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Costs and benefits of Mongolia mine

Friday, September 14 09:04:26

Even before its scheduled opening next month, the work on the huge Oyu Tolgoi mine project already accounts for roughly 30 percent of Mongolia's annual economic output. The sheer scale of the mineral wealth to be found here - an estimated 41 million pounds of copper and 21 million ounces of gold - on the dusty edges of the Gobi Desert has long attracted mining executives from around the world. Now, after a decade-long effort, Canada's Turquoise Hill Resources, in a joint venture with the Mongolian government, is about to start pulling the mine's riches from the ground.

"This single mining project is one of the main reasons for the amazing economic growth in the country," said Dale Choi, an analyst at Origo Partners, a private equity company that advises investors on China and Mongolia. Mongolia's gross domestic product grew 17.3 percent last year, and a further 16.7 percent in the first quarter of this year, the latest payoff from the roughly $6 billion spent on developing the isolated site close to the Mongolian-Chinese border over the past few years.

"In terms of the basic infrastructure, there were no decent roads, no electricity, no water, no air transport coming in, and the work force we needed was nowhere near the mine," said Cameron McRae, chief executive of Oyu Tolgoi, at his office in the capital, Ulan Bator, which is about 375 miles from the mine. "Basically we have had to provide everything from scratch."

The economic impact of Oyu Tolgoi is visible on the streets of Khanbogd, the town nearest to the site. The population of Khanbogd, a frontierlike outpost where most residents still live in traditional nomadic tents, has grown from just 2,000 a decade ago to over 7,000 today, not including the 10,000 workers housed at the mine itself. The dusty roads are now crisscrossed with cars and vans, as well as the shuttle buses filled with workers traveling from their nearby camp to the mine and back. Electricity is now available to households for set periods throughout the day, and the mine has promised residents 24-hour electricity soon. Still, life is harsh for many here, with no running water and only five doctors working at the town's small, one-story hospital, the same number as before the influx of people.

The development is inexorably altering the area, for good and ill. "The high level of respiratory illness in the southern Gobi is due to the influence of the mining companies, as well as to the influx of people into the region and the subsequent increase in building projects," said Narantsetseg Logii, a doctor at the Health Sciences University of Mongolia.

In fact, the mine is altering the entire country. Once it reaches full production, which is expected to be in 2018, the operation will be among the top three copper-gold mines in the world and is expected to account for more than a third of Mongolia's economic output. "It will be a huge source of employment," Mr. Choi said, "and will help to improve the living standards of the whole country." Some residents in and around Khanbogd fear this nationwide improvement will come at their expense, especially those who continue to herd animals in the dry expanse and who rely, like generations before them, on a delicate relationship with nature.