G. Iderkhangai sees the future coming up in Tsogttsetsii soum of Umnogobi province.While we waited for the plane to take us to the Gobi on this assignment, my companion cameraman told me I should have worn more warm clothes. I wondered if we would find everything under snow and if a sand storm would make things worse. As we took off, there was an announcement that the temperature at destination would be -2 C, and further reassurance came when I looked out and saw the naked yellow steppe below, all snow melted away. I also heard someone saying it had snowed in Tsogttsetsii for a few days, but it took just one day of the proper spring weather to melt it all away.
Thus relieved, I took a look at my fellow passengers and saw that among the members of parliament were Ts. Sedvanchig and G. Bayarsaikhan, both of whom were recently honoured as Green Stars by the union of civil movements for environmental protection. On landing in Tsogttsetsii, a place much warmer than I had expected and free of pollution, I learnt that the MPs were visiting the Tsankhi area in Tavan Tolgoi to study how post-mining rehabilitation and environmental laws were to be enforced in the areas of Oyu Tolgoi and TavanTolgoi. I had planned to write on life in the soum, but thought it would be better to join the MPs’ team.
So off we went and it took us just ten minutes to reach the ger camp of Erdenes MGL, the company that owns 96 percent of the Tavan Tolgoi deposit, 88 percent of which is coking coal. There are about 30 gers and some toilets for the use of their 150 workers who work in 3 shifts. Soon it will be expanded to serve 600 people, and in the not too distant future, the camp will give way to a township for thousands of people.
The Vice Chairman of Erdenes Tavan Tolgoi was to be our guide and his very first sentence was: “Our company has been valued at USD15 billion, even though no coal has yet been mined and there is almost no infrastructure.” When MP Sedvaanchik asked if mining had already begun in January, it seemed strange to me that our politicians did not know that actual mining was still far away, and the company was working on some just basic construction at the moment. However, our guide said 90 percent of the work of clearing the surface has been finished and the site for the shaft to reach the coal was cleared.
Erdenes Tavan Tolgoi plans to use water from the lake Balgasiin Ulaan for mining, though other sources will need to be discovered as time goes by. Three business entities are now working in the area of Tavan Tolgoi: Energy Resources LLC, a consortium of 14 Mongolian companies; the privately owned and small Tavantolgoi LLC; and the state-owned Erdenes MGL LLC. Each is expected to arrange to meet its own electricity needs and to construct a stretch of railway track to meet up with the national network. It is likely that the three will jointly search for new water reserves. MP Enkhbat suggested setting up a Water Council to help in the work, like in Australia.
In private conversation, the MPs admitted that they have gradually realized that there is s huge difference between mining and politics. One of them commented that mining work has to follow a strict schedule, with every little deviation from it meaning loss of money, while Parliament members enjoyed the luxury of taking a decision and then changing it as often as they wished. He also wondered if their decisions were always realistic.
The current resources estimate of Tavan Tolgoi were determined by the Russian Mongolian joint council in 1988 and must be updated by using improved and more modern methods. Heavy machinery from Caterpillar, Komatsu and Liebherr is at work, raising clouds of dust. Erdenes MGL has five Rigid Dump Trucks and uses them in the eastern part of the Tsankhi. I also saw two excavators.
Initial mining by Erdenes Tavan Tolgoi will cover comparatively easy parts, where heavy equipment can be operated without obstacles. This will be in the first two years when some 9.8 million tons of coking coal will be extracted from up to the fourth level. Thereafter they will enter Phase Zero or the deepest phase, to bring up some 15 million tons of coking coal annually for 30 years.
The western part of the Tsankhi on the Tavan Tolgoi deposit will be run by international investors yet to be named, while Erdenes MGL will hire a contractor for mining the eastern part. The western part has 1,204 million tons of coal, 65 percent of it coking coal, while the eastern part has 1,078 million tons of reserve, with 78 percent of it is being coking coal.
Erdene MGL spends its own money on surface clearing
All the work on “overburden removal”, the industry term for surface clearing, between August and November last year was done by Erdene MGL on its own, and it has been well done. Some 530,000 sq. meters have been cleared so that the pits are ready to yield 50,000 tons of coal. Initial coal thickness is between 15-18 meters. Ultimately excavation will reach a depth of 280-300 meters. As one pit is abandoned after optimal extraction, it will be filled with fertile soil and greenery will return.
There have been some complaints that Erdenes MGL issued no tenders for overburden removal even though the money came from the state budget. Erdenes MGL says the allegation is baseless, for even though it is a state-owned company, it did not require any state funding for this work, choosing to do it with its own resources, from revenue earned from the 15 deposits it owns.
This will also help when it finally goes for an IPO, for investors like to see what a company has so far done and evaluate the nature and quality of its experience. It is not enough to have an enormous reserve; a company must convince investors that it will be able to exploit the reserve successfully. Overburden removal is just a part of this but it is an important beginning.
Not all the surface is vacant. Erdenes Tavan Tolgoi will have to remove 17 winter shelters for herders and their animals from the area and this predictably becomes an issue. The company agreed to build alternative shelters elsewhere and also promised better constructed facilities, but some herders have struck out for more money than the company and most observers feel is reasonable. For example, one herder insists on being paid MNT900 million as compensation. The company is confident an amicable solution will be reached with all individual households.
