Mongolian mining boom threatens traditional herding www.phys.org

Exploring the vastness of Gobi Desert in the 13th century, Marco Polo proclaimed it to be filled with "extraordinary illusions." Today, Oyu Tolgoi, one of the world's largest copper-gold mines, rises among Mongolia's traditional herding lands, shimmering like an illusion across the steppe's treeless, grassless plains.

Mineral-rich Mongolia, labeled "the next Qatar" by The Economist, is experiencing an unparalleled mining boom. But as mega-mines like Oyu Tolgoi ramp up production, they are creating distrust and conflict with herder communities.

The rapid rise in mineral extraction now raises the question, "Can herding survive mining?"

The Gobi, Mongolia's high-latitude desert, is a harsh environment traditionally inhabited by mobile pastoralists. The dramatic steppe and its extreme aridity form an important backdrop to herding activities, with low rainfall, droughts and extreme dzud winters.

The unpredictable climate make seasonal animal migrations (known as otor) exceptionally challenging here. For six millennia, Mongolian herders adapted to water and pasture scarcity with Traditional Ecological Knowledge. But Soviet collectivization centralized and controlled their herding practices, making them less mobile and less resilient to environmental shocks.

Today, these adaptive strategies are being further threatened by resource extraction. Mines can have negative environmental and socioeconomic impacts on herder livelihoods, from landscape degradation, dust emissions and water pollution, to a loss of traditional practices, community displacement and corruption.

A line of trucks transporting coal and ore through the Gobi Desert to the Chinese border. Credit: Jerome Mayaud
Oyu Tolgoi's footprint

The US$12-billion Oyu Tolgoi mine, which means "turquoise hill," is perhaps the most prominent example of herder-mine conflict in Mongolia. The mine, located in the traditional camel-breeding region of Khanbogd Soum (district), was acquired by Ivanhoe Mines in 2000 and expanded. The Mongolian public's doubts about the mine first surfaced when Ivanhoe's president announced to investors the company had found a "cash machine in the Gobi."

Now majority-owned and operated by Rio Tinto Corporation, the mine is the biggest employer in the district. Even though mining costs recently jumped by almost US$2 billion, Oyu Tolgoi remains Mongolia's largest corporate taxpayer.

Oyu Tolgoi has impacted the district in many ways. The mine funds a variety of corporate social responsibility initiatives, including a community health program, business training for local entrepreneurs and a project preserving dinosaur tracks in the desert. It has also built significant infrastructure, including graded roads and an airport.

However, much of this infrastructure remains unavailable to herders, or actively inconveniences them. The exclusion zones around the mine site, airport and pipelines have displaced traditional migration routes. Roads have divided and fragmented pastureland, and traffic poses a collision risk to herds. Boreholes built by Oyu Tolgoi may have accidentally connected shallow and deep water aquifers in the region, and may dramatically reduce the availability of shallow groundwater used for animals.

These issues prompted local herders to bring a case against Oyu Tolgoi to the World Bank, leading to a landmark agreement between them in 2017.

Highly variable rainfall and temperatures present a challenge for the herders of Khanbogd Soum. Credit: Jerome Mayaud & Troy Sternberg
Changing priorities among herders

While Oyu Tolgoi's shadow looms large on the steppe, a variety of social and economic factors unconnected to the mine have also led herders to change their behaviors and decision-making.

Livestock numbers have boomed since Mongolia's transition to democracy from 20 million in the 1990s to more than 60 million in the 2010s. This upward trend, which reflects herding's transformation from a subsistence livelihood to a form of development and wealth, has also been observed in Khanbogd district.

A two-fold increase in animals herded in the district between 2003 and 2015 has placed much greater pressure on water and pasture resources. The poor maintenance of the water wells and limited access to some water points have exacerbated these pressures, and the growing use of motorized water pumps has slowed well refilling.

Pastoralism thus seems to be shifting towards maximizing resource usage for personal advantage, rather than following the customary shared approach to land use. The district government has struggled to respond to this shift as it lacks the capacity or power to address local challenges related to land ownership. In the absence of clear governance, herders have increasingly come to expect Oyu Tolgoi to perform the role of the state and provide infrastructure and services.

