Oyu Tolgoi mine

Oyu Tolgoi

Number 1 Shaft at Oyu Tolgoi
Location
Oyu Tolgoi Location in Mongolia
Location	Khanbogd
Aimag	Ömnögovi
Country	Mongolia
Coordinates	43°00′30″N 106°50′35″E / 43.00833°N 106.84306°E / 43.00833; 106.84306Coordinates: 43°00′30″N 106°50′35″E / 43.00833°N 106.84306°E / 43.00833; 106.84306
Production
Products	Gold, Copper
Owner
Company	Ivanhoe Mines Mongolia Inc
Website	www.ot.mn

The Oyu Tolgoi mine (Mongolian: Оюу Толгой, also Oyu Tolgoi, Turquoise Hill) is a combined open pit and underground mining project in Khanbogd sum within the south Gobi Desert, approximately 235 kilometres (146 mi) east of the Ömnögovi Province capital Dalanzadgad. The site was discovered in 2001 and is being developed as a joint venture between Turquoise Hill Resources (a majority owned subsidiary of Rio Tinto) with 66% ownership and the Government of Mongolia with 34%. The mine began construction as of 2010 and shipped its first batch of copper, all 5,800 tons of it, on July 9, 2013.^[1]

The Oyu Tolgoi mining project is the largest financial undertaking in Mongolia's history and is expected upon completion to account for more than 30% of the country's gross domestic product. Copper production is expected to reach 450,000 tonnes (500,000 short tons) annually. Financing for the project has come in part from the Rio Tinto Group and an investment agreement between Ivanhoe Mines and the government of Mongolia.

History

Canadian-based Ivanhoe Mines discovered the gold-copper ore deposit in 2001 in the Gobi Desert of Mongolia. It is in an area known as Oyu Tolgoi (Mongolian for Turquoise Hill),^[2] where in the time of Genghis Khan outcropping rocks were smelted for copper.^[3] By 2003 there were 18 exploration drill rigs on the property employing approximately 200 people, and Oyu Tolgoi was the "biggest mining exploration project in the world."^[2] In January 2013 Oyu Tolgoi started producing concentrate from the mine.^[4]

Description

The Oyu Tolgoi mine is in the South Gobi Desert of Mongolia, 80 kilometres (50 mi) north of Mongolia's border with the People's Republic of China, where the mined copper is expected to be shipped.^[3] Oyu Tolgoi deposits contains an estimated 2,700,000 tonnes of copper and 1.7 million ounces (48,195,000 grams) of gold.^[5] The gold resource reported here must be an error in reporting by the either the contributor or in the cited reference. The gold resource must be 10 times greater than that for the annual production target to make any sense and for the 10+ billion dollar development cost to be economic. The copper resource is also likely much larger than reported here. Production began in 2013 and is scheduled to reach full capacity in 2021. Over the anticipated lifespan of the mine (>50 years), Oyu Tolgoi is scheduled to produce 430,000 tonnes (470,000 short tons) of copper per year, an amount equal to 3% of global production. Oyu Tolgoi is also expected to produce 425,000 ounces of gold annually, with "by-product silver and molybdenum".^[5][6][7] Rio Tinto intends to employ 3,000-4,000 people from Mongolia.^[8]

Mining and milling

Oyu Tolgoi will use both underground and open pit mining techniques. Initially the mine will process 70,000 tonnes of rock per day, ramping up to 85,000 tonnes from both the open pit and the underground mine (underground mining is to be done by block caving). The yield from the first phase of mining will be ground through one semi-autogenous grinding mill (SAG mill). Expansion to new underground areas will result in an additional increase of up to 140,000 tonnes per day with a possible increase to 170,000 tonnes per day.^[9]

Financing

The original discovery site of the Oyu Tolgoi deposit

As of 2010, the estimated cost of bringing the Oyu Tolgoi mine into production was US$4.6 billion,^[10] making it (financially) the largest project in Mongolian history;^[11] however, by 2013 costs had ballooned to $10 billion.^[12] The mine will account for more than 30% of Mongolia's GDP.^[9] In early 2010 global mining company Rio Tinto owned 22.4% of Oyu Tolgoi owner Ivanhoe Mines (now Turquoise Hill Resources), and gave both technical assistance and financial support to the project. At the time Rio Tinto had the option of increasing their stake to 46.6%. On 31 March 2010 the Government of Mongolia approved an investment agreement where they would purchase 34% of the project.^[13] In October 2010, Ivanhoe announced a new US$1 billion share offering in order to raise funds to develop this mine.^[14] Rio Tinto increased its ownership of Ivanhoe in December 2010, also assuming direct management of the design and construction of the project, however without fulfilling another aim, to achieve direct ownership of the mine.^[15][16]

