Bankwatch report and video: Mongolia’s mining bonanza poses threat to locals and planet

A new report launched today by CEE Bankwatch Network, urgewald and OT Watch (1), following on-the-ground research in Mongolia, details the impact of the country’s mining boom on local populations, shedding light on the ignored side of one of the biggest business stories of today: Mongolia’s planned public offering of the state-owned Erdenes Tavan Tolgoi and the rights to one of the world’s largest untapped coal reserves. (2)

The report, entitled “Spirited Away – Mongolia’s mining boom and the people that development left behind” is accompanied by an original video produced by Bankwatch (3) including interviews with herders from both Oyu Tolgoi and Tavan Tolgoi, the main mining deposits in the country (3).

Sukhgerel Dugersuren from Mongolian NGO OT Watch and co-author of the report: “As foreign and Mongolian companies are preparing for massive coal, gold and copper exploitations in the Gobi desert, locals have been dangerously sidelined: infrastructure building and pollution have put immense pressure on traditional herding practices – already suffering from the impacts of extreme winters, with still very little in the way of jobs or social services offered in exchange to populations displaced to municipal centres. The greatest concern is the water scarcity and expected long-term shortages, yet affected people are left out of decision-making on this issue.”

Regine Richter, a co-author of the report and finance institutions campaigner at urgewald, points to the global impacts of Mongolian coal mining: “Mongolia possesses 12 billion tons of proven coal reserves, while the carbon content of globally known fossil fuel reserves is already five times more than the amount that must be adhered to over the coming decades, if we are to limit global warming to manageable levels. Therefore the climate impacts of coal mining in Mongolia should be given a serious consideration, if not by the Mongolian government, then definitely by international public banks financing these mining projects, who should be using tax-payers money for preventing climate change, not exacerbating it.” (4)

The report finds that these problems are not recognized enough by public banks investing in Mongolian mining, such as the European Bank for Reconstruction and Development or the World Bank (via International Finance Corporation).

The EBRD is a special focus of the report as the bank is currently preparing its new Mining Operations Policy. The bank has already invested in the development of the Tavan Tolgoi coal deposit and is considering investment in the Oyu Tolgoi gold mine, as well as in several other mining projects in Mongolia (5).

Although the bank claims to add value to extractive industry projects through bringing higher standards in mitigating environmental and social problems, the report concludes that such investments are essentially misguided. In the context of central and local authorities in Mongolia lacking the capacity to adequately plan and control the rapid mining developments, it becomes clear that EBRD moneys are in fact fueling short-term commercial interests while disregarding long-term risks.

“We really expect the EBRD to stop and think twice before investing more money into Mongolian mining,” said Fidanka Bacheva-McGrath, Bankwatch EBRD coordinator and co-author of the report. “The bank has two decades of experience from other resource-rich countries, like Azerbaijan and Kazakhstan, who have developed unhealthy dependency on export of commodities and fluctuations of their prices on the global market. So the bank should have learned a lesson and should diversify its portfolio in Mongolia, considering other sectors of the economy that can bring longer-term benefits for the country’s people, namely municipal and environmental services, infrastructure and agriculture.”

Notes for the editors:

1. The report is available online here: https://bankwatch.org/sites/default/files/spirited-away-mongolia-mining.pdf

2. Some of the latest information about the public offering: http://online.wsj.com/article/SB10001424052970204301404577172292914843580.html

3. The video is available here: https://bankwatch.org/news-media/blog/video-spirited-away-mongolias-mining-boom-and-people-development-left-behind

4. Read more about the impact that exploiting these reserves can have on climate targets at: http://www.carbontracker.org/wp-content/uploads/downloads/2011/07/Unburnable-Carbon-Full-rev2.pdf

5. The Tavan Tolgoi deposit (TT), located around 270 km north of the Chinese border, holds an estimated 6.4 billion metric tonnes of coal, about a quarter of which is expected to be the high quality coking coal necessary for steel production and the rest thermal coal. To date the vast majority of the deposit has not been tapped.

Oyu Tolgoi (OT) is the world’s largest undeveloped gold and copper mine. OT is 66 percent-owned by Ivanhoe Mines Mongolia Inc,a joint venture between Ivanhoe and Rio Tinto, and the Mongolian state that retains a 34 percent stake. OT is situated 160 kilometres southeast of TT en route to the Mongolian-Chinese border crossing of Gashuun Sukhait.

For more information, contact:

Fidanka Bacheva McGrath
Bankwatch EBRD coordinator
fidankab AT bankwatch.org

Regine Richter
Urgewald finance institutions campaigner
+49-170-2930725