The dynamic ‘Passive Housing Solution’ for Mongolia’s ger districts www.news.mn

The Capital City Housing Corporation of Mongolia has signed a Memorandum of Understanding with a company from Germany called Rongen Architekten to cooperate on introducing European ‘passive house standards’ to the country. The ‘passive house’ is the world’s leading benchmark in energy efficient construction. The memorandum focuses on infrastructure development in the challenging environments of the ger districts of Ulaanbaatar.

BoM: External demand may slow growth in mining sector www.zgm.mn

The Bank of Mongolia (BoM) anticipated the Mongolian economy to increase by 5.6 percent in 2020. This figure is around the previous projection. Slowing external demand and trade conditions in the next year may decrease the mining sector growth, the central bank said. However, non-mining sectors are likely to be activated as a result of budget expansion. These uncertain situations, namely trade dispute acceleration, whether China’s coal import limitation would continue, exiting the FATF’s grey list, and the potential decrease in the Oyu Tolgoi underground investment could affect the economic growth in 2020. The economic growth was comparatively lower than its expected level in the first three quarters. This was mainly due to the poor performance of the mining industry, emphasized in an inflation outlook report. Thus, the report includes labor market performance. Reducing employment and soaring unemployment shows that labor market activity has been slowed in recent quarters. It reported that the unemployment rate has been slowing down since 2016, and it increased 10 percent in the last quarter. Central bank emphasized that inflation will gradually decrease to six percent due to supply factors, it may slightly increase in the fourth quarter of 2020, and stabilized around the central bank’s target level. As of December 2019, the inflation rate stands at 5.2 percent. BoM believes that inflation has been slowed down as the supply factors of meat and fuel decreases.

Mining and the making of a sacrifice zone in Mongolia www.towardfreedom.org

Over the last decade, Mongolia’s Oyu Tolgoi mine has become synonymous with abusive business and mining practices that have displaced Mongolian herders, causing outrage among environmentalists and rights organizations in the South Gobi desert.

A massive underground expansion that will make Oyu Tolgoi one of the largest copper and gold mines in the world is underway, despite Rio Tinto’s announcement over the summer that the mine would require redesign. With over eighty percent of the mine’s value found underground, and over 200km of planned underground roads and infrastructure, the mine is now entering its most profitable phase.

Oyu Tolgoi’s majority owners, British-Australian company Rio Tinto, and Rio Tinto’s Canadian subsidiary Turquoise Hill Resources, have long exploited Mongolia’s lax environmental and economic regulations. Access to water and land, resource colonialism, and government corruption are ongoing issues that have led to sustained conflict. Despite ongoing criticism of the mine’s contracts and claims of corporate tax evasion, Mongolia’s government has persisted in granting dangerous concessions to the company.

Mongolian nomadic herders continue to struggle against Oyu Tolgoi’s disregard of their traditional rights to free-flowing rivers and pastures in the Khanbogd soum, the region in the southeastern Ömnögovi Province most directly affected by the mine.

A coalition of herders, represented by the Mongolian NGOs Gobi Soil and Oyu Tolgoi Watch, submitted a complaint to the International Finance Corporation (IFC) in 2012, during the mine’s open-pit phase.

The complaint describes the mine’s destructive impacts, including the forced relocation of herding communities. Herders raised the alarm that diversion of the Undai River and the sacred Bor Ovoo spring would “deplete local water sources, deteriorate pastureland, and threaten the community’s spiritual practices.” Access to fresh water in Khanbogd remains limited, as much of it is prioritized for use by the mine.

Oyu Tolgoi’s expropriation of land and construction of fences for the mining license area has forced herders onto one another’s pastures, which are now tight and overpopulated. Soil and vegetation are covered by dust from the mine, and are no longer able to naturally regenerate with the healthy migration of herds. This has also caused horses, camels, goats and sheep on which the herders rely to become sick, creating a vicious cycle of intergenerational impacts for families.