A two-fold increase in the number of animals herded in Khanbogd Soum has led to increased pressure on water and pasture resources. Credit: Jerome Mayaud & Troy Sternberg
Coexistence, survival?

Contrary to common narratives, mining and herding do appear to coexist in Khanbogd district—for now, at least. Herders have strategies to cope with the harshness of the desert, and the rise in animal numbers suggests this remains a viable, if not entirely sustainable, livelihood in the region.

Nevertheless, the continuing evolution of herding away from subsistence livelihoods, combined with the presence of Oyu Tolgoi and other mega-mines, is leading pastoralism into an uncharted future. As China's US$1-trillion Belt and Road Initiative gains pace, Mongolian herders will have to navigate a complex cocktail of climate change, water risk and pressure from extractive industries and market forces. A point may soon come where traditional mobile pastoralism gives way to more settled animal husbandry, making Gobi life unrecognizable to Marco Polo's expedition centuries ago.

China donates 20,000 school supply items to Mongolian pupils www.xinhuanet.com

ULAN BATOR, Sept. 25 (Xinhua) -- China launched the Mongolia Panda Pack Project in the Nalaikh district of Ulan Bator on Wednesday.

More diplomatic appointment blues for Mongolia www.news.mn

Mongolia has failed to appoint new ambassadors in four counties and new consul generals in five foreign cities due to domestic disputes and blunt refusals form the countries in questions. Currently, Mongolia has no ambassadors in Russia, Sweden, South Korea and Australia; the posts for consul generals remain vacant in San-Francisco, Istanbul, Hohhot and Hong Kong.

Rio strikes deal with Chinese partners to cut steel-making emissions www.mining.com

The world’s No. 2 producer of iron ore, Rio Tinto (ASX, LON:RIO), has inked a preliminary deal with two Chinese partners to develop new ways to cut carbon emissions along the steelmaking supply chain amid increasing pressure from stakeholders to make mining a more environmentally-friendly activity.

‘The Hu’ tops U.S. chart with Gerege album www.news.mn

A new album from ‘The Hu’, the famous Mongolian rock band that blends heavy metal and traditional Mongolian throat singing, has reached No. 1 on the Billboard Chart in the first week of release. ‘The Gereg’ Album has nine hits including, “Yuve Yuve Yu” and “Wolf Totem” – songs which immediately went viral with 16 and 10 million views respectively on YouTube. “Gereg,” is a term that was used to describe a diplomatic passport from the time of Chinggis Khaan.

MIAT to lease Boeing 787-9 Dreamliner for direct flight to US www.montsame.mn

Ulaanbaatar /MONTSAME/. MIAT Mongolian Airlines, national flag carrier of Mongolia has reached a lease agreement with the Air Lease Corporation, American aircraft leasing company regarding Boeing 787-9 Dreamliner aircraft capable of long-haul direct flight to the USA. The plane is expected to arrive in Mongolia and put into operation by 2021 and the sides yet to agree on price.

Bills on general budget for 2020 ready for submission to parliament www.montsame.mn

Ulaanbaatar /MONTSAME/. At its meeting on September 25, the Cabinet approved bills on 2020 Budget law of Mongolia, 2020 budget of social insurance fund, 2020 budget of health insurance fund, budget framework of 2020 general budget, amendments to the budget assumptions of 2021-2022 and revised version of Government special fund and other draft laws regarding these documents and decided to submit them for parliament debate.

Kincora Releases First Copper-Gold Assays at Mongolia Project www.streetwisereports.com

On September 10th Kincora Copper Ltd. (KCC:TSX.V) provided the first drilling update at its 100%-owned copper-gold porphyry projects in the Southern Gobi region of Mongolia. This update comes after an oversubscribed $6.25 million equity raising in late June.

First phase drilling at Bronze Fox consisted of 4,264 meters at two targets. Results for 2,876 meters were announced in the press release. To put this into content, that's ~16% of a total of 18,000 meters planned across multiple projects/prospects in multiple phases.

The market did not like initial results…..

