Publicity:
Genghis Khan might be rolling in his grave, wherever that is. The all-conquering Mongol was laid to rest in a secret location but he’d almost certainly disapprove of the foreigners coming to plunder his once mighty domain. And with all the mining activity rolling out across this remote and striking country, you really want to hope he doesn’t get dug up in the frenzy.


Mongolia is the big new frontier in a resources rush that’s breathtaking in its scale and speed. And among the companies leading the charge to exploit the mineral riches are two Australian giants – miner Rio Tinto and developer Leighton.


Leighton is operating a large joint-venture coal mine in the Gobi desert while Rio Tinto is about to open one of the biggest copper mines on the planet. It will soon account for more than 30% of the country’s entire GDP .


“Some of the optimistic geologists we have say that this business could run for up to 100 years. Those more conservatively say 50 years plus”. CAMERON MCRAE Rio Tinto


The Rio Tinto deal means the company keeps a large controlling stake in the operation and cedes the Mongolian government a 34 percent stake and that’s provoked widespread controversy and a degree of resentment among locals who are worried about where the benefits of Mongolia’s resource wealth will go. There’s concern the government is ill-equipped to strike complex and sophisticated mining deals in the national interest.


“People have different views on that deal. My feeling is Mongolia made a political decision. After all the deal is a financial transaction and whether it’s really beneficial to Mongolia I have many doubts about that.” DORJDARI - Responsible Mining Initiative


And it’s not only the deals that are sounding alarm bells. Environmentalists worry that the mining push has come so fast and so aggressively that proper checks and balances are not in place.


“Most of the tourists come to Mongolia because they want to see that pristine open space blue sky but what if we couldn’t offer it anymore?” ONO BATKHUU Mongol Ecology Centre


The other big question is – how will the spread of mining and its use of scarce natural resources like water impact the range of the proud Mongolian nomadic herders.


China Correspondent Stephen McDonell and cameraman Rob Hill have travelled to the awesome, sweeping Mongolian Steppe and beyond for this important report.

Mongolian steppe vistas/Herdsmen
Music
00:00

MCDONELL: Sandwiched between China and Russia, Mongolia is a land that for nearly all of its history has not been a place of cities or even towns, but of nomads farming and grazing for a living. That is, when they were not busy conquering other countries.
00:11

Music
00:28

MCDONELL:  Just about every inch of this landlocked nation is remote.
00:39
Herder boy with goats
This 14-year-old boy lives a day and a half’s drive to the west of Mongolia’s only city. He’s going to have a busy day. Some customers have arrived, so he’s driving his stock into camp.
00:44
Mother (Doljinsuren) and son
His mother will oversee today’s work.
00:59
Doljinsuren
DOLJINSUREN: A man who keeps his animals here has sold some. He sold them to people who were here before. He’s trading five or six goats for a horse.
01:02
Goats
MCDONELL: But before they can be traded, the goats have to be caught.
 
01:18
Boy chasing goats/Parents look on
Music
01:23

MCDONELL: Little has changed in these practices for many hundreds of years. The economy here is still ticking over using barter as a form of transaction, the same as it has for generations. Doljinsuren and her husband began herding in the area 10 years ago.
01:39

They now have three children and life’s fortunes pretty much turn on the quality of the seasons.
01: 55

DOLJINSUREN: Herders always hope for a warmer winter and springtime –
02:04
Doljinsuren
a harsh winter with snowstorms means they’ll face hardship. Generally, the herd is very vulnerable to extreme climate.
02:09

Family catching goats and loading into truck
MCDONELL: Though this is anything but an easy existence, there will always be those who want to work the land here. However the numbers are dwindling with each harsh winter or crippling drought. What’s more, Mongolian agriculture is now being swamped by a new industry and wherever you go, it’s not far away.
02:20
Gold mine
Music
02:42

MCDONELL:  In a nearby area the new Mongolian economy is creeping in and you’d have to say in this spot it’s certainly not pretty. As far as the local herders can see, this is the face of a mining boom that looks set to sweep the country – small scale gold hunting that’s destroying the river valley with little or no rehabilitation.
DOLJINSUREN: Once, the Booroljuut and Olt Valleys were very nice places.
02:49
Doljinsuren
When I was little, we used to pass through there. Now those places look like overturned earth.
03:16
Gold mine
Music
03:24

MCDONELL: But relatively modest operations like this are really just a sideshow, because the direction Mongolia is heading in is big mining.

