion in The Sunday Times Rich List, runs the world's biggest steel producer. He has a £70m mansion in central London and this year donated £2m to Labour.

Arcelor Mittal said the miners' concerns were being addressed. It said it would spend £13.2m this year on mod-ernisation. New personal gas detectors and masks are on order. The firm says its investment is already paying off: there have been no fatalities this year and injuries have dropped by 30%.

More EBRD money to fund more Mittal tragedy in Kazakhstan?

Published by CEE Bankwatch

18th May 2007

Following a postponement, the Mittal Steel Temirtau Health & Safety Project will be discussed and likely approved on June 12, 2007 by the board of directors of the European Bank for Reconstruction and Development (EBRD).

The project is intended to improve the metal and mining complexes in Temirtau (in the Karaganda region of Kazakhstan) of Mittal Steel Temirtau (MST). The particular aim is to improve the health and safety practices at MST's coal mines in Karaganda and bring them into line with international best practice.

On first sight, this proposed project is not controversial. However, when the actions (or non-actions) of MST in recent history are considered, there must be serious doubts about MST's willingness to improve labour and safety conditions for its workers.

In 1997 the EBRD approved a USD 54 million loan for MST to restore the company's productive capacity and improve the efficiency of its steel mills and coal mines. The loan to Mittal was co-financed by the IFC and accompanied by additional financing programs through financial intermediaries with the aim to mitigate the environmental and health and safety impacts of the facilities and align the company's performance with World Bank standards. The project is considered by the EBRD to be complete and successfully implemented.

However MST remains one of the largest polluters in Kazakhstan, emitting 95 percent of the total harmful pollutants into the air of Temirtau. With the increased steel plant production, the total amount of pollution deriving from MST activities has increased

Repeated accidents in the coal mines have left doubts about Mittal's successful implementation of the coal mines' Environmental Action Plans within the project.

A methane explosion at the Lenin mine killed 41 miners in September 2006; an explosion at another MST-owned mine killed 23 people in December 2004.

In 2004 the cases of industrial injuries leading to fatalities at MST increased by a factor of five; and the rate of industrial accidents tripled. In 2006 there were 217 cases of industrial accidents, including 48 fatal cases and 17 which lead to severe injuries.

The approach to health and safety issues demonstrated by MST up to now raises serious doubts about its ability to bring the company into line with international best practice. Workers in Temirtau and Karaganda have long alleged that the company has done little to improve the labour and safety conditions since taking over Kazakhstan's largest metal factory and the mines that fuel it 12 years ago.

According to MST's Metallurgical trade union leader Yuri Baranov, the equipment at the plant has become obsolete. The same situation exists with the equipment at Mittal's coal mines. Some of the miners who survived in September's blast said that some of the equipment they were using was more than 20 years old. None gave their name for fear of losing their job.

So what can be the results of the Environmental Action Plans at MST's coal mines that were so successful according to the EBRD? Why is the EBRD now interested in providing a new loan to a company that clearly did not implement the requirements of its previous project? It's also worth bearing in mind that Arcelor Mittal, which runs 61 plants in 27 countries, should be pretty well placed to provide decent coal mining equipment without recourse to European taxpayers' money.

It is not the only one inexplicable aspect in the MST case. Mittal Steel's acquisition of the Termitau steel and power plants and coal mines results from a tax-alleviation scheme and generous state incentives. According to the contract signed with the Kazakh government in 1995, the investor did not need to observe any new environmental laws for a ten-year period following the date of privatisation of the facility and was exempt from paying taxes and pollution fees.

The company was also exempt from any social liabilities of the previous owners of the steel plant and coal mines. During this ten-year period regional governing organisations such as the Karganda department for environmental protection and others have had very limited access to the company's sites and documentation. Such an agreement has had a devastating effect on the environment. And on many occasions MST has violeted national environmental and work and safety legislation.

There has also been no public access to the project's environmental information nor opportunities to participate in the project after the completion of its due diligence. People living in Termitau, Karaganda and other communities have not been able to voice their concerns about the environmental and social impacts associated with the project since no project-related information was made available for public reference.

MST has created serious environmental and social implications for the citizens of Temirtau and the results of the previous EBRD financed project at MST are still unclear for local communities. So far an environmental audit on MST recently conducted by Golder Associates Europe has not been released and local people have once again been excluded from the process of environmentally important decision-making.

The delayed EBRD vote on this project may be an indication that alarm bells are ringing in London. This is long overdue.

Dana Sadykova, EcoMuseum


Villagers protest against a gold mining development by throwing stones at the prime minister, but the real battle to control the industry is taking place elsewhere.

By Taalaibek Amanov in Bishkek


Recent protests over a gold mine in northwestern Kyrgyzstan involve local villagers who are fearful of possible chemical spills on their land and angry at being left out from the consultation process. But some commentators note that the dispute is taking place as commercial rights to the Jeruy mine change hands yet again, and they see a connection between grassroots protests and the high-level struggle for control of Kyrgyzstan’s gold mines.

Kyrgyz prime minister Almazbek Atambaev had been in the job for less than two months when he was dragged into the dispute at the Jeruy mine at the end of May.

Jeruy is the second largest gold deposit in Kyrgyzstan, and its long-delayed development is seen as vital to economic growth.

For the previous six months, locals had carried on protests by attrition, sporadically blocking the road to the mine to stop trucks bringing workers and equipment to the mine, located in the Talas region.

