The mine is jointly owned by the Government of Mongolia (with 34% stake in the project) and the companies Turquoise Hill Resources (formerly Ivanhoe Mines) (Canada) (with 66% ownership). Rio Tinto (UK) has a 50.8% interest in Turquoise Hill. The International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) are also financiers of the project.
BIC has been monitoring this project in collaboration with local and international partners since 2011. Two fact-finding missions undertaken in 2011, one by a USAID field team and another by a coalition of CSOs (including BIC) found that the long-term interests of the mining companies and the traditional herders that live nearby are incompatible. One of the most significant concerns is water resource management. Oyu Tolgoi is located in the Southern Gobi Desert, an arid ecosystem that is suffering the effects of increased desertification due to climate change. Mining is a notoriously water-intensive industry, and the large size of Oyu Tolgoi means that the nearby nomadic herding community's access to water may be put in jeopardy.
Phase one of the Oyu Tolgoi project, which involved development and operation of the open-pit mine, is completed and production began in 2013. Over the past six years, civil society organizations have filed multiple complaints with the IFC's Compliance Advisor Ombudsman (see external resources section below) regarding the social and environmental impacts of the project.
Phase two of the project, which involves underground infrastructure and mine development, is ongoing. Oyu Tolgoi is currently negotiating the construction of a 300MW power plant to power the second phase of the mine. Ongoing social and environmental concerns include:
Oyu Tolgoi is a huge mine with a project life of 30-60 years. Since the project's inception, CSOs have raised concerns about the project's impact on water resources, particularly for local nomadic herders who rely on existing water resources to sustain their livelihoods.
A 2014 report by the 2030 Water Resources Group stated that "serious water challenges which can threaten the country’s economic and social development" exist in the Southern Gobi desert, and "the largest single water users in the Southern Gobi are the mines." Another mega-mine, the Tsagaan Suvraga copper mine, is 230km to the north of Oyu Tolgoi, and an additional five to six medium-sized mines are located within a 500km radius. According to the Water Resources Group report, "future water demand in Galba-Uush-Doloodiin Govi Water Basin in 2021 is projected to increase by 350 percent, 720 percent and 912 percent in the low, medium and high economic development scenarios, respectively. The high increase in water demand is driven by the newly developed mines, namely Oyu Tolgoi, Tavan Tolgoi and Tsagaan Suvarga."
The Water Resources Group report also stated that "water demand projections show that expected water demand could exceed available resources in the high water demand scenario before 2030. However, in all scenarios high water risks can be expected at the local level, including quantity and quality, as increased water demand from mining and industrial activities puts a strain on locally limited water resources. Future effects of extensive groundwater extractions are yet to be understood. Competing, future water demands hold strong potential for conflicts between mining companies, herders and local communities dependent on groundwater resources."
The Tavan Tolgoi mine, the world’s largest untapped coking coal deposit, is a mere 160km away from OT. OT is currently negotiating the construction of a 300MW power plant to power the second phase of the mine, which will likely use coal from Tavan Tolgoi.
The overall cost of the Oyu Tolgoi project is expected to be around $12 billion.
The IFC and the EBRD have spearheaded a fundraising effort with a consortium of other banks for approximately $4 billion. The co-financiers include Export Development Canada (EDC), Standard Chartered Bank, BNP Paribas, US Export Import Bank (US EXIM), and the Multilateral Investment Guarantee Agency (MIGA). The balance will come from sponsor equity, shareholder loans, and project-generated cash flows. The IFC has approved a Category A loan amount of $400 million from its own accounts, as well as a B loan program syndicated to international commercial for approximately $600 million. The EBRD has provided $400 million in Category A loans and approximately $800 million in syndicated Category B loans. Standard Chartered Bank has also received a political risk guarantee from MIGA in the amount of $1 billion. The lenders signed the $4.4 billion lending agreement for Oyu Tolgoi on December 15, 2015.
Executive Director, Oyu Tolgoi Watch
Oyu Tolgoi Watch is a Mongolian NGO founded in 2010 to monitor Oyu Tolgoi investment agreement compliance with national and international laws and standards.
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