Oyu Tolgoi Mine
Music
03:38


MCDONELL:  This country is in the midst of a mining-led transformation and at the forefront is the flagship Oyu Tolgoi Project. Run by Australia’s Rio Tinto, it will open in the coming months and become one of the biggest copper mines on the planet.
03:49

It alone is to account for more than 30% of Mongolia’s entire GDP. Yet only a few years ago, hardly anybody had heard of this place.
04:09
McDonell with Sanjdorj at mine
Geophysicist Sanjdorj, who like nearly all Mongolians goes by just one name, was part of a small exploration team camping out at Turquoise Hill or, in Mongolian, Oyu Tolgoi.
04:20
Super:
Sanjdorj
Geologist
SANJDORJ: [Geologist] Of course every geologist or geoscientist’s dream to discover something big, you know, but at that time we were so busy and we did not just imagine how it would be big, but we were very excited.
04:39
Sanjdorj holds rock sample
MCDONELL: What they were sitting on was a very rich deposit indeed, as you can see from the naked eye on the original samples.
04:54
McDonell with Sanjdorj at mine
SANJDORJ: To participate in the discovery of such a big deposit, it’s… how to say I don’t know… I’m feeling very proud from day to day.
05:03

Trucks at mine
MCDONELL: Though Sanjdorj now works for a Rio Tinto venture, that always wasn’t the case. In the early exploration days, he was on the payroll of another Australian company known as BHP. But the discovery here coincided with the Asian financial crisis. BHP pulled out. Rio Tinto snapped it up and now everybody has realised just what a huge deposit it is.
[to Sanjdorj]: Do you think that BHP would be kicking themselves now,
05:19
McDonell with Sanjdorj at mine
thinking I’d wish we’d done this?
SANJDORJ: Maybe [laughs] maybe.
05:54
McRae
CAMERON MCRAE: Some of the more optimistic geologists that we have say that this business could run for up to a hundred years. Those more conservatively say, you know, fifty years plus.
05:57

MCDONELL: Rio Tinto veteran Cameron McRae cut his teeth in Africa and Bougainville. He’s the company’s man in Mongolia and is CEO of the Oyu Tolgoi mine which will eventually have both an open cut and underground component.
06:08
Super:
Cameron McRae
CEO Oyu Tolgoi Mine
CAMERON MCRAE: The open cut will run at a contained copper grade of a per cent. The underground will run at a grade of about three times that.
MCDONELL: Is that good by the way for someone who doesn’t know about mining?
CAMERON MCRAE: That is good.
06:24
Truck at mine

06:39
McDonell to camera
MCDONELL: When you come to Oyu Tolgoi you can’t help but be struck by the scale of it and this is only one mine up here. In the coming years there could be dozens of operations just as big. Miners in countries like Australia must be scratching their heads and wondering how in the future they’re going to compete with Mongolia.
06:44
Fast motion. Mine operation.
Music
07:05

MCDONELL: Of course one way not to worry about the rise of Mongolian mining is to become part of it, as many Australian companies are. As a result Rio Tinto says it’s already helping this country significantly. After a boost from this single enterprise, from a mine that’s only in the testing and pre-stage stockpiling phase, Mongolia has seen economic growth of between 12 and 17% over recent years. Yet Rio Tinto says it can only pour billions of dollars into constructing an enormous mine in the middle of the desert after it’s signed a controversial agreement, giving the company a large controlling stake in the operation and the Mongolian Government only 34%. It’s an agreement that’s attracted considerable suspicion.
07:18
Dorjdari
DORJDARI: People have different views on that deal and my feeling is Mongolia made a political decision.
08:15

MCDONELL: Dorjdari from the Responsible Mining Initiative, is pushing for community groups to have access to the detail of all big mining agreements, including that at Oyu Tolgoi.
08:23

Super:
Dorjdari
Responsible Mining Initiative
DORJDARI: After all this deal is a financial transaction and whether it’s really beneficial for Mongolia, I have many doubts about that.
MCDONELL: But why is that?
DORJARI: Well, simply because you have on one side of the table Rio Tinto, which has an annual revenue far larger than our whole economy, and you have the best paid lawyers in the world, basically, who do those sort of deals every year on a regular basis. On the other side of the table, you have Mongolian Government people and none of them did such negotiation in the past.
08:34
Mine operation
MCDONELL: Apart from the ownership question, Rio Tinto was made exempt from a windfall profits tax. The day after the tax was removed, construction started at Oyu Tolgoi.
DORJDARI: It’s just like forcing some country to change its rules just because of one deal and in the future you can have like
09:20
Dorjdari
separate legal regimes for hundreds of mines and how the government is going to basically manage or supervise everything here.
09:44

