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Warning Shots

An attack on a mining site raises questions about how Mongolia’s immense mineral wealth will be exploited. From EurasiaNet.

by Pearly Jacob 20 October 2010

ULAANBAATAR | In early September at a small outpost 110 kilometers north of the Mongolian capital, Ulaanbaatar, four environmental activists armed with hunting rifles opened fire on gold mining equipment owned by two foreign companies. The incident has come to symbolize the challenges faced by the Mongolian government as it strives to balance environmental protection and economic growth in the development of the country’s immense mineral wealth.


A landlocked nation of steppes and desert, Mongolia is known mostly as a country of nomadic herders. But vast and sudden changes could be in the works for the country’s roughly 3 million inhabitants. It has an estimated $1.3 trillion worth of untapped mineral assets, according to Eurasia Capital, a Hong Kong-based investment bank, and the investment world is eagerly eyeing opportunities in Mongolia. Some call it the Saudi Arabia of Central Asia. Analysts at Eurasia Capital have predicted the country’s GDP could swell from $5 billion to $30 billion by 2020, based on its mineral resources alone. The pressure on Mongolia -- or ‘Minegolia,’ as some investors call it – to develop is intense.


To a certain extent, the early September shooting incident is a reflection of the wrenching economic changes already under way. The shooters, members of the United Movement of Mongolian Rivers and Lakes, caused only minimal property damage, just a few dents in a bulldozer tread and a busted radiator. But they sent a powerful message: Puraam, a Chinese firm, and Centerra Gold, a Canadian-operated company, aren’t welcome in the area, one of Mongolia’s few forested regions.


The activists were also protesting the government’s failure to properly implement environmental regulations, including a year-old law prohibiting exploration or mining at the headwaters of rivers. Mining experts and activists agree the government is at fault for enacting laws it has neither the ability, nor perhaps the will, to enforce.


Centerra Gold and Puraam are operating on 168 hectares of land in the headwaters of the Selenge, Mongolia’s largest river, which feeds Lake Baikal, the world’s largest freshwater lake.


In the rush to develop the site, the local environment has suffered, activists contend. “We targeted these companies because they are mining illegally in a historically important place and right next to the headwaters of two crucial rivers in a healthy forest region in defiance of existing laws. They need to be shut down,” said Tsetsegee Munkhbayar, a former herder turned conservationist and recipient of a 2007 Goldman Environmental Prize for grassroots environmentalism.


A 1991 discovery led to the present-day gold rush in the area around the former logging hamlet of Tunkhel. The Gatsuurt deposit, currently managed by Centerra, contains an estimated 1.3 million ounces of gold, according to the company’s website.


Activists became alarmed after traces of arsenic were found at the site. “When you’re talking about risks like arsenic, responsible and transparent mining does not work,” said Dambiinyam Dashdorj, a retired Tunkhel resident who is now campaigning for the closure of the Gatsuurt mines. Outside the fenced-off mining sites, a herder says he can no longer access a well now within the company’s work zone and must instead rely on the polluted rivers for drinking water.


Back in the capital, facing criminal prosecution, the environmentalists defended their radical actions, arguing they had no other way to call attention to government negligence.


Some officials hint that the reason for government inaction could be that environmental protection legislation is too expensive to implement. “The principle of the law is right. The government adopted the law with a view to protect the environment, but the implementation side has many issues,” admits Tamir Tegshsaikhan, an official at the Mineral Resources Authority of Mongolia, the state’s implementation agency for the law.


Licenses of mining companies operating less than 200 meters from a water source may be revoked or modified, provided the government compensates license holders for exploration expenses already incurred, or lost revenue from mining operations already initiated. Technically, mining companies can continue operating until they’ve been compensated, Tegshsaikhan told Currently, the total compensation that would have to be paid out in order for the law to be fully implemented stands at a staggering $4 billion.


“When you make a law, you have to put a lot of thought into it, and in this case, it looks like the homework was not done very well,” said Rena Guenduez, senior mining adviser at the USAID-sponsored Economic Policy Reform and Competitiveness Project.


The shooting incident is part of a trend. Mining conflicts and confrontations have increased dramatically in Mongolia in the last two years, she said. This year alone there have been six reported mining-related confrontations and one death.


“This will increase and escalate, if there is no mechanism for participation and no mechanism to resolve conflict,” Guenduez said, adding that frequently changing laws, “myths about mining,” and a lack of informed decision making in Mongolia leave both mining companies and the public frustrated.


Foreign company representatives also express frustration about the legislative framework. Centerra Gold’s vice president for Mongolia, Doug Krahn, said his firm had done nothing illegal and fully supported environmental protection provisions. But he added there was not enough consultation done with the industry to create a law that could be effectively implemented. He also blamed pollution at the Gatsuurt site on previous operations there, undertaken prior to the start of Centerra’s activity. “That entire valley is covered in tailings from work that previous companies have done before us,” he said. He stressed that all water discharged from area mines is treated to meet required groundwater standards.


Although many Mongolians are dazzled by economic growth projections, some, like Munkhbayar of the United Movement of Mongolian Rivers and Lakes, are convinced that the social and environmental costs are too high.


While he had neither heard of the term “eco-terrorism,” nor thinks it applies to him, Munkhbayar readily acknowledged that he broke the law and he could end up with a five-year prison term. It is a sentence, he said, that he is more than willing to endure, if it will help preserve Mongolia’s environment.


“Exploiting everything is not development,” Munkhbayar said.

Pearly Jacob is a freelance journalist in Ulaanbaatar.This is a partner post from EurasiaNet.
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