S. Batkhuu, CEO of Tsairt Mineral, tells D. Ulaanaa that his company wants to be a model of responsible mining and asserts that constructive cooperation with the local community is very much possible.
Zinc is the main mineral processed at the Tomortiin Ovoo plant. Has any other mineral been found at the deposit?
Tomortiin Ovoo is primarily a deposit of zinc, but the ore has other minerals mixed in it. It is not yet known if they have any commercial value. Minerals of many types are found underground but it is impossible to extract all of them. Our zinc ore has in some cases silver mixed in it. We can sell this but if any mineral is found in the concentrate we export, we have to pay royalty on it.
When did your mining operations begin? How much zinc has been extracted until today? Have you been able to add to the originally estimated reserves?
We started work in August 2005 and have so far extracted 5.7 million tonnes. Our annual processing capacity is between 400,000 and 420,000 tonnes. New reserves identified in January 2019 would add another 8-9 years to the mine life. We are also likely to change from being an open pit mine to an underground one. At present estimate, we shall continue mining and processing at our current capacity until 2030. This is great news for the country, the local community and for all our employees. We have always tried to engage in responsible mining and are sure we shall be able to raise the money to develop the underground mine.
Please tell us something about the company’s investments in the local community as part of its social responsibility agenda?
The MNT 1.5 billion Tsairt Mineral annually puts into the Sukhbaatar aimag’s budget under a cooperation agreement signed with the local community in 2013 is spent on health, education, agriculture and construction, and on encouraging small and medium entrepreneurs. Specific programmes are identified, discussed and adopted and the amounts to be spent on them determined. Among the major works taken up or implemented are: renovation of the Central Square with the statue of Sukhbaatar at a cost of over MNT 800 million in 2007-2008; construction of housing for miners at the centre of the aimag, where the third building was commissioned last November, bringing to 108 the number of our workers’ families settled there. Some families have more than one member working for the company, and some others now have a second generation with us. Infrastructure issues such as power, sewage and roads have been resolved, and we are now ready to build another apartment building.
As regards education, the company pays all the tuition fees of those who meet certain requirements to study in colleges and universities. Altogether 400 such scholarships have been awarded, usually 40-50 every year. They are mostly children of our employees or from soums which have some cooperation with the company. As 98 percent of our workers are citizens of Sukhbaatar aimag, we encourage and pay for development of team sports in the aimag, especially volleyball. A volleyball championship named after Tsairt Mineral has been organized at the aimag level for the last 14 years. It has always been a great success.
MNT 600 million has been spent on improving facilities at the aimag’s central hospital, including providing equipment for first aid, a laboratory to test for Hepatitis B and C, and a pair of lifts. Another MNT 600 million has gone into completion of construction of a hospital of traditional medicine, a project that is almost finished. In addition to these, MNT 800 million has been spent on several health-related projects, including improving facilities at smaller hospitals spread over the aimag.
Altogether, how many apartment buildings do you plan to build for employees?
Our plan is to build five, of which three are already in use. The remaining two should be completed within two years and then all employees would have apartments. People who work for the mine and dedicate their strength and efforts to the development of their country have the right to live in modern apartments. Roughly, every employee’s work over a year helps put MNT 230 million into the state budget. Our miners are our main asset and we always try to make their living and working environment and conditions safe, good and comfortable. Our policy is to give them a regular annual raise. Last year, the increase was by five percent and this year, it would be by 10 percent.
Who initiates the activities that you fund under the cooperation agreement -- the local community or the company?
The local community. Aimag leaders identify and prioritise activities, mainly on the basis of what would benefit most citizens, and we generally agree with them. We did many things on our own, as our social responsibility, in the days when we had no cooperation agreement, but I think it is better for those who determine policy to identify needs rather than leave this work to an entity.
Of the MNT 2 billion Sukhbaatar aimag received in 2018, under cooperation agreements with mining companies, as much as MNT 1.5 billion was from Tsairt Mineral alone. That contribution apart, do you take up any project for the community? One of your officials has said you spend three percent of your profits on the aimag.
We have given financial support to many traditional activities. Its total amount until 2018 would be about MNT 2 billion. Incidentally, the cooperation agreement Tsairt Mineral signed with the aimag Governor’s Office in 2013 was the first such act by any mining company. It was voluntary on both sides, but its success meant that the agreement was extended after four year and this practice would continue. This method of cooperation should become the model for other companies. Mining will be easier if there is a feeling of trust and cooperation between a company and the local community, and when mining flourishes many small and medium businesses get a chance to grow.
Have you found it difficult to cooperate with the local community?
It is difficult to say that everything has been good always. However, our mutual understanding has been overall good, and our operations have never been interrupted. People see the need for effective cooperation when they realise that the financial contributions made by the company helps the state pay the salaries of public servants and pensions to the elderly, among other things.
A recent mining conference held in the aimag has led to a proposal on changing some conditions in the agreements between mining companies and the aimag. What is your position on this?
We have nothing against it. As a matter of fact, the terms of the agreement we have signed are not quite final. We hope more discussions will lead to a consensus on what is optimal for both parties.
Do the existing terms call for the company to take up one large construction project?
We have already implemented several such projects, including those on Sukhbaatar Square and Dorvolj Park.
What is the total amount you have so far paid in taxes to the state and the aimag?