I understand the disappointment, but was the very negative share price reaction warranted for results that although not great, were not horrible? Readers should know that 84% of the estimated meters to be drilled and assayed, on programs that stretch well into 2020, are yet to be reported.

Three drill holes at Bronze Fox's West West Kasulu (WWK) returned extensive lower-grade mineralization and a few higher-grade zones increasing towards the west. Some shareholders exited stage left on these mediocre results, sending the share price 50% lower in subsequent days to $0.07.

Highlights include drill hole F103, which returned 20m @ 0.64% CuEq from 140m; and 120m @ 0.41% CuEq from 700m. While 0.64% CuEq is a decent grade, the 20m width hardly stands out. And, while a 140m intercept is wide, 0.41% CuEq is nothing to write home about.

Partial results from drill hole F107 at WWK showed more of the same, no blockbuster, conclusive, "discovery" type intervals combined with high-grade copper. F107 contained 8m @ 0.25% Cu (1.26% CuEq) from 528m; 10m @ 0.54% CuEq from 630m; 22m @ 0.55% CuEq from 654m; 30m @ 0.50% CuEq from 702m; 10m @ 0.79% CuEq from 828m and 2m @ 0.22% Cu (1.14% CuEq) from 880m.

The market is looking to see intervals boasting 1%+ CuEq, that are much wider than the 2–8 meter higher-grade segments reported in hole F107, and/or tens of meters of 0.5%+ CuEq near-surface.

Gold's not driving this story, but at ~1/6 the economics, it's not trivial

Something worth remembering is that Mining Associates stated about 16% of the in-situ value is represented by gold from the WWK mineralized system, defined before this drill program started, as a total conceptual exploration target of 1.3–1.5 million tonnes of CuEq metal.

Otherwise mediocre drill results showed pockets of fairly strong gold mineralization. For instance, hole F107 was gold-rich. It had an eight meter intercept grading 0.25% Cu that was 1.26% CuEq.

About 16% of overall value is being driven by a gold price that's up 16% year-to-date, and 23% in the past 12 months. In US$, gold is near a 6.5-year high. Perhaps weighing on bullish gold sentiment is a weak copper price.

I remain bullish on copper due to its essential need in multiple new paradigms (green energy, high-tech, the building/rebuilding of global infrastructure, and the electrification of passenger and commercial vehicles).

Kincora's wholly owned East TS project is 10 to 15 km east of the Tsagaan Suvarga porphyry Cu/Au project, under development on the western margin of the Tsagaan Suvarga intrusive complex. TS has had over US$370 million invested in it and is forecast to produce 316,000 tonnes copper per year.

The market has heard a great deal about Kincora from its CEO Sam Spring. I reached out to SVP of Exploration Peter Leaman to learn more about his views on the projects, and new drilling to date.

Peter Epstein: Can you please provide an overview of your background and your role at Kincora?

Peter Leaman: Yes. I have 40 years' exploration experience, 28 with BHP, and I'm still involved with PanAust (since 2010). I've witnessed firsthand multiple copper and gold discoveries, including the Reko Diq deposit. My current role at Kincora is senior vice president of exploration.

I joined Kincora in late 2016, after the company consolidated the dominant position in the Southern Gobi copper-gold belt and regained full access to the Bronze Fox project. I am a member of the technical committee including Chairman John Holliday.

John is a very seasoned and successful explorer. He, CEO Sam Spring and I oversee a hard-working, skilled Mongolian team of geologists. We also have a strong network of technical advisors, including my old colleague Barry de Wet.

I feel I have unfinished business in this belt and in Mongolia. I ran the BHP Falcon JV with Ivanhoe in the 2000's, which was the last district-scale exploration in the region (before Kincora). I was involved, at the development stage, in the BHP review team of Oyu Tolgoi.

In carefully reviewing the data on Kincora's projects, I saw, and continue to see, the potential for globally significant discoveries.

Peter Epstein: Thanks Peter, what are your thoughts on the current Kincora exploration program?

Peter Leaman: Kincora announced initial exploration results from the first phase of drilling at Bronze Fox, and drilling has commenced at our second priority target, a brownfield project, East Tsagaan Suvarga. Multiple-phase programs are underway at both projects. We are undertaking the first modern, systematic exploration and drilling at district scale in the Southern Gobi.

