Wednesday, March 5, 2014

Mine-golia – will there be a positive impact?

Mongolia is one of the world’s fastest growing economies. GDP reportedly grew by 12 percent in 2012 representing a slight dip from over 17 percent in 2011. Much of this growth has been fuelled by the ‘resource boom’ with the growth of mining developments throughout the country.

The biggest mine is the Oyu Tolgoi (Mongolian for ‘Turquoise Hill’) which is a joint venture between the Mongolian government (34%) and Turquoise Hill Resources (66%), which is in turn 49% owned by Rio Tinto. It is expected that the mine will become one of the world’s largest mines and is estimated to produce 450,000 tonnes of copper a year.

Mining has the potential to bring incomes for countries and for the companies involved. Other benefits include creation of jobs, infrastructural development and secondary employment through service companies. This mineral boom in Mongolia is expected to more than double its GDP within a decade. The rapid changes taking place in the country have the potential to pull many out of poverty. At the same time there is recognition that mining can bring negative impacts to the environment and put additional stress on already scarce water resources. According to the United Nations Development Program (UNDP), one-third of Mongolia’s provinces fell “well below the international norm that defines absolute water scarcity,” and more than half of the population lives without access to clean water. Others worry about the impact on cultural heritage and the livelihoods of herders.

While much attention is focussed on the massive large scale mining (LSM) investments, artisanal and small scale mining (ASM) is an important source of livelihood. Artisanal miners (or ‘ninjas’ as they are often referred to) are estimated to have grown substantially over the years given the earning potential but do not typically hold exploration licences or mining licences. A report by the Mongolian Business Development Agency and Eco-Minex International estimates that there are about 100,000 people involved in informal gold mining or 20 percent of the rural workforce. It is estimated that artisanal mining contributes US$110 million annually to export revenues. A survey from the Sustainable Artisanal Mining Project of SDC (SAM) indicates that miners earn an average of US $176 per month, which is about 57% above the Mongolian minimum wage.

While men are more engaged in ASM, women predominantly participate in gold processing which can bring huge health risks due to unsafe mercury use. It is estimated that between 10 and 15 per cent of artisanal miners are children with an average age of 15. Working conditions in informal gold mining pose serious risks to the miners’ health and safety. In hard-rock mining, the risks are associated with the use of explosives, tunnel collapse, and crushing and milling of the ore. In Gold Mining, mercury is used in the amalgamation process to separate the gold from the ore. Use of mercury poses multiple health risks arising from skin exposure to metallic mercury, inhalation of mercury vapour, and entry of mercury into the food chain and drinking water supply. Relationships between ASM and LSM have often been conflictual in nature and leading large scale mines are testing and developing innovative approaches.

The changes the country has witnessed are evident in the capital city, Ulam Baatar the capital, where more than half the population is estimated to still live in the ‘ger district’ of traditional tents set up around the outskirts of the city. Although growth has been immense, over 30 percent of the close to 3 million population still live below the poverty line putting severe strains on infrastructure in the city, including education and health care are severe.

For some resource rich countries the ‘resource curse’ has been used to describe the paradox whereby states who have large reserves of natural resources to be less developed than other states lacking such resources. How governments manage the use of resources imperative.

Let’s hope Mongolia will manage this transition well….

Photo Credit: Telegraph

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