Everybody wants land for future profit
The MPs went back to the soum center to meet local residents. Many complained that officials had handed over to companies land at Tsogttsetsii that should have been theirs. A woman who spent weeks to take the papers for the land promised to her finally found the title had been made out in someone else’s name. She wept as she narrated her tale to the visitors. An old man who had lived in the soum center all his life has now been told he cannot have land there. He waited for a year for his plea to be reconsidered, and now lives on rented land. He wondered if in the coming days land distribution will be mired in corruption.
The mining boom promises to turn Tsogttsetsii and Hanbogd soums into townships, where land is a commercial asset. Every Mongolian is allocated 0.7 hectares of land free of cost, but this is changing hands for MNT15 million on average, while a plot for a petrol station sold for MNT808 million in an auction, while another of 4 hectares fetched MNT560 million from people who want to build a tourist camp there. There are many such examples. With the distribution of free land scheduled to end in 2012, everybody is in a hurry to lay his hands on something that can be put to commercial profit later.
Last year, the Government earmarked for industrial use 3,512 hectares of land in Dorngobi province, 7,736 hectares near the Oyu Tolgoi deposit, and 3,667 hectares near Tavan Tolgoi. People in Tsogttsetsii soum said they had not heard of this but officials insisted they had announced the decisions.
The old saying that living in Khangai as a bull is better than living in the Gobi as a human being is being turned on its head. The future is luring people into Tsogttsetsii soum, even when they do not know how or where they will live. The population has risen from hardly 2,000 two years ago to 9,000 today. As in all crowded urban areas, shops are coming up to cater to the needs of the surrounding habitation but the general goal is to have a job in mining for at least one member of every family. So people want to be near the center of action before it is too late but such unregulated influx means 2,000 children have to be accommodated in schools with capacity for 750. Kindergartens are under similar pressure. The soum needs at least two schools and three kindergartens immediately, but the head of the soum says they have no money.
Life as it is lived
I spoke to some families in Tsogttsetsii. B. Jaalbaatar lives in a ger close to a garbage dump. A few years ago an increasing fondness for alcohol was making him indolent, but some time spent in South Korea opened his eyes to opportunities to make money in Mongolia. He now has 20 pigs that eat stuff he collects from the kitchens of mining companies. He also collects bits of glass and metal from the garbage dump and sells them for recycling. There have been millionaires who began thus humbly.
Jaalbaatar’s request for financial help to expand his business has not been met by officials. He leads the NGO, Healthy Environment of Tsogttsetsii, and arranges for jobs for some poor people, paying them MNT108,000. He sees how anomalous it is that there are so many poor people in Tsogttsetsii, home to some of the richest mineral deposits in the world. People older than 40 are not chosen for mining jobs, so they come to him instead. He also sees how the haphazardly dumped garbage pollutes the environment, and since much of it comes from companies, he wants better management methods for both collection and disposal.
Some at Energy Resources LLC once watched a TV show featuring a young family that made a precarious living from collecting garbage in Ulaanbaatar. The company brought them to Tsogttsetsii, and gave Tsogoo, the man of the family, a job tending stoves in the gers at its camp. His wife, Bayarmaa, helps with housekeeping chores there. She told me they and their four children live much better in Tsogttsetsii than they did in Ulaanbaatar. She hopes her husband will one day become a mine worker and life would be even more wonderful. The company looks after them, with working hours so arranged that they can properly look after their kids. Energy Resources will soon be ready with a kindergarten where their workers like Tsogoo and Bayarmaa can send their children.
T. Otgonbayar is also from Ulaanbaatar but he came on his own, looking for business opportunities. He makes ger furniture and morin huurs at a rented place and is troubled by frequent power cuts. He hopes to bring his wife and children here after his business is more successful. Wood and other material are not cheap in the Gobi and he also has two business competitors. His prospects will improve with a loan but his long-term goal is to find a job in a mine.
His friend Tuvshinjargal came from Dundgobi province a year ago with a family that has four children. They rent a ger for MNT70,000 per month to make traditional boots and saddles. The latter has acquired fame among race horse trainers. He has to bring the leather from Ulaanbaatar, making a profit of around MNT25,000 for a pair of boots. This is not too much and to keep costs low, he steals electricity from neighbours. He is a skilled worker who works hard, so I asked him why he stays here when he can earn more in Ulaanbaatar. He did not agree, saying that the competition was stronger in the capital while the demand for boots was not very high. In Tsogttsetsii, on the other hand, everybody except administration officials wore and needed boots. He has a large number of regular customers whose trust he has earned. Interestingly, when he approached the local governor for a loan, he found the official had no time for small loans or for anything micro. He was focused on mining deposits.
N. Adyasuren, chief of the service department at Erdenes Tavan Tolgoi LLC, is proud of the fact that she is among the first workers in a company that will soon become a name in the world, and that she is a native of the South Gobi. Her husband is a driver at Energy Resources. They have lived in Tsogttsetsii for 10 years now, and have just built a pretty house that cost MNT30 million. They also own a jeep.
Life in Tsogttsetsii soum is changing. Nomadism is giving way to apartment districts and supermarkets. Will the vast steppes one day stop reverberating to the hooves of the nomads’ horses, giving way to the wheels of a variety of vehicles owned by modern nomads?