Metals are going to lift Mongolia
15 februari, 2019
In the middle of the Gobi Desert the world’s largest copper mine is developing. Some people have been given the chance to start small, legal mines. With the help of the deposits discovered under Mongolia’s soil, the country is going to rise from poverty.
Population: 3.2 million
Government: Republic. Elections every fourth year. Next general elections 2019.
Surface: lion square kilometres.
Unemployment: 7.5 per cent.
Poverty: 30 per cent are classified as poor with less that USD 75 per month to live on. 3 per cent live in extreme poverty.
Once the largest country on Earth
In the 13th century, Mongolia was the largest country on Earth stretching from today’s Eastern Europe to the Pacific Ocean in the east. The empire broke down and fell under Chinese rule in the 17th century.
With Russian help the Chinese were defeated in 1921. Mongolia was declared a People’s Republic, became a Russian satellite state with a socialistic planned economy. During the fall of the Soviet Union, demonstrations in Mongolia forced political change. In 1992 the country became a democratic republic and changed to a market economy.
5 per cent work in the mines
The mining business, the country’s growth engine, is behind nearly 30 per cent of the GDP, but only 5 per cent of the total workforce.
The largest category of workers is cattle farming and agriculture.
The average wage is USD 380 per month and considerably more in the mining industry: USD 850. Coal stands for 40 per cent of the export revenues and copper for nearly 30 per cent. In third place, with 7 per cent is textile, with for example cashmere wool.
The copper mine employs 16,000 people (of which 13,000 work for sub-contractors) and is so far Mongolia’s biggest investment.
In 2020, when the underground mine starts production, a total of 14 billion dollars have been invested.
One of the world’s largest copper deposits, around 20 million tonnes. Also gold, silver and molybdenum.
The Mongolian state owns 34 per cent. The rest is owned by Turquoise Hills which is mainly owned by the mining giant Rio Tinto.
Traces of something that once was a road is meandering between heaps of gravel and abandoned mine pits. A railway track has been robbed of its rails and, very conveniently, there is a Chinese smelting plant a short distance away. A brick factory, also owned by the Chinese, appears on the far side of a garbage dump.
Apart from this there are no jobs here. Just mine pits. Only a few days ago four men died in one of them.
“They weren’t even twenty years old. They were inexperienced and worked in spite of the rain”, says Altankhuyag.
He works himself with digging up coal from one of the 150 active pits in Nalaikh, around twenty kilometres outside the Mongolian capital Ulaanbaatar. “But when it rains, one mustn’t go down there”, he says, “because that’s when the rain and soil are pouring down into the shaft and blocks it.”
After the fatal accident, the police came and cut the electric cables, so right now Altankhuyag cannot bring up more coal. Normally he makes one or two trips ever day to the capital and earns the equivalent of USD 5–10.
“They weren’t even twenty years old. They were inexperienced and worked in spite of the rain”
He has always been a miner, just like his parents. Nearly a 100 years ago, as the mine in Nalaikh was started, it was the first in Mongolia. When it was disused in the 1990s there were no other ways of support, so many people simply went on digging for coal on their own.
Selling sacks of coal isn’t really hard. Ulaanbaatar, with a million inhabitants, is around 20 kilometres away. Half of the country’s population live there, and the air is thick with diesel fumes and coal smoke. Around the expanding city centre hundreds of thousands of small houses, shacks and traditional tents are spreading. They all use coal to keep warm and when the outside temperature drops towards minus 40 degree Centigrade the need for coal is great. Almost all energy in Mongolia comes from coal.
The mining area in Nalaikh is not unique. As the Soviet Union collapsed in 1993, Mongolia lost the economic support it had received. At the same time the country chose to leave the socialist planned economy and introduced democracy and market economy. The transition was tough, and many companies went broke.
Left with no possibility to sustain themselves, a lot of people felt forced to switch to a traditional nomad life. Others joined the gold miners and coal miners who stayed on in abandoned mining areas, although it was forbidden to do so.
Mongolia is depending on mainly two businesses; mines for the economic growth and cattle farming for the jobs. A third of the population make their living as nomads. It is a precarious life. At regular intervals the winters are so harsh that up to a third of the cattle die. In such times, the remains of disused mines can offer a rescue also for destitute nomads.
Up until 2010 all form of small-scale mining was illegal in Mongolia. But in the end the government found that it was better to give people the opportunity to run mines. When they don’t risk being arrested any longer, they can pay taxes and invest in safety and proper equipment.
Dambiisurenjav lives in the community Tunkhel, 150 kilometres north of Ulaanbaatar and was recently elected chairman of more than 100 mine workers who are running and working in a gold mine outside the town. He has just put his signature and a stamp on a paper that is going to be sent to the State Mining Agency. In the last eight years they have had permission from the borough to mine for gold, but now they also want an official certificate. That would make it possible for them to enlarge further with the help of money from investors.