CAMERON MCRAE: I think if you’re a business, and a law that was in place was going to stop you from investing and if the government was prepared to change that law, I would see that as a win-win situation.
09:53

Mine factory shots
MCDONELL: Because of the distance of this mine from, well, everywhere, machinery, pipelines and enormous buildings have all had to be constructed. This has cost more than 12 billion dollars.
10:03
Power lines
New power lines have been built to bring in electricity from China, and Mongolia’s neighbours drove a hard bargain before just agreeing to turn on the switch. But there’s one aspect of this mine which is probably its most contentious.
10:21
Shar on motorbike herding camels

10:44

HERDSMAN SHAR: I’ve herded animals since I was born. I served in the army for three years, but apart from that I’ve been herding animals continuously.
10:49

MCDONELL: Herdsman Shar knows that the most precious commodity in the South Gobi Desert is water and before the Oyu Tolgoi mine his animals knew where to find it.
11:02

HERDSMAN SHAR: Previously, animals would drink from open water sources. This was a pristine natural environment. But Oyu Tolgoi has closed off these old open water sources which it owns now.
11:15
Shar
Instead it’s built two or three wells for us and we’re drinking from these water wells now.
11:25


MCDONELL: We’re told that for the moment the water is plentiful coming out of the new Oyu Tolgoi wells, but this herder has heard rumours.
HERDSMAN SHAR: They say this water well will be closed by winter.
11:36
Shar
Then the camels will have nowhere to drink water from.
11:49
Camels drinking from well
MCDONELL: Yet Rio Tinto has told us that the new wells will stay open all year round. Critics of the mine say it’s good that the company is providing water to local herders, but they’ve questioned why it should have control over precious shallow water reserves. Then there’s the deep aquifer.
CAMERON MCRAE: Well we don’t actually know if it recharges
11:51
McCrae. Super:
Cameron McRae
CEO Oyu Tolgoi Mine
but if it doesn’t recharge then we’re only going to draw down on it by 20% in the first 30 years of the operation, and nobody else uses that aquifer so it’s not a shared water resource that others were using at the time of the discovery.
12:14
Mine shots
MCDONELL: There’s no mining without impact on the natural world and many environmentalists are worried that the extremely remote locations of these mines is meaning less scrutiny.
ONO BATKHUU: I’m not going to lose faith in our people and I do believe our government and our companies they have the best intentions in their hearts, but again, we do not have the
12:29
Ono
experience really with the mining and a lot of the issues that’s actually rising and emerging with it and we need to learn and we need to learn fast.
12:51
Ono and McDonell walk
MCDONELL: Ono from the Mongol Ecology Centre says the drive to mining is happening so fast that proper checks and balances are not in place. She also worries that mining could endanger another potential big money spinner for Mongolia.
ONO BATKHUU: Most of the tourists actually come to Mongolia because they want to see that pristine land. They want
13:01
Ono. Super:
Ono Batkhuu
Mongol Ecology Centre
to see that open space, they want to see that blue sky, but what if we cannot offer that any more?
13:22
Horses running on steppes
Music
13:28

ONO BATKHUU: And if somebody asked me, what’s the most thing that you’re proud of, I would say being Mongolian. And that comes with a question. What does that mean? And that means the sky and the mountains and the nature and then the culture and my people.
13:35

MCDONELL: Yet at the moment tourist dollars are not speaking as loud as mining dollars.
13:53
Mine shots
Music
13:58