Between 2005 and 2007, all taxes were paid to the aimag. Then the law was changed, and we were put in the “large taxpayers” category. Now we pay under many heads directly to the State. At present, personal income tax, health and social insurance taxes, land and water fees and immovable property tax are paid to the local community. Last year, we paid MNT83 billion to the state budget and out of this, MNT 3.1 billion was allocated to the aimag. The government also allocates money to the aimags from the central community development fund, with the amount for each aimag determined on the basis of the amount of the royalty paid by miners operating there. Our contribution to the fund works out to about MNT 30 billion, of which MNT1.5 billion comes to the aimag. As for the total you ask for, Tsairt Mineral has so far paid MNT 445 billion in tax to the state and the local community.
What would be the right course to take to develop responsible mining in Sukhbaatar aimag, and to ensure the most benefit for the local community?
There has been mining in the aimag for long, with Burentsogt and Talbulag being among the first mines. Several coal, fluorspar and iron ore mines followed them. Tsairt Mineral was established in 1998 to put the Tomortiin Ovoo zinc deposit into economic circulation. Production began in 2005, but unfortunately, none of the several other large mines that have come up here since then have had stable operations. There will be great benefits for the local community when they do so. That way, mining has not developed satisfactorily in the aimag. Mines should work responsibly and the aimag should then support them. Ordinary people have very little knowledge of mining, and the other stakeholders have not made any real effort to provide fair information to them. I think there is great potential for mining in the aimag but decisions to operate depend on so many factors, many of them social and not necessarily commercial. Price fluctuation in the world market happens on a daily basis and is not so major a factor.
More mining will surely bring development to the community, raising individual incomes. Developing infrastructure will create jobs. The direct impact of mining on the community can be seen from the experience of Dornod and Dornogobi aimags, where life has changed so much for the better with new people moving in and with infrastructure being built. Similar opportunities are there in Sukhbaatar aimag. If the road and the railway to the Bichigt border post are built, it will throw open big gates for development.
How have professional organizations assessed your reclamation work?
Some work is done every year, but we do not have a really big area, so there not much to do, and we spend between MNT 100 million and MNT 200 million annually on reclamation, both technical and biological. At least 1,000 trees have been planted, and various measures on environmental protection, such as safeguarding wells and springs in the vicinity, taken. Each year, a team including local professionals and citizens inspects the activities carried out. In general, it has approved over 80 percent of our work.
How do you work with local businesses? Recently there was criticism on the social network that Tsairt Mineral does not cooperate with tailoring companies.
According to our agreement with the aimag, MNT 500 million of what we pay annually to it goes into the Small and Medium Businesses Support Fund and granted as loan to projects and programmes to create more jobs. Some 100 workplaces were generated in the last two years as a result of this. Tsairt Mineral cooperates as much as possible with local producers to meet its processing plant requirements. Recently, we renewed our agreement with Sukhbaatar Proimpex for it to sew 5,000 ore sacks. Meat and other foodstuffs are also procured from the aimag.
How many employees do you have and what percentage of them is local?
We have 370 employees, including about 40 non-Mongolians who work in various capacities in technical departments, and 98 percent of the Mongolian are from Sukhbaatar aimag.
Why is there so little about you in the media? Do you discourage media interest?
Tsairt Mineral does everything according to law, and that is why we are not in the news or in the public eye. We know that most people have a positive view of us. I think that enough information on us is available on our website www.tsairt.mn. We drew the optical fibre from the centre of the aimag, and in the process made it possible for citizens of Sukhbaatar and Tumentsogt soums to be connected through the mobile communications network. Now there is almost no household here that does not have a mobile telephone or television. This gives them access to information. No, we do not discourage media interest, and provide information on the public television. Last year, we signed an agreement with the newspaper Sukhbaataryn Ongo to help us disseminate information about us more widely. We have had similar cooperation with a local magazine. We are open to all who want to know about our mine’s operations and every year organize an acquaintance tour to Tsairt Mineral. Let me make it clear that we are always ready to offer information about our operations to those who are interested.
Now that the company does not pay taxes directly to the aimag, people no longer know how positively you impact local life. What do you think about this?
Changing the arrangement was a political decision that might turn out to be beneficial, but you are right that people no longer get to understand how directly mining benefits a local community. The present system is seen as the government distributing what it receives equally among the aimags but I find inherent inequality in it. It would be right to allot to Sukhbaatar aimag more of the revenue that was generated there. Since this is not done, citizens fail to see how mining benefits them. They cannot be blamed if they then nurture wrong ideas about mining.
Since mining is the major source of state revenue, and we have budget deficits, the Government should support this sector so that it can operate stably and provide more revenue. The Government should make the legal environment clear and sustainable to help mining grow and thus help local communities develop faster, and the economy get stronger.
How do you plan to become more local community friendly?
We aim to become a model of responsible mining to the extent that people in other aimags would demand from mining in their areas the same standards of excellence as seen in Sukhbaatar aimag. The main thing is that the Government should have a sustainable policy supporting mining and let people see its benefits.
Were you ever approached by decision makers offering support in return for some consideration?
No. We are confident that our reputation as a responsible mining concern is too strong for any such approach.
How do you see the future of the company?
We shall extract from the Tomortiin Ovoo deposit until 2030 with ten-year plans and our hope is that by then we shall have a new project to take up. We have trained our workforce in processing zinc ore and this skilled team must find a way to work productively for a long period.