Mongolian livestock herders are
worried that a series of massive gold and copper mining projects will dry up
scarce water reserves and exacerbate desertification in the delicate Gobi
Desert when operations begin next year to tap one of the world’s largest copper
and gold deposits.

A landlocked country of 2.8 million caught between China and Russia, Mongolia
is home to the first “cowboys” – nomadic herdsman. Even today, two
out of five people in Mongolia still make their living herding livestock, and
the same number live in poverty.

After the fall of the Soviet Union, Mongolia’s major former trading partner,
the government encouraged free market development and
expansion of mining in the gold,
copper and uranium-rich country, on the advice of the World Bank.
Last year the country’s economy grew 17 percent from mining alone – faster than
any other in the world and twice as fast as China.

Eurasia Capital, a Hong Kong-based investment bank, estimates that Mongolia
sits on $1.3 trillion worth of untapped mineral assets.
They predict that the country’s gross domestic product could swell from $5
billion to $30 billion by 2020, based on its mineral resources alone.

The biggest project to date – the $6 billion Oyu Tolgoi gold and copper mine
(“Turquoise Hill” in Mongolian) – is now nearly ready to open. Located just 50
miles north of the Chinese border, it is expected to be one of the world’s
three largest mines when it reaches full production in 2018. Two thirds of Oyu
Tolgoi is owned by Canadian-owned Turquoise Hill (formerly Ivanhoe Mines),
which in turn is
majority-owned by Rio Tinto, the
world’s largest private mining company, based in London.

“This is the
biggest agreement in the history of
the country by a magnitude of a thousand,” Jim Dwyer, executive
director of the Business Council of Mongolia, told the Global Mail in February.

Indeed, even while under construction Oyu Tolgoi accounted for 30 percent of
Mongolia’s current economy, according to the mine’s spokesperson. Already
thousands of young people in their 20s and 30s have flocked to the capitol,
Ulan Bator, seeking jobs working for Oyu Tolgoi. The noveaux rich
spend time at the new Irish pubs near
the Louis Vuitton store and watch Hummers drive by alongside
Soviet-era buses.

“When international investors make
big decisions to employ their scarce capital, cutting-edge technology,
management expertise, and marketing prowess, they look for responsible
partners,” Oyu Tolgoi’s Australian CEO Cameron McRae, said. “Partners like Rio
Tinto prefer to invest in countries when the government takes the long view, as
we do.”

But critics say that the large-scale mining operations have dire social and
environmental costs.

“We don’t need money from mining,”

Battsengel
Lkhamdoorov, a 40-year-old former herder, told the New York Times. “What we
need is water and land.”

Sukhgerel Dugersuren, head of
Oyu Tolgoi Watch, a Mongolian non-governmental
organization that keeps tabs on the mine, says the agreement with Rio Tinto is
a bad deal for Mongolia. Dugersuren said that the investment agreement the
government signed with Rio Tinto is unfair and that World Bank leadership
pushed too hard for the Mongolian government to sign on. She told the Bank
Information Center in Washington DC that the World Bank extended 
“too much credit to Mongolia” in support of mining “without implementing compliance monitoring mechanisms or
impact assessments.”

Today, the Mongolian government owns just 34 percent of the mine under the deal
that was signed with Rio Tinto in 2009. Mongolian members of parliament are now

pressuring the government to push the
mining companies to renegotiate for a majority 51 percent share but
the company has refused – noting that the agreement only allows for the state
to negotiate for a larger share after the project has been in operation for 30
years – and even then no more than 50 percent.

Even worse, the London Mining Network alleges that the Mongolian government
signed the agreement “
before a technical and economic
feasibility study was accepted by the Mongolian government, as prescribed by
law.” Additionally, the London Mining Network notes that the
mining company has failed to show that there is enough water for the 30 to
60-year project.

This is despite the fact that
mining industries consume the largest
part of the country”s annual water consumption, says The
RiverMovements, a Mongolian environmental group which points out that Oyu
Tolgoi will use approximately 243 gallons of water a second.

Meanwhile nomadic herders, who
comprise 40 percent of the country’s population, will be forced to wander further to find water
for their flocks, a 2011 United States Agency of International
Development report said.

“(Oyu Tolgoi) does not understand the dynamics of herding and the need to
follow the livestock to adequate pasture and water sources,” the report stated.
“It is economically and psychologically difficult for herder families to move
from their traditional land.”

Rio Tinto says it is committed to having a “zero impact on community water
sources.”

“The water source for Oyu Tolgoi is the Gunii Hooloi aquifer – a deep,
non-drinkable water source that is separate from the shallow water sources used
by households and animals,” the company states on its website. “Oyu Tolgoi is
only allowed to use approximately 20 per cent of the water from Gunii Hooloi,
so the aquifer can never be exhausted.
We do not need to take water from any other source.”

But many local herders are skeptical.

“When we come to the well,
we can see the level of the well water
is 8 inches lower than it used to be,” Mijiddorj Ayur, a
76-year-old who herds his camels near Oyu Tolgoi, told National Public Radio.

Oyu Tolgoi Watch believes that the country should invest instead in sustainable
economic development that bolsters traditional livelihoods like cashmere
production and organic beef ranching.

“If the same amount of credit was made available to developing world standards
products and services from these sectors
Mongolia could sit on its wealth until there is dire need to
disturb the earth,” Dugersuren said. “Unfortunately, this does not
coincide with the interest of the World Bank to support Western industries to
extract and sell minerals to China.”

The government has made a major effort to ban mining in environmentally
sensitive areas but ironically this has the heaviest economic impact on the
100,000 Mongolian self-employed miners rather than on Rio Tinto. By contrast,
Oyu Tolgoi will
employ about 3,500 workers
when it is fully operational, according to the World Bank.