In 1995, when the town’s big wood industry went broke, Dambiisurenjav couldn’t imagine that life would change and turn so good as it feels now. The first 15 years were a struggle for survival. They knew nothing about mining and were often chased away by companies that had already secured rights to mine for gold.
“I thought that if we get organised in a large group we can start to negotiate with the borough and the companies”, says Dambiisurenjav.
He doesn’t know why, but one of the companies backed off and let them take over the mountain where they are still mining today.
“It used to be in order to survive, but now I am really knowledgeable and interested in mining.”
They have had much assistance from an international organisation working to empower small-scale miners, help them to get organised, increase safety, healthcare and also the environment around the pits. A part of Dambiisurenjav’s task is to check the legislation and see to that they follow all the rules.
Right now, two mine pits are open. In one of the 20 metres deep holes a man is being winched down by his work mates. For two hours he will be drilling underground and send up sacks of ore. Then they swap tasks and someone else gets to be winched down into the darkness.
There is a lot of gold here and each one of them can make USD550-1,100 a month. They invest some of it in the business or use it for insurances and fees. They keep the rest for themselves.
Now that they have established their business Dambiisurenjav is glad that it wasn’t some mining company that settled here and employed them.
“It is much better for us to run our own mines. We work for ourselves and get our pay every day. It used to be in order to survive, but now I am really knowledgeable and interested in mining. We know this. We are professionals.”
Mongolia is struggling to leave poverty behind. Close to a third of the population count as poor with less than USD 75 to live on every month.
In the underground there are enormous riches of copper, gold and coal and the government puts its faith in the natural resources to get the country’s economy up to speed. But they need capital from international investors in order to start new mines.
In the Gobi desert, 550 kilometres south of Ulaanbaatar lies the prestige project Oyu Tolgoi. The name, meaning Turquoise Hill, suggests that the presence of copper has been known for several thousand years. But the fact that this is the world’s greatest copper ore deposit wasn’t established until a Canadian surveying company had made a thorough investigation.
Now, the mine has been operating for five years and it is owned mainly by the giant mining company Rio Tinto. More than 16,000 people work here but less than 3,000 of them are employed by the mining company. The rest of them work for sub-contractors and that is the reason why the global union IndustriAll has started a project in the country.
In a hotel in Ulaanbaatar a group of around 30 people have gathered in a conference room. They all work in the mining industry, many of them for sub-contractors to Rio Tinto. They have been invited by the Mongolian mine workers union MEGM and IndustriAll.
A woman says that anyone who happens to make a mistake at her job, is fired straight away. Others speak about late salaries, unpaid overtime, isolation and harassments. But the main topic is that no one dares to raise questions about problems for fear of losing their job. There is a big difference, they say, between being employed by Rio Tinto and working for a sub-contractor.
The meeting in Ulaanbaatar is part of the project run by IndustriAll and MEGM. They are trying to support the employees of the sub-contractors to get organised. Moreover, they want to persuade Rio Tinto to see and take responsibility for the problems among the sub-contractors, putting pressure on Rio Tinto to offer more workers direct employment.
Glen Mpufane, the top representative of the mining industry in IndustriAll is present in Ulaanbbatar. After he has listened to all the stories he asks permission to speak.
“Yesterday we had a very interesting meeting with the top management of Rio Tinto. Four years ago I wasn’t even allowed into their office. So, things change. Now Rio Tinto wants to talk with the union.”
This is also a reason for them to be here in Mongolia. For the first time IndustriAll and Glen Mpufane can experience that a mine giant opens up for talks and cooperation with the union.
It takes a while to fathom how large the mine pit is. Only when the eyes see that the spots moving on the other side of the abyss actually are dumpers loading 300 tonnes of ore, the brain turns giddy. The pit is enormous, but it still is just the beginning for the mine in Oyu Tolgoi. A few kilometres away there are intense ongoing preparations for underground mining and when it starts the mine will treble its output of copper ore and gold.
Surrounded by the Gobi desert, the compound mostly resembles a space station on Mars. The union guests from IndustriAll and MEGM are given a full day’s round-trip by bus but there was still no time to show them everything. In the evening they finally step off the bus for a meeting they had long been waiting for.
They share side of the meeting table with Oyu Tolgoi’s highest HR manager, Michael Gavin. On the other side, there are representatives of a large number of subcontractors. Michael Gavin initiates the meeting.
“We have a code of conduct for entrepreneurs here at Oyu Tolgoi, and our guests want to know if it is followed. Everyone who works here has the right to join the union. We have a good relationship with the union and it is based on mutual respect for each other.”
“The mining business in the world make tough use of people. But Rio Tinto has chosen another path now.”
For Glen Mpufane everything that happens is a new experience. Never before has he been invited to a meeting by a mining company that wants to show a united front with the union in this way. He is soft-spoken but there is no doubt in his voice.
“We cannot ignore the serious allegations that we hear from our members. Listen to your employees and take them seriously before we end up in a fight. And don’t go back now chasing after the persons that have told us things. That would only make the situation worse.”