Kincora is implementing a sophisticated exploration approach, testing targets in a way that the majors would. We are testing targets with significant scale potential and improving the odds, as best we can. Importantly, we are using methods that are significantly improved from my time at the Falcon JV period.

That said, we are all very mindful of the fact that, as a junior, the market judges you press release by press release. We are undertaking high-risk, high-reward exploration, and we recognize that we need to get good results with the current 12-month program and budget.

Peter Epstein: How do you see last weeks' exploration update? Were first phase results at Bronze Fox disappointing? Have you drilled the best targets?

Peter Leaman: Bronze Fox is a large, lower-grade system with zones of higher-grade copper and gold. Its size and relative lack of extensive drilling, with complementary geophysics done since the last drill campaign, suggests that a deeper and higher-grade core could be present at depth. An analogy is the Red Chrisdeposit in British Columbia, Canada.

We have better defined the system and greatly improved our understanding of the new geophysics, lithological controls and depth profile of the target zone. Like all shareholders, we wanted to see more high-grade from the initial results. Everyone wants a discovery yesterday—that's what we're looking to do—discover a new high-grade zone.

But, we have to continue in a systematic and unemotional way. Merely adding confidence and tonnage to the system is not our goal, the clear goal is to provide compelling evidence of a high-grade system and core.

In the end, we don't have to drill hundreds of holes ourselves, just tee it up for bigger players to take notice. SolGold in Ecuador is a prime example of a tier 1 discovery that attracted cornerstone investments by BHP and Newcrest.

I will shortly lead the team reviewing these results in the field, with the critical element being the area to the west where there is sufficient scale for a large system. We want to revisit the original concept of a preserved monzodiorite system being an attractive and higher grade target. So far, Phase 1 drilling supports the most prospective part of the system being away from the regional fault to the west.

Phase 1 is providing valuable results and insights to help us better understand the system correlating to the new geophysics, thereby assisting and informing our plans for phase 2. Our focus on Mongolia is to find globally significant new discoveries, not average-to-low-grade results or deposits.

Peter Epstein: Can you provide an update on current activities?

Peter Leaman: Yes, we have drilled ~4,200m of up to 18,000m, with assay results outstanding on a third of the initial ~4,200m at Bronze Fox, and we have moved the rigs to a project that we call East TS—East Tsagaan Suvarga.

We are now testing a number of large-scale targets that may be caused by blind and potentially high-grade porphyry copper mineralization. This is a project that has me very excited given its location, age and scale potential, but it's early stage.

In addition to drilling at East Tsagaan Suvarga we are also continuing with project generation activities, which we believe is very important for any sustainable exploration strategy at our stage.

With that in mind, in the next several weeks I will be reviewing various projects identified by our team that could strategically fit within our exploration portfolio. In the past 18 months, we have walked over 200 projects/targets in the field as part of our due diligence.

Separately, we have just made an application for a new exploration license prospective for gold-rich copper porphyries—large size, good location, previous drilling (limited), but including a >1% copper hit, that was inadequately followed up on. We are looking to leverage the strong team we have in place and our systematic exploration approach.

Peter Epstein: What final message would you like to pass on to investors?

Peter Leaman: I am a significant shareholder in Kincora, as is most of our senior team. We are true believers in new discoveries continuing to be made in Mongolia. I have confidence in the rigorous, systematic exploration approach the company has adopted for undercover exploration.

We have assembled a strong team, particularly for a junior with our tiny enterprise value, and our demonstrated ability to make globally significant discoveries. We have a highly prospective portfolio of targets that are finally getting the meters they deserve, and a project generation strategy that I am confident will yield positive results with continued hard work.

Peter Epstein: Thank you, Peter. I look forward to seeing the results from drilling over the next year!

Peter Epstein is the founder of Epstein Research. His background is in company and financial analysis. He holds an MBA degree in financial analysis from New York University's Stern School of Business.

'The devil's excrement': How did oil price become so important? www.bbc.com

It was 27 August 1859, and a crucial message had been sent. Entrepreneur Edwin Drake's last financial backer had finally lost patience. Pay off your debts, give up and come home, the message read.