MCDONELL: A few hundred kilometres across the Gobi to the west of Oyu Tolgoi is another whopping mine. The Ukhaa Khudag mine, known as UHG for short, is part of a wider coal deposit that’s also one of the biggest in the world. It too is operated by an Australian company, Leighton, but it’s owned by Mongolia’s Energy Resources or ER. Overseeing operations here, is ER’s Sam Bowles.
SAM BOWLES: [Co-Chief Operating Officer, UHG Mine] So at the moment we’re feeding about 40,000
14:02
McDonell with Bowles. Super:
Sam Bowles
Co-Chief Operating Officer, UHG Mine
tonnes of coal a day. That’s roughly a10 million tonne per annum processing rate. With the third module we’ll increase to about 15 million tonnes per year, so about 60,000 tonnes per day.
MCDONELL: That sounds like a lot to me, is that a lot?
SAM BOWLES: On an international scale this is a large coal mine.
14:36
Coal mine operations
MCDONELL: But there’s been something of a slowdown just across the border which has dampened expectations of what can be achieved here.
14:53
McDonell to camera
[at the mine] Well as you can see from the padded safety gear, it’s pretty cold up here looking down on the UHG pit, but again the thing that impresses is the size and nearly 100% of the coal that comes out of this huge hole in the ground is going to just one location – you guessed it – China. And not for electricity generation, this is mostly coking coal so it’s going into steel production. Now the company here has big plans to expand this operation, but it doesn’t want to go too quickly. Instead they’re waiting for Chinese demand for steel to really pick up again. But at the moment they do look like they’re doing a pretty good business as it is.
15:06
Mine
And mining in Mongolia is not for the faint hearted. In the middle of winter, it will hover well below minus 30 degrees Celsius with snow, ice and wind to deal with.
15:46
McDonell with Bowles
[to Bowles] I mean you were in Queensland before this. How do you go personally at minus 40?
SAM BOWLES: Oh look... just rug up... wear the right clothes.
16:01
Mine operations at night
Music
16:08

MCDONELL: People may joke about it but the extreme cold is actually a serious safety issue for everyone working here. Staff are on 12 hour shifts. That means at times working right through the night in the middle of a harsh winter. This also makes fatigue a major problem – especially for those driving heavy machinery.
16:17
Safety meeting
It’s 6.20 am and a new shift is preparing to come on. This is a regular morning safety meeting, but today there’s an important message. Overnight there’s been an accident with a driver going to sleep at the wheel. So it’s time for a big reminder of just how dangerous fatigue can be.
Then it’s off for another day of battle at the coalface.
16:48

Miners start work
Most staff here have had to be trained from scratch and giving new skills to Mongolians is something the company is trumpeting. They’re even helping break down a few gender barriers by giving opportunities to women in a pretty macho society. What’s more, the treatment of staff at the Leighton UHG mine is earning praise from would-be critics.
DORJDARI: Basically what
1718
Dorjdari. Super:
Dorjdari
Responsible Mining Initiative
people are saying, labour standards, the community development for UHG are really the example for all other companies including Rio Tinto for example, at least in Mongolia.
17:44
Local town
MCDONELL: There’s a town next to the mine which was once very sleepy. Lately it seems to have been expanding every day, and when you speak to people here, there seems to be quite a unanimity of views on the impact of mining on the local community.
17:59
Mongolian Man #1
MONGOLIAN MAN #1: Because of mining, the population is concentrated, buildings are being built and the economy and businesses are developing.
18:18
Mongolian Man #2
MONGOLIAN MAN #2: There are many positive things. Of course, the airport is one – also roads and transportation are developing.
18:26
Mongolian Woman #1
MCDONELL: And any negative things?
MONGOLIAN WOMAN #1: For instance, this dust problem.
18:36
Mongolian Woman #2
MONGOLIAN WOMAN #2: It’s clear that this dust is affecting people’s health.
18:41
Blasting at mine/Dust
Music
18:49

MCDONELL: This is an open cut mine in an arid fragile landscape with regular high winds. It does produce quite a bit of dust. In fact the entire Gobi region is plagued with this problem. Scientists estimate that the dust from here travels to Beijing, Seoul and even across the Pacific Ocean to the West Coast of America. But it’s the locals that the mine is probably most worried about alienating. Leighton and
19:02
McDonell to camera
its local partner ER have been sensitive, even paranoid about us showing too much dust at their site. They’ve even tried to censor any footage we’ve taken which they think makes their coal mine in the middle of the desert appear too dusty. Now we’ve not agreed to let them do that, but they’re obviously copping some pretty serious flak from somewhere about dust.
19:34
Mine operation/Clouds of dust
Well what do you say to those critics who say that you’re actually creating too much dust, not by the surrounds,
19:56
McDonell with Bowles
but actually by the mining operation?
SAM BOWLES: Oh look, we’re actively monitoring all areas in our lease to understand the dust that we are generating. There’s baseline studies to which we compare current operations and at present we’re definitely in compliance with our requirements.
20:06