Since the 2012 complaint to Oyu Tolgoi’s lenders, the mine’s owners have failed to deliver on promises of remediation, despite negotiating two agreements in March 2019 with the IFC’s Compliance Advisor Ombudsman. Sukhgerel Dugersuren, the head of Oyu Tolgoi Watch, described the early negotiation process as tainted by conflicts of interest, with local business owners acting as “elected herder representatives.”

A report published last year by the Accountability Council found that only about a third of the mine’s commitments can be considered “complete or well underway.”

“Oyu Tolgoi [OT] and its lenders continue to resist [carrying] out an environmental and social impact assessment of the underground mine phase,” said Sukhgerel in an email interview with Toward Freedom. “Herders continue to demand that OT carry out an environmental and, most importantly, a social impact assessment of underground mine and take control of its sub-contractor’s non-compliant actions on the ground.”

Paul Robinson, a researcher with BankWatch who is the director of the Southwest Institute, has been working with Oyu Tolgoi Watch and Mongolian herders for over ten years. In a Skype interview, Robinson described how the mine initially lacked a land reclamation plan, which, along with the financial assurance to guarantee the plan’s completion, should be standard process.

“They have an environmental social impact assessment that was published in 2012,” said Robinson. “The mine had already started then—they’d been stripping overburden for years. The lack of coherent baseline makes it very difficult to assess their performance.”

Robinson described how agreements between herders and Oyu Tolgoi were slower to be implemented in relation to concerns around tailings facilities in the Undai River watershed. He also mentioned the shoddy construction of 37 wells that were supposed to monitor the separation of the upper and lower aquifer. Oyu Tolgoi’s subcontractors constructed these wells with gravel instead of concrete, causing the upper level of water (which was to be used by herders) to drain into the deeper groundwater that is used by the mine.

“There’s been no hydrological analysis of the Oyu Tolgoi area to monitor the overall water levels and to address these wells,” said Robinson. “The wells were fixed, according to Oyu Tolgoi, but there’s no analysis of the consequences.” The total number of wells drilled falls far short of what was initially promised.

With the underground expansion underway, Khanbogd herders are still struggling to access and understand the compensation they are being offered by Oyu Tolgoi as it relates to the mine’s open-pit phase. The absence of meaningful economic alternatives to herding combined with the irreparable damage to their land has forced herders into dependency, circumstances the Accountability Council describes as “desperate.”

The bigger picture: austerity and tax evasion

Oyu Tolgoi has been an important vehicle of neoliberal intervention and accelerated the privatization of Mongolian land and resources. Rio Tinto and Turquoise Hill claim that the mine is a “national treasure” that is “contributing to the prosperity of Mongolia.” However, until the country pays off the loan from Turquoise Hill that financed the government’s 34 per cent share in Oyu Tolgoi, Mongolia won’t see substantial profits from the mine.

Mongolia has been under strict austerity measures following a $5.5 billion bailout by the International Monetary Fund (IMF) in 2017. The IMF bailout pressures Mongolia to privatize public assets and enforce free-trade policies. The country remains saddled with an external debt of $29.37 billion.

The influence of the mining lobby has significantly shaped Mongolia’s economic and energy policies. Armando Torres, CEO of Oyu Tolgoi LLC, is a director at the Business Council of Mongolia, which has been instrumental in lobbying for corporate tax reforms favorable to the extractive industry, including new measures announced in June 2019, which took effect on the first day of 2020.

These new tax reforms include a significant drop in withholding tax rates, which mining companies are known to exploit. The Ottawa-based Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development describes this kind of taxation policy as an “added incentive for a company to load up the mine with debt, as well as charge above-market interest rates to reduce local taxes and shift profits overseas.”

In July 2019, Rio Tinto announced an unprecedented delay of 16-30 months, estimated to cost up to $1.9 billion, raising the mine’s total cost to $7.2 billion. Citing “stability risks” and more challenging ground conditions than expected, Rio Tinto estimates that this delay may require the relocation or removal of “critical underground infrastructure, such as the mid-access drive and the ore handling system.”

No doubt the new tax arrangements are also appealing for Rio Tinto and Turquoise Hill, as the mine’s owners have repeatedly been charged with tax evasion. In 2018, the Centre for Research on Multinational Corporations (SOMO) published a report documenting how Turquoise Hill Resources had set up a network of shell companies in global tax havens, including the Netherlands.

Ambiguity in Mongolian tax laws and the Canadian Revenue Authority’s approval of the shell companies has allowed for substantial corporate tax avoidance. In addition to a $130 million fine in 2015 (which Turquoise Hill settled for only $30 million), the Mongolian Tax Authority fined the Canadian company an additional $155 million for tax evasion in 2018.

The allegations published by SOMO also include an estimated $559 million in Canadian taxes that were effectively avoided when the company shifted profits through a Luxembourg-based shell company Movele.

Erdenebat Bataa, the head of the Economics Department at the National University of Mongolia, confirmed SOMO’s claims that there was “widespread evidence of transfer pricing and other tax evasion strategies.” Erdenebat has written extensively about the danger of the country’s excessive dependence on the extractive industries.

Referring to the unilateral negotiations between the mining companies and the Mongolian government, Erdenebat said he does not expect positive results from mining in Mongolia until “experts with personal and professional integrity” are involved in the negotiations. “…The World Bank’s country economists never bothered cooperating with indigenous economists, nor [did they reply] to many invitations to seminars and events at the Mongolian Economists’ Association and the National University of Mongolia,” wrote Erdenebat in an email interview.

Despite the glaring unfairness of the agreements, Mongolia’s government unanimously approved a resolution in December 2019 that confirmed the validity of all agreements related to Oyu Tolgoi dating back to 2009. Pressure from the IMF and World Bank together with lobbying on the part of the extractive sector, continue to act as barriers to Mongolia’s sovereignty over its own tax legislation and energy priorities, much less to allow the country to protect the traditional land rights of its people.

Author Bio:

Lital Khaikin is an author and journalist based in Tiohtiá:ke (Montréal). She has published articles in Warscapes, Briarpatch, and the Media Co-op, appeared in literary publications like 3:AM Magazine, Berfrois, and Black Sun Lit’s “Vestiges” journal. She runs The Green Violin, a slow-burning samizdat-style literary press for the free distribution of literary paraphernalia.

Finance Minister of Mongolia signs loan agreement with China’s Exim Bank Vice President www.akipress.com

Minister of Finance of Mongolia Ch.Khurelbaatar met with Vice President of the Export-Import Bank of China Xie Ping in Beijing to exchange views on the projects being implemented in Mongolia by Chinese government soft loans, Montsame reports.

TRQ to spend USD 1.3 billion underground development www.zgm.mn

Turquoise Hill Resources (TRQ) announced fourth-quarter 2019 production for Oyu Tolgoi (OT) as well as operational and financial guidance for 2020. Copper production in Q4’19 of 32,905 tons was lower compared to Q4’18 due to decreased head grade driven by the transition from Phase 4a and Phase 6a, to Phase 4b, Phase 6b and lower grade stockpiles, the company said in a report.Equally, gold production in Q4’19 of 24,343 ounces was also lower compared to Q4’18 due to the transition from Phase 4a to low-grade sources of Phase 4b and stockpiles.

