The mine at Oyu Tolgoi ("the Project" or "OT") is a copper and gold mine in the South Gobi region of Mongolia. The Project's developer is Oyu Tolgoi LLC ("the Company"), a Mongolian corporation that is jointly owned by the Mongolian government and Turquoise Hill Resources Ltd. (a subsidiary of Rio Tinto PLC, which acquired former Project partner Ivanhoe Mines in 2012). One of the world's largest known copper and gold deposits, the OT deposit contains an estimated 80 billion pounds of copper and 45 million ounces of gold. Mining operations will be divided between open pit mining of a near-surface deposit at Southern Oyu )where the Company has constructed an ore concentrator capable of producing 100,000 tons of ore per day (tpd)+) and underground block-cave mining of the high-grade deposit at Hugo North. The Company, which announced in August 2012 that the mine's infrastructure was 94% complete, projects that the first ore from Southern Oyu will enter the concentrator in September 2012. (Production at Hugo North is expected to begin in 2016 or 2017, bringing OT's production to full capacity by 2018.) The projected mine life is 27 years, and the Project's operational workforce will number approximately 3,500. The construction workforce, estimated by IFC to have peaked near 14,800 in late 2011, includes over 9,000 Mongolian workers.
In addition to the ore concentrator and other infrastructure required to support open pit and underground mining operations, the Project will require construction of:
The Project is located approximately 550 km south of Ulaanbaatar in the mngovi province (aimag). Of the relatively nearby South Gobi communities, the nearest is Khanbogd, a town with a population of around 2,500 located 35 km east within the district (soum) of the same name. The Bayan Ovoo community, with a population of 1,600, is 55 km west. The most prominent nearby community is the small city of Dalanzadgad, which is located 220 km northwest; with a population of 15,000 and facilities including a regional hospital, technical colleges, and a domestic airport, it is expected to serve as OT's regional recruitment and training center. Approximately 310 km north, on the road between OT and Ulaanbaatar in the Dundgovi province, is the town Mandalgovi (population 13,500). An 80-km gravel road leading to the Mongolia-China border crossing at Gashuun Sukhait is being upgraded to a tarred highway in order to facilitate the trucking of mine output to China, the Project's primary target market.
+An expansion of capacity to 150,000-160,000 tpd is under consideration. A Project expansion will require regulatory approval by the Mongolian authorities, including additional environmental approvals, and will necessitate the identification and permitting of appropriate water resources. The IFC will require updated project documentation, and an expansion proposal will be subject to full consultation and disclosure per IFC policies. Similar updated documentation and further consultation and disclosure procedures will be required for construction of the power plant.
The IFC classifies Oyu Tolgoi as a Category A project according to its Environmental and Social Review Procedure *because it is a very large, complex project with correspondingly significant risks and impacts on the environment and way of life in the Southern Gobi.* Potential adverse impacts identified by IFC include a burden on freshwater resources, dust and noise nuisance to herders and vegetation, biodiversity and habitat concerns, potential contamination resulting from use of chemicals (e.g., frothers and settling agents) used for ore processing and other hazardous materials like fuels and lubricants, emissions from mobile mining equipment, process heaters, the ore concentrator, and power generation, impacts on tangible and intangible cultural heritage, and social impacts resulting from a sudden influx of workers to Khanbogd (including overburdening of existing municipal infrastructure, services, and facilities as well as risk of conflict between native and settler populations). The Company's ESIA also noted the risk of recurrence of unregulated artisanal mining activities as a result of the population influx.
APPLICABLE IFC PERFORMANCE STANDARDS
According to the IFC, the Project will have impacts that must be managed in a manner consistent with the following Performance Standards:
* PS1: Social and Environmental Assessment and Management Systems
* PS2: Labor and Working Conditions
* PS3: Pollution Prevention and Abatement
* PS4: Community Health, Safety, and Security
* PS5: Land Acquisition and Involuntary Resettlement
* PS6: Biodiversity Conservation and Sustainable Natural Resource Management
* PS8: Cultural Heritage
There is no evidence that the Company undertook a separate Human Rights Impact Assessment pursuant to the IFC's Guide to Human Rights Impact Assessment and Management. According to the IFC Sustainability Framework Performance Standards, "In limited high risk circumstances, it may be appropriate for the client to complement its environmental and social risks and impacts identification process with specific human rights due diligence as relevant to the particular business," but HRIA is not required of all projects (see footnote 12). However, Rio Tinto has developed a Human Rights Guidance
document for use by its managers, which includes a checklist of human rights indicators.
