Mongolia, the land of Genghis Khan and nomadic herders, is in the midst
of a remarkable transition. Rich in coal, gold and copper, this country of fewer
than 3 million people in Central Asia is riding a mineral boom that is expected
to more than double its GDP within a decade. The rapid changes simultaneously
excite and unnerve many Mongolians, who hope mining can help pull many out of
poverty, but worry it will ravage the environment and further erode the
nation”s distinctive, nomadic identity.

Second of four parts

The Central Asian nation of Mongolia has untold riches in copper, coal and
gold, which could help many of its nearly 3 million people — more than
one-third of whom live in poverty.

But mining is also reshaping Mongolia”s landscape and nomadic culture. Camel
and goat herders worry that new mega-mines will siphon off precious water in an
area that”s already suffering from the effects of climate change.

Mijiddorj Ayur, whose livestock graze near the Oyu Tolgoi mine, tends camels
in a stretch of Mongolia”s South Gobi province that”s a moonscape of sand and
gravel. He relies on the animals for meat, wool and milk, and they rely on
hand-pumped well water to survive.

“When we come to the well, we can see the level of the well water is 8
inches lower than it used to be,” says Mijiddorj, 76, who wears a golden,
double-breasted robe called a deel and a brimmed felt hat.

Mijiddorj — Mongolians typically go by one name — says the well water has
dropped in the last several years because of lower rainfall, while the
grasslands are shrinking because of rising temperatures from climate change.

Now, he sees another potential threat: Oyu Tolgoi, a giant mine that will
need huge amounts of water to process copper ore. The company has already
drilled test wells near where Mijiddorj”s camels drink.

“My greatest fear is we won”t have water,” he says. “I don”t
care about the gold or the copper, I”m just afraid there won”t be water.”

Threats To Traditional Herding

It”s a worry echoing across South Gobi province, a mix of rocky desert and
grassland where drought periodically wipes out herds. It”s home to thousands of
herders and about a million head of livestock.

Officials from Oyu Tolgoi, which has been under construction since mid-2010,
say the mine will draw water from a deep aquifer that won”t affect wells like
Mijiddorj”s. But he and other herders are suspicious.

They have already felt mining”s impact. Herders say mine trucks hit their
animals and kick up dust that chokes pastureland. Indeed, almost all the roads
in the area are dirt, and trucks trail plumes of dust so huge they look like
they”re on fire.

A herder named Chuluunbaatar says he”s lost about 40 percent of the
pastureland he uses, as well as many sheep, goats and camels, since Oyu Tolgoi
built a nearby road a year and a half ago.

“Some of them died, because they were exhausted because there was not
enough pasture,” he says. He adds that he had to kill some dying animals
and sell their meat in order to salvage some of their value.

A Question Of Compensation

Oyu Tolgoi — which means “Turquoise Hill” in Mongolian, a name
that refers to the color copper turns when it”s exposed to oxygen — is owned by
global mining giant Rio Tinto and Canada”s Ivanhoe Mines, as well as the
Mongolian government.

The mine has offered herders compensation, including simple jobs helping
livestock cross roads, in a country where per capita GDP is about $2,500,
according to the Mongolia government.

Many herders have signed compensation agreements, but Myagmardorj Mijiddorj,
a local government official, says some herders already working for the company
complain of coercion.

“Oyu Tolgoi employs people for maybe $230 a month,” says Myagmardorj.
“When the people are reluctant to sign the contract, they say: “You are an
employee and you have to sign it or there will be measures.””

In other words, Myagmardorj says, they”ll be out of a job.

“We never forced them to sign the agreement,” says Suugie
Gonchigjantsan, who manages community relations for Oyu Tolgoi.

She denies that the company has pressured anyone and says the complaints are
just a negotiating tactic.

“Some of the individuals really want to get more, more and more,”
Suugie says.

The company”s compensation scheme is modest. One option, for instance, would
provide an affected family with a $3,800 scholarship to put a child through
college. In its first full year of operation, Oyu Tolgoi could produce about
$900 million worth of gold and copper, according to company statistics.

So, why not give herders more money and quiet them down?

Suugie rules that option out. Any solution, she says, “has to be
equal.”

Growing Competition For Water

Mark Newby, Oyu Tolgoi”s principal adviser for water resources, says the
company has monitored more than 100 herder wells in the area for years.

He says Oyu Tolgoi has found no connection between the herder wells, which
go down as far as 30 feet, and the aquifer the mine will draw from, which
begins about 150 feet below the surface.

At full capacity, the mine will pump about 180 gallons per second from the
aquifer. If herders” wells are affected — which Newby says he seriously doubts
— Oyu Tolgoi says it will fix the problem.

“In the very worst case, it would require the delivery of treated water
to the herder,” he says. “For a typical herd, that would require up
to a truckload a day.”

Newby says a bigger challenge may be managing perceptions and helping
herders already struggling for water.

“The biggest risk we face is that we will be seen to be a land of
plenty in a sea of stress,” he says.

Competition for water continues to grow across South Gobi province, which is
about the size of Wisconsin. Outside the provincial capital of Dalanzadgad,
local officials are at odds with Mongolia”s central government and a nearby
coal mine.

Two years ago, local officials designated a nearby seasonal lake as a
protected area. Last year, the central government reversed the decision and
said the coal mine could pump out water underneath the lake.

“That is the only fresh water source of this whole area,” says
Munkhjargal Batdorj, a local official. Munkhjargal says the central government
has a stake in the mine — which like Oyu Tolgoi also has foreign ownership —
and appears to be pursuing its own interests.

“The government is probably reversing its own decision because it”s
just not caring about the people,” she says. “I think it”s a rotten
decision.”

Who Benefits The Most?

Mining contributes heavily to both local and central government budgets, and
residents complain that officials sometimes use the money to enrich themselves.

Rashboud Tumen, a grocer in Dalanzadgad, cites one local representative in
particular.

He says the official had a Russian jeep and traded it in for a Toyota Land
Cruiser 80. Then, a few months later, he traded that in for a Land Cruiser 105
— which an incredulous Rashboud notes costs $53,000.

More than 30 percent of Mongolians live on $1.25 a day.

“Animals die in the drought,” he says. “You could have bought
livestock for 10 families. You could have done so much good with that $53,000.
What does a Land Cruiser 105 do for local people? Nothing.”

As mines begin to pump more water from the Gobi, herders will be watching
their wells and waiting. And as profits continue to pour into mineral
companies, some Mongolians will continue to wonder what is in it for them.

By Frank Langfitt