Open cut mine
MCDONELL: Leighton says it’s as strict here as in Australia, but it’s still searching for new ways to water down dust in a climate where the best weapon against it freezes every winter, and that its local partner ER, has built hundreds of kilometres of sealed road outside the mine to reduce truck-driven dust. Yet the biggest criticism regarding UHG is not really to do with mining and is levelled at those based far away.
DORJDARI: With UHG the problem is
20:26
Dorjdari
again about the issue of fairness and how they got the licences, because Ukhaa Khudag was first explored by the use of state funds - our government budget basically - and then somehow it ended up in the hands of some business people.
21:00
Ulaanbaatar general views
Music
21:19

MCDONELL: Ulaanbaatar is the bustling, chaotic capital of Mongolia. It’s known for daily traffic jams on pot-holed streets. Here, shiny new office towers bulging with mining money, sit next to Soviet era structures. New apartment blocks are going up all over the city and the talk of the town is mining. Should UHG have been handed over to a private company? Is Rio Tinto paying its fair share? What’s really in it for Mongolia? Whether it’s true or not, there’s also gossip galore about backhanders and corrupt favours being done left, right and centre. As you might expect,
21:28

McDonell to camera
mining policy has become a hot political topic in Mongolia and the source of plenty of debate here in the country’s parliament. On the one hand you’ve got the government giving out these direct cash handouts to every citizen as a way of saying, see you’re benefiting from the mining boom. On the other, you’ve got these MP’s arguing that the original Oyu Tolgoi agreement was a rip-off for Mongolia and they want the entire thing now renegotiated. Either way, with so much at stake in these big mining deals, the arguments are not going away.
22:10
McCrae
CAMERON MCRAE: From our perspective, you know, we feel that the investment agreement is something that’s been great for Mongolia. We’ve seen a lot of development. It’s been something that the investors have relied on to go forward.
MCDONELL: So it’s a bit late to be renegotiating now?
CAMERON MCRAE: Absolutely.
22:46
Ulaanbaatar parliament building
MCDONELL: We had arranged to speak to the country’s mining minister for this program but at the last minute he pulled out saying he was too busy. One thing we would have asked is how wide he really expects the benefits of this boom to go. On the outskirts of the capital,
23:04
Ger communities on the outskirts of the city
hundreds of thousands of people now live in the so-called ger communities that cover the hills. There’s no power or sewerage and people burn whatever they can for heat.
23:21
McDonell with Chantsaldulam inside tent
Chantsaldulam is the rather typical mother of a family that’s drifted into the capital and set up camp in her tent or ger. Hoping the mining boom will bring job opportunities in the capital, they’ve abandoned rural life.
23:35
Chantsaldulam
CHANTSALDULAM: When we first came to Ulaanbaatar the urban culture and environment felt very nice. However, it became very difficult when I had no job.
23:50
Chantsaldulam cooking/Children
MCDONELL: However there are bits of work here and she’s currently making $154 a month. She’s going to stick it out in Ulaanbaatar so her children can get a better education, but her most important priorities are paying for food and heating for the winter. She’s heard about a boom elsewhere.
24:06
Chantsaldulam
CHANTSALDULAM: Poor people like us are not feeling it. Now it is hard to find heating coal. They say Oyu Tolgoi is developing and prospering. I simply wouldn’t know about that.
24:27

Music
24:43
Children eat
MCDONELL: The end of the day for her family is the beginning of the day for this mother. After speaking to us, she heads off into the night where she’ll work through to around 7 am cleaning dishes in a restaurant and each new dawn brings many more like her to the capital.
24:47

Ulaanbaatar traffic/people
Mongolia has some huge decisions to make in terms of what type of country it wants to be. Many say it’s a mining future or bust but others are holding out to see if extra government revenue actually leads to better infrastructure. Pollution, corruption and a gaping wealth divide are all major concerns, but even the poorest here can be pretty optimistic.
25:08
Chantsaldulam
CHANTSALDULAM: Well, I’m thinking Ulaanbaatar will be very nice and beautiful.
25:35
Chantsaldulam and children at stone mound
MCDONELL: Chantsaldulam and her children take part in a ritual that’s been played out for centuries in Mongolia. Soldiers once left a stone before going off to war and they’d collect it when they returned, giving an idea of the losses in battle. These days, people place stones hoping for good fortune in the future. It’s a pile that’s getting higher and higher.
25:39

Reporter:     Stephen McDonell
Camera:      Robert Hill, ACS
Editor:     Scott Monro
Research:     Qian Zhang
Mongolian fixer: Ganbat Namjilsangarav
26:09