The meeting goes on, without any details being raised but behind the words there are incidents that the union and Rio Tinto have been told of. Among other things about an employee that supposedly had been beaten up by his line manager, and about insults and harassment from foreign bosses.
After the visit in Oyu Tolgoi, Glen Mpufane is cautiously optimistic. Looking back, he and IndustriAll have many years of campaigning against the giant mine company Rio Tinto, but the chilly relationship became warmer with the arrival of a new CEO in 2016.
“The mining business in the world make tough use of people. But Rio Tinto has chosen another path now. It takes a long time to turn such a large ship around, but in Oyu Tolgoi they showed openly that they want a dialogue instead of a fight with the union.”
He hopes that other mining companies are carefully studying the development.
To invest 14 billion dollars to start a mine in the middle of a desert, in a country with a faulty infrastructure and an unstable economy, demands reassurances. The agreement between Rio Tinto and Mongolia is comprehensive and offers, among other things, tax discounts.
At the same time the company has committed itself to 90 per cent of the workforce being from Mongolia, preferably from the region. This means that they are training many of those who were once nomads and herders. Every year, the company will also contribute 5 million dollars to a fund for the development of the nearest village, Khanbogd. A hospital, a school and a water purification plant have been built and there are plans for a whole new residential area.
The mayor has only praise for Oyu Tolgoi, where 1,600 of his 7,000 citizens are working. But he thinks that their borough should receive more money from the government, that is taking a commission for every kilo copper or gold that is dug up from their ground.
The super mine is carrying the nation’s hope of an economic development, but it is a controversial project in many ways. Mining comes with a price, among other things for the environment and for the nomads who lived here before. Mining needs huge amounts of water and here in the Gobi Desert they use groundwater. This must be under close surveillance, a group of experts noted in a report last year.
The expectations are strong that the whole of Mongolia will benefit from the mine and many people are impatient.
By the water in a valley in northern Mongolia a woman is mixing sand and water in a pan. She stops and puts her index finger on something glittering at the bottom of the pan. Is it gold? But then she washes it all out. No catch this time.
Her name is Oyuna and she has been a gold digger for 15 years. Her husband Lkhagvaa is digging tunnels in one of all the heaps of gravel that have been left when a mine closed. But in the last month they haven’t found that much gold. They say that they are going to swap places tomorrow.
Lkhagvaa pulls out a small bag from his pocket, unfolds a paper and pours the content into the palm of his hand. The gold flakes are nearly blown away as he is showing them. 1.2 gramme is his guess. They can give around USD35 when they are sold.
Their work is illegal. They have no permission to be here and could be chased away anytime, losing the gold that they haven’t sold. But they are not worried. No one cares that they are here.
They have eagerly been following the coverage about Oyu Tolgoi.
“It should be able to create income for the whole country, but we haven’t noticed any benefits yet”, says Lkhagvaa.
The tiny gold flakes in his hand may seem very small compared to what is extracted at Oyu Tolgoi. But put together the illegal and legal small-scale mines dig, wash, blast and extract more gold than the big mines do put together. The latest official report indicates that 60 per cent of the gold being bought by Bank of Mongolia come from private individuals.
The small-scale mines are not only building the foreign currency reserve. They are crucial to the communities in the countryside. Here, the profits from the mines remain in the local area. A certified mine nearby has used the profit to start manufacturing cement walls, giving jobs to several people. It is common to see mine workers invest their money in various business ideas beside the mining and for many that is a chance to let the children have an education.
The gold washer Oyuna does not know if she dares put her faith in a brighter future for Mongolia. Those who govern the country are too eager to give themselves big advantages, she says.
“Mongolia is a rich country. If everybody had a job with a good salary and there was no corruption, that would be good. We must use our riches in a good way. We are only three million inhabitants, our standard of living should be good. It shouldn’t be so difficult.”
As the sun sets people gather on a hill in the outskirts of Ulaanbaatar. The smoke rising from the coal plants is almost beautiful in the back-light, but winter is approaching, and the air is rapidly deteriorating. The high season is soon here for the miners in the old coalfield in Nalaikh and Altankhuyag is anxious for the electricity to come back on.
Working in a worn-down office space in Nalaikh’s House of Culture, Ganbold, once a coalminer himself, has been struggling for many years trying to give the 800 people wearing themselves out in the mine shafts, the right by law to use the land. The best thing would be for a big mine company to open here again, he feels. That would give people proper jobs in a safe environment. No one would any longer risk dying under a landslip in a dark pit.
The reporting trip to Mongolia has been financed with a grant from the aid organisation Union to Union.
Swedish union IF Metall is supporting, via IndustriAll, the union MEGM (workers in energy, geology and mining sectors) in Mongolia. MEGM has an office in Ulaabaatar with only a handful staff. Chairman Buyanjargal Khuyag and secretary Bayarkhuu Oyundorj are the nucleus of the union, now working to organise workers among the sub-contractors in the mining industry.
Reporter: Marie Edholm
Translation: Lars Ryding
The swedish version is avaible here: