Mongolia's Mining Boom: Oyu Tolgoi and Tavan Tolgoi
As the world's fastest growing economy, Mongolia has the most promising untapped deposits of iron, gold, silver and coal in the world--but will it serve as a curse or a blessing?
Where traditional nomadic life once comprised the landscape of the Gobi desert for thousands of years, bus stops and 20-story tall ore extraction shafts now stand among an ancient culture as Mongolia experiences the first phases of rapid industrialization. Due to recent discoveries, a country where over a third of the people live in poverty will soon become a global economic giant, home to hundreds of billions of dollars worth of untapped minerals and precious metals. Deemed the Saudi Arabia of Central Asia, Mongolia is one of the richest countries in the world in terms of natural resources.
MINING MANIA
When Canadian mining giant Ivanhoe Mines made its first discovery in Mongolia's Gobi desert in 2001, the result was one of the largest finds in mining history with deposits of iron, gold and silver greater than the size of Manhattan. In Oyu Tolgoi, over 81 billion pounds of coper and 46 million ounces of gold are expected to ensure production for well over 50 years.
The $10 billion Oyu Tolgoi copper-gold deposit is 66 percent owned by Ivanhoe and Rio Tinto with the remaining falling to the Mongolian government. Tavan Tolgoi on the other hand, an open coal pit expected to contain 7.5 billion tons of coal, is still being eyed by foreign investors, but China alone is expected to get an upwards of 39 percent of its coal from Mongolia this year. Coupled with global rises in the price of gold, Mongolia's operations will contribute to a stabilization of the market.
In an attempt to pull its people out of poverty by exploiting its vast amounts of untapped wealth, the newly Democratic state pursues the privatization of assets to ensure that a tenth of all proceeds go directly to its citizens. Subsequently, the country's GDP is expected to quadruple, boosting the average Mongolian's earnings by 60 percent in 2013. The government has promised to pour large sums of money into the country's infrastructure, healthcare system and education, including $85 million towards education and training for the new jobs expected to come from mining in upcoming years.
CURSE OR BLESSING?
As locals are thrust into the 21st century, many worry that mining operations will drain water supplies and threaten the nomadic life and culture most have depended on for centuries. The stress put on animal herds and available land outside the massive mining operations and infrastructure has made it impossible for grazing to take place within 20 to 30 kilometers of the sites due to growing traffic and dust.
“Both Oyu Tolgoi and Tavan Tolgoi ... will require huge amounts of water, and from the environmental impact assessment, and from their plans and their feasibility studies, we know they have not demonstrated availability of water for the life of this project,” Dugersuren Sukhgerel, executive director of an NGO called Oyu Tolgoi Watch told Reuters. “Mongolia is experiencing a higher degree of climate change – over 70 percent of Mongolia’s territory is suffering desertification. That is a big concern.”
Others worry the government moved too quickly to cede control of mining activities to foreigners, which has led to a number of heated parliamentary meetings, editorials and protests within Mongolia. Monitoring signs of corruption will also be crucial. In 2009, Transparency International rated Mongolia 120 in corruption percent, falling from 102 the previous year.
Education will play a vital role in getting the people on board with the goals of the government and the true long term benefits of mining efforts in the region, according to PM Sukhbaataryn Batbold. Under advisements of international organizations like the IMF and World Bank and learning from the success stories of other resource-rich areas like Chile, Canada, Norway and Alaska, Mongolia is off to a good start.
With the chance to claim the title as the world's fastest growing economy, Mongolia has been coined as the new Asian Tiger, with a “wolf economy” that is ready to pounce the capital market. In an interview with CNN, Prime Minister Batbold said “like the spirit of Mongolia, a wolf is strong and able to survive harsh environments.” As the government faces these challenges ahead, “we think we can overcome them by being strong like a wolf.”
Where traditional nomadic life once comprised the landscape of the Gobi desert for thousands of years, bus stops and 20-story tall ore extraction shafts now stand among an ancient culture as Mongolia experiences the first phases of rapid industrialization. Due to recent discoveries, a country where over a third of the people live in poverty will soon become a global economic giant, home to hundreds of billions of dollars worth of untapped minerals and precious metals. Deemed the Saudi Arabia of Central Asia, Mongolia is one of the richest countries in the world in terms of natural resources.
MINING MANIA
When Canadian mining giant Ivanhoe Mines made its first discovery in Mongolia's Gobi desert in 2001, the result was one of the largest finds in mining history with deposits of iron, gold and silver greater than the size of Manhattan. In Oyu Tolgoi, over 81 billion pounds of coper and 46 million ounces of gold are expected to ensure production for well over 50 years.
The $10 billion Oyu Tolgoi copper-gold deposit is 66 percent owned by Ivanhoe and Rio Tinto with the remaining falling to the Mongolian government. Tavan Tolgoi on the other hand, an open coal pit expected to contain 7.5 billion tons of coal, is still being eyed by foreign investors, but China alone is expected to get an upwards of 39 percent of its coal from Mongolia this year. Coupled with global rises in the price of gold, Mongolia's operations will contribute to a stabilization of the market.
In an attempt to pull its people out of poverty by exploiting its vast amounts of untapped wealth, the newly Democratic state pursues the privatization of assets to ensure that a tenth of all proceeds go directly to its citizens. Subsequently, the country's GDP is expected to quadruple, boosting the average Mongolian's earnings by 60 percent in 2013. The government has promised to pour large sums of money into the country's infrastructure, healthcare system and education, including $85 million towards education and training for the new jobs expected to come from mining in upcoming years.
CURSE OR BLESSING?
As locals are thrust into the 21st century, many worry that mining operations will drain water supplies and threaten the nomadic life and culture most have depended on for centuries. The stress put on animal herds and available land outside the massive mining operations and infrastructure has made it impossible for grazing to take place within 20 to 30 kilometers of the sites due to growing traffic and dust.
“Both Oyu Tolgoi and Tavan Tolgoi ... will require huge amounts of water, and from the environmental impact assessment, and from their plans and their feasibility studies, we know they have not demonstrated availability of water for the life of this project,” Dugersuren Sukhgerel, executive director of an NGO called Oyu Tolgoi Watch told Reuters. “Mongolia is experiencing a higher degree of climate change – over 70 percent of Mongolia’s territory is suffering desertification. That is a big concern.”
Others worry the government moved too quickly to cede control of mining activities to foreigners, which has led to a number of heated parliamentary meetings, editorials and protests within Mongolia. Monitoring signs of corruption will also be crucial. In 2009, Transparency International rated Mongolia 120 in corruption percent, falling from 102 the previous year.
Education will play a vital role in getting the people on board with the goals of the government and the true long term benefits of mining efforts in the region, according to PM Sukhbaataryn Batbold. Under advisements of international organizations like the IMF and World Bank and learning from the success stories of other resource-rich areas like Chile, Canada, Norway and Alaska, Mongolia is off to a good start.
With the chance to claim the title as the world's fastest growing economy, Mongolia has been coined as the new Asian Tiger, with a “wolf economy” that is ready to pounce the capital market. In an interview with CNN, Prime Minister Batbold said “like the spirit of Mongolia, a wolf is strong and able to survive harsh environments.” As the government faces these challenges ahead, “we think we can overcome them by being strong like a wolf.”
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