Drake had been hoping to find "rock oil", a brownish unrefined "crude" oil that sometimes bubbled near the surface of western Pennsylvania. He planned to refine it into kerosene, for lamps - a substitute for increasingly expensive whale oil.

There would also be less useful by-products, such as gasoline, but if he couldn't find a buyer for that he could always pour it away.

The message had been sent, but Drake had not yet received it when his drill bit punctured an underground reservoir full of crude oil under pressure. From 69 ft (21m) beneath the surface, the oil began to rise.

The whales had been saved, and the world was about to change.

Just a few miles south and a few years later, came a hint of what lay in store.

When oil was struck at Pithole, Pennsylvania, in 1864, "there were not 50 inhabitants within half a dozen miles", according to the New York Times.

Pithole City at the height of its short-lived oil boom in 1865
A year later, Pithole had at least 10,000 inhabitants, 50 hotels, one of the country's busiest post offices, two telegraph stations and dozens of brothels.

A few men made fortunes, but a real economy is complex and self-sustaining. Pithole was neither, and within another year, it was gone.

Its oil boom did not last, but our thirst for the fuel grew and grew. The modern economy is drenched in oil.

50 Things That Made the Modern Economy highlights the inventions, ideas and innovations that helped create the economic world.

It is broadcast on the BBC World Service. You can find more information about the programme's sources and listen to all the episodes online or subscribe to the programme podcast.

It's the source of more than a third of the world's energy.

That's more than coal, and more than twice as much as nuclear, hydroelectric and renewable energy sources combined.

Oil and gas together provide a quarter of our electricity, and the raw material for most plastics.

Then there's transport.

Edwin Drake may have questioned who would buy gasoline, but the internal combustion engine was about to give him an answer. From cars to trucks, cargo ships to jet planes, oil-derived fuel still moves us - and stuff - around.

In 1973, when some Arab states declared an embargo on sales to several rich nations, prices surged from $3 to $12 a barrel in just six months.

It led to a global slowdown, with US recessions following subsequent price spikes in 1978, 1990, and 2001. Some economists even believe that record high oil prices played an important role in the global recession of 2008, which is conventionally blamed on the banking crisis alone.

As oil goes, so goes the economy.

So why did we become so excruciatingly dependent on the stuff?

Churchill was made head of the Royal Navy in 1911.

One of his first decisions was whether the British Empire would meet the challenge of an expansionist Germany with new battleships powered by safe, secure Welsh coal, or by oil from faraway Persia - modern-day Iran.

Why would anyone rely on such an insecure source? Because oil-fired battleships would accelerate more quickly and sustain a higher speed, required fewer men to deal with the fuel and would have more capacity for guns and ammunition.

Oil was simply a better fuel than coal.

Churchill's "fateful plunge" in April 1912 reflected the same logic that has governed our dependence on oil - and shaped global politics - ever since.

After Churchill's decision, the British Treasury bought a majority stake in the Anglo-Persian oil company - the ancestor of BP.
In 1951, it was nationalised by the government of Iran. Our company, protested the British. Our oil, responded the Iranians. The argument would be repeated around the world over the subsequent decades.

Some countries did well. Saudi Arabia is one of the richest on the planet, thanks to its large oil reserves.

Its state-owned oil company, ASaudi Aramco, is worth more than Apple or Google or Amazon.

Still, nobody would mistake Saudi Arabia for a complex, sophisticated economy such as that of Japan or Germany. It's perhaps a bit more like Pithole on a grander scale.

Elsewhere, from Iraq to Iran, Venezuela to Nigeria, few oil-rich countries have prospered from the discovery. Economists call it the "curse of oil".

Juan Pablo Pérez Alfonzo, Venezuela's oil minister in the early 1960s, had a more vivid description. "It is the devil's excrement," he declared in 1975. "We are drowning in the devil's excrement."

Mongolia tenders 10 MW solar plant in Khovd Province www.news.mn

Mongolia’s Ministry of Energy is seeking contractors to develop and construct a 10 MW solar power plant in Khovd, the administrative centre of the province of the same name in the westernmost part of the country.