Disagreement between the Mongolian government and Rio Tinto came to a head in 2013, with the government urging Rio Tinto to increase revenue and the company backtracking on a $5 billion investment.^[17] In July 2013, the shares of Turquoise Hill Resources (Rio Tinto's unit that controls 66% of the mine) dropped 20% after a dispute between Tserenbat Sedvanchig, the executive director of Erdenes Oyu Tolgoi (the state-owned company that controls the other 34%), and Rio Tinto. Sedvanchig was fired in August and replaced by Davaadorj Ganbold, a former deputy minister and member of parliament.^[18] In the meantime, Rio Tinto announced it would cut 1700 employees from the mining operation.^[17]

Controversial issues

Environmental impact

Rio Tinto has a bad record of environmental management and a number of its mines, including Oyu Tolgoi, are routinely criticized by prominent international environmental groups.^[19]

Oyu Tolgoi mine is located in one of the driest areas in Mongolia.^[19] Rainfall in the desert area ranges between zero and 50mm per year. It is estimated that the water demand will triple in the coming two decades mainly due to mineral exploitation in the area.^[20] Herders worry that Oyu Tolgoi is draining the region’s water supply, since it uses more than a billion gallons of water a month.^[19] In addition, there is a substantial risk of acid rock drainage from the mine, from tailings storage facilities and from any overburden or waste rock stored on the surface and not deposited back into the mine.^[21]

South Gobi is also a critical habitat for at least six endangered and threatened species found nowhere else in the world. Two protected areas are located in close proximity to Oyu Tolgoi and are included in the mine’s area of impact.^[22] In order to compensate for the loss of habitat, a biodiversity offset strategy has been released,^[23] however the NGOs are not convinced. They are stressing that company did not consider avoiding, minimizing or mitigating the damage and went directly to offsetting. They urge the company to develop a strong, detailed, long-term species conservation and habitat protection plan, including a rigorous monitoring strategy. They are of the opinion that the current mitigation strategies described in the ESIA are to general and are not based on empirical data. Consequently, the offset strategy presented by the company can be called into question.^[22]

Social impact

Mongolia's Southern and Central Zones occupy terrain traditionally used by nomadic herdsmen. Diverting already scarce water resources to mining could jeopardize their livelihoods.^[20] In harsh conditions of Gobi desert herders have a very specific way of organizing summer pasture and its rotation, access to water, hay collection and hay storage. Any changes to these unique practises hamper the livelihoods of nomads.^[21][24] Steel fence that surrounds the gaping mine blocks traditional herding corridors and makes it difficult for the herd animals to find water. Roads constructed by the mine owners present additional barriers to animals.^[19]

Some Mongolian herders forced to resettle because of the Oyu Tolgoi expansion have experienced herd loss. They were forced to move to inferior locations without adequate time to select spots that would protect their animals from harsh winter storms. The minimal assistance provided at the time of resettlement was not sufficient.^[25] Furthermore, they were forced to accept inadequate compensation based on their location in proximity to the mine, rather than the size of pasture taken away from them.^[26]

Economic impact

Mining in Mongolia currently contributes about a third of GDP and accounts for 89.2 percent of the country’s total exports.^[27] The numbers are expected to rise since government issued about 3,000 new mining licences. Building an economy on minerals puts country at risk of Dutch disease which is a term used to describe the relationship between the increase in the economic development of natural resources and a decline in the manufacturing sector or agriculture. Cashmere industry and agricultural sector are already feeling the side effects.^[27][28] Although Mongolia’s economic growth has helped to reduce poverty by more than 11 % in recent years, there is also a rising inequality in terms of income distribution. Poverty is higher in the rural areas (35.5%) compared to the urban areas (23.2%), as herders in the countryside struggle to survive as their traditional livelihood dissolves.^[29]

References

External links

Wikimedia Commons has media related to Oyu Tolgoi.

• Oyu Tolgoi web site
• Ivanhoe Mines Mongolia Inc web page
• Mongolian mining directory
• World Bank, EBRD approve destructive Oyu Tolgoi mining project
• NGOs key recommendations for Oyu Tolgoi copper and gold mine project in Mongolia