On May 26, Atambaev went to Jeruy to urge local people to open the road and allow development work to resume. He tried to reassure a sceptical audience that once the mine was finally up and running, it would net 500 million US dollars a year in added revenue for central government, while another 150 million dollars would go straight to Talas region.

When Atambaev’s motorcade was setting off to return to Bishkek, a crowd of 300 to 400 villagers blocked the road and pelted the official cars with stones. Several police officers were injured and government cars were damaged.

Police made a number of arrests and launched a criminal investigation into the incident.

At one level, the dispute is about a rural population worried about environmental safety in their area once commercial mining starts, and also unhappy that so far, they have seen none of the economic benefits of investment.

The primary ecological worry is a possible leak of cyanide, used in processing pure gold from ore.

In 1998, a truck carrying cyanide to the Kumtor gold mine – Kyrgyzstan’s largest – overturned and spilled some of its cargo into the Barskoon river, which feeds into Lake Issyk-Kul.

The scale of the resulting contamination is still hotly disputed. Activists say a number of people died soon afterwards and many more illnesses and fatalities were caused by poisoning of subsoil waters and crops. But the authorities have said the impact has been much less than claimed. A joint commission of Russian and Canadian scientists found in late 1998 that irrigation water reaching local villages did not contain enough toxic traces to cause health concerns.

There is a direct parallel between Kumtor and the situation now at Jeruy, as in both places, grassroots concerns about environmental worries and demands for compensation are going on against a background of high-level discussions on contractual arrangements, and even questions about whether foreign investors should be allowed in the gold industry at all.

“The people are not being kept informed about whether Kyrgyzstan’s interests are being protected, whether licenses to develop fields are issued to companies correctly, and whether our legislative requirements are observed,” said opposition member of parliament Temir Sariev.

At the Kumtor mine, high in the mountains of Jeti-Oguz region at the southeastern end of Lake Issyk-Kul, there were similar scenes in the first two weeks of May as protesters blocked the main road up to the mine.

They were demanding further compensation payments for the 1998 spill, and also a review of the government’s agreement with Canadian investors Centerra Gold, who run the mine through the subsidiary Kumtor Operating Company, KOC.

The protests followed a parliamentary debate in late March over a bill which would if successful cancel the contract with Centerra and hand the mine back to the government.

Even though the Kyrgyz government already holds 16 per cent of the stock in Centerra, and it is unlikely it could run a high-tech mining operation on its own, the debate is a live and highly politicised one in Kyrgyzstan.

Re-nationalisation is probably not imminent, since the bill would need a parliamentary majority and a final signature from President Kurmanbek Bakiev.

Yet many politicians are worried about the many contracts signed with a variety of gold industry over the years since independence in 1991, allegations of corruption and certainly a lack of transparency in many of these deals, and suggestions that the Kyrgyz state has lost out financially as a result.

These concerns, tinged too with some nationalist sentiment, dovetail neatly with the worries expressed by local groups about health and livelihood.

KOC vice president Andrei Sazanov said in early May that all the talk of re-nationalisation and protests by locals had dented Centerra Gold’s position on international stock markets, and the Kyrgyz government as a shareholder had consequently lost some 60 million dollars this spring.

A special government commission is currently holding talks with Centerra.

The Jeruy protests similarly come at a time of transition at the top, with one foreign investers pushed out unceremoniously and two more acquiring the mine’s assets and the right to dig gold, respectively.

On April 26, KazakhGold, a major mining firm in Kyrgyzstan’s bigger neighbour, announced that it had bought out Norox Mining, the company which owns the Jeruy gold processing plant via a two-thirds holding in the Talas Gold Mining Company.

The Kazak firm bought the Norox shares from a subsidiary of the UK-based mining firm Oxus Gold.

What KazakhGold did not acquire was the right granted by the Kyrgyz authorities to actually mine the deposit, although an April 26 statement made it clear that it was interested in doing so.

Oxus Gold held the operating license until last year, when the Kyrgyz government took it away following allegations that the company had breached some terms of its agreement. Oxus has described some of the government’s actions as unlawful.

The license now rests with a firm called Jerooyaltyn, set up by the Kyrgyz government and an Austrian company called Global Gold. Jerooyaltyn’s plans for the mine are unclear.

Some observers say the real issue being played out at Kumtor and Jeruy is attempts by politicians to exert control over the mines. The campaign to seek fair solutions for local communities is merely a sideshow that is being exploited for bigger ends, they say.

“Kyrgyzstan’s natural resources are being divided up. The fact that conflicts around the major gold deposits are heating up is intimately connected with corruption,” said Tolekan Ismailova, head of the Citizens against Corruption pressure group.

Political analyst Zainidin Kurmanov believes the political and business turbulence surrounding Kyrgyzstan’s gold mines is affecting – perhaps even driving – the local protest movements.

“There are various financial groups behind these [mining] projects, and they in turn are backed by certain politicians. Civil society gets drawn into the struggle for ownership, because that struggle needs to be framed within a clear, understandable and attractive agenda. And that is where the environmental issue comes in,” Kurmanov told IWPR.

Kurmanov said the grassroots protestors are probably completely unaware of the wider political and business context. But he argues that a pattern of selfless, public-spirited actions being manipulated by specific interest groups is bad for Kyrgyzstan.

“It’s catastrophic for our country, because such actions show that Kyrgyzstan is not open to attract cooperation and partnership,” he said.

Taalaibek Amanov is an IWPR contributor in Bishkek.


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