Mining the Gobi The Battle for Mongolia's Resources
Part 3: The Downside of Dependence
As the protests grew louder, the country's cabinet froze all licenses that had already been issued. Last year, when a foreign company wanted to sell a coal mine to a Chinese corporation, Mongolia's new government temporarily halted all foreign strategic investment in the country.
Environment Minister Oyun describes herself as a staunch economic liberal, but believes that in the case of poor but resource-rich countries such as Mongolia, liberalism needs some limits. "It isn't good to make yourself dependent, whether on a large neighboring country, on a company or on natural resource price cycles."
In late July of this year, the price of copper was around $7,000. Under the shimmering sun of the Gobi Desert, Rio Tinto's drilling machines had surrounded half of Oyu Tolgoi's banana-shaped deposit with a dense network of tunnels and shafts. Another seven years and a further $5 billion would make this the world's most modern copper mine, extracting ore from every shaft and making its owners rich.
The Tug-of-War Continues
At least, that's what the company's stockholders thought until last week, when the British-Australian corporation suddenly halted work, saying the Mongolian government had announced that not only the cabinet, but the parliament as well, needed to approve funding for the mine. "In view of the current uncertainty all funding and work on the underground development will be delayed until these matters are concluded and a new timetable has been agreed," the company stated.
That didn't just sound like a threat, it was a threat. Shortly after the company's announcement, raw materials analyst Tony Robson warned that, "Mongolia's reputation for mining investment has been destroyed."
Later last week, the government tried to calm mining investors' worries: "Parliament has already made the decision and signed their agreement," Prime Minister Altankhuyag Norov said at a press briefing. Not even the cabinet would have to be involved. "All issues can be discussed and decided at the board of directors level," he explained.
The tug-of-war between the poor, rich country and the corporation will go on.
Editor's note: For the sake of clarity, the editor's have amended this story to note that, as a junior partner in Mongolia's coalition government, the Democratic Party was responsible for nominating Mongolia's finance minister. We have also specified that Robert Friedland held a 50-percent stake in a copper mine in Burma. In addition, the term "cash flow engine" has been changed to "cash machine," and "mining license" has been changed to "exploration licenses" to provide the most accurate translation possible.
Translated from the German by Ella Ornstein