2020 OUTLOOK

OT is expected to produce 140,000 to 170,000 tons of copper and 120,000 to 150,000 ounces of gold in concentrates in 2020 from both the open pit and the beginning of the underground development material being processed.Although the mid-point copper production range guidance is higher in 2020 versus the 2019 guidance, a lower gold production year is expected for 2020. This is due to the need to mine through lower grade material on the periphery of the South West pit as Phase 4b sinks towards the highest gold and copper grades in the bottom of the pit. It is anticipated that the higher grade ore will be accessed in 2021, resulting in a significant increase in gold production in 2021. Mill throughput for 2020 is expected to be approximately 40 million tons. Operating cash costs for 2020 are expected to be USD 800 million to USD 850 million. Capital expenditure for 2020 on a cash-basis is expected to be approximately USD 80 million to USD 120 million for open-pit operations and USD 1.2 billion to USD 1.3 billion for the underground development exclusive of any expenditure on power.Open-pit capital is mainly comprised of deferred stripping, equipment purchases, tailings storage facility construction, and maintenance componentization. Underground development capital includes both expansion capital and VAT. C1 cash costs are expected to be in the range of USD 1.80 to USD 2.20 per pound of copper produced, up from 2019 guidance largely reflecting the reduced gold production estimate. Unit cost guidance assumes the midpoint of expected 2020 copper and gold production ranges and commodity assumptions of USD 2.71 per pound copper and USD 1,362 per ounce gold.

UNDERGROUND DEVELOPMENT UPDATE

Construction of shaft 2 was completed in October 2019 allowing for the movement of 300 people per cage cycle versus a maximum of 60 people per cage cycle through shaft 1. Underground development material is also being lifted to surface via the Shaft 2 production hoist. Productivity improvements resulted in increased underground lateral development rates during the fourth quarter, with an average rate of 1,607 equivalent meters (eqm) compared to 1,214 eqm in the third quarter, with December seeing a record 1,809 eqm.Construction is progressing on shafts 3 and 4 with both collars now installed. Final preparations are now underway to enable commencement of main sinking operations for both shafts during the second quarter of 2020 Detailed analysis work on the mine design is still anticipated to be completed during the first half of 2020, and the Definitive Estimate, which will include the estimate of cost and schedule for the underground project based on the updated design of Panel 0, is still expected to be delivered in the second half of 2020.

Quality of life in Mongolia www.montsame.mn

Ulaanbaatar /MONTSAME/ The ‘Vision-2050’ is a policy document, which was formulated by a working group comprising of 1500 people, including scholars, experts and state secretaries of 13 ministries, heads of some government agencies, authorities of universities and representatives of non-government organizations. According to the Prime Minister's order No: 52 dated April 30, 2019, the working group analyzed development stages of the past 30 years of Mongolia and formulated the policy document that will define long and mid-term development policy until 2050. We are presenting 9 fundamental goals of the development policy in detail.

Ambassador of Japan pledges to increase Mongolian exports to Japan www.montsame.mn

Ulaanbaatar /MONTSAME/. On January 20, Minister of Foreign Affairs of Mongolia D.Tsogtbaatar met with Japanese Ambassador to Mongolia Hiroyuki Kobayashi to congratulate him on presenting his diplomatic credentials and assuming office.

Electric buses start running in Ulaanbaatar www.news.mn

Mongolia has imported 10 electric buses from China for transportation in Ulaanbaatar. The electric buses began operation earlier today (20 January) on a three month-long trial. According to officials, the buses can handle -50 and -60 Celsius temperatures and can be recharged after 15-20 minutes. The buses have 36 seats and run 200 km when fully charged.

Number of foreign workers with labor contract in Mongolia decreased by www.montsame.mn

Ulaanbaatar /MONTSAME/ At the end of December 2019, 4.6 thousand foreign workers from 95 foreign countries were employed with labor contract in Mongolia including persons in employment work for pay or profit and persons in volunteer work without pay or profit.

Savings in foreign currency increased by MNT464.2 billion from previous year www.montsame.mn

Ulaanbaatar/MONTSAME/. At the end of December 2019, the time deposit in domestic currency amounted to MNT 11.1 trillion, showing an increase of MNT 356.9 billion (3.3%) from the previous month and MNT 923.0 billion (9.1%) from the end of the previous year.