Project appraisal by the IFC, which commenced in 2010 and continues through 2012, has included:
According to the ESIA, consultations have indicated that Mongolian stakeholders (including local populations, government and administrators, civil society groups and NGOs) support the project overall, so long as adverse impacts are minimized and adequately managed and the benefits to the public actually materialize at the district level. Of the community's various expectations, the provision of direct employment opportunities is the highest priority. The ESIA notes that the general approval was coupled with stakeholders* will to be consulted moving forward with design and implementation of the Project.
ENVIRONMENTAL AND HUMAN RIGHTS RISK ASSESSMENT
Although the construction workforce peaked around 15,000, the permanent operational workforce will be 3,500. As part of the Investment Agreement, the Company has committed to making best efforts to ensure that at least 60% of the permanent labor force is made up of Mongolian nationals. However, according to a January 2012 report (see link to Spirited Away report), employment opportunities *remain limited* in Khanbogd and some 3,000 of the Mongolian employees counted to achieves the 60% were students on vocational training. While the workforce has been sourced primarily from within Mongolia, there are three major Chinese sub-contractors whose workers are recruited, mobilized, and demobilized in China. According to IFC, during working rotational periods, all contractor workers remain on-site in a separate camp and are not permitted off-site for recreational purposes during working periods, which may raise concerns related to the right of employees to leave the premises at the end of their shifts. In April 2011, OT Watch reported complaints from workers at Oyu Tolgoi about long, 12-14 hour days, a lack of sufficient lunch break time, and a lack of hot meals for workers at the mine construction site and those working underground. (However, it appears that IFC due diligence has not revealed these types of concerns.) During ESIA, stakeholders expressed additional concerns about impacts associated with loss of employment after conclusion of the construction phase and eventual mine closure.
Working hours and pay are set in compliance with the Mongolian Labor Law, which also prohibits workplace discrimination, and the Company *endeavors to work in good faith with trade unions and any other bodies that employees collectively choose for their formal representation.* The Company has developed a Labor Management Plan aimed at achieving compliance with Mongolian labor laws and regulations, international standards, local and national employment targets, and fair and transparent recruitment and training procedures. (A copy of the plan is available here.) The integrated Rio Tinto HSEQ health and safety management standard, which IFC found to conform with good international industry practice and IFC guidelines, sets out minimum requirements to be verified during performance audits. (The Rio Tinto standard is available here.) The Company has established an employee grievance mechanism called the Speak OUT Program, as well as a fair treatment policy intended to provide a formal process for employees to raise concerns with Project managers. According to IFC, the Company *endeavors to work in good faith with trade unions and any other bodies that employees collectively choose for their formal representation.* The Company must ensure that contractors and subcontractors comply with all of the Company's requirements, and that the requirements are reflected in contractual provisions; all suppliers are also expected to comply with Mongolian labor standards, relevant ILO standards, and applicable human rights standards.
Given the information above, the following survey questions related to labor rights should be raised among communities and individuals affected by Oyu Tolgoi:
Right to Health
Hazardous Chemicals and Mine Tailings:
Mining and processing of ore raise unique health risks for both the Project's workers and the surrounding environment. The ESIA found that key potential for risks associated with the mining and processing include impacts on soil and groundwater, impacts on human health and safety due to either direct exposure or through fire/explosion, and impacts on human health and safety due to airborne releases of toxic materials in confined spaces. Processing operations at the OT plant will involve froth flotation, a conventional ore processing step during which the ore, once crushed and ground, is mixed with water and chemical reagents. At OT, reagents will include potassium amyl xanthate* of which the Company plans to store an estimated 358,000 kg on-site* among others.+ Canada's Workplace Hazardous Materials Information System classifies this xanthate as acutely toxic, a toxic irritant to skin and eyes, and reactively flammable. Repeated exposure to the airborne dust particles may cause such serious health problems as cardiovascular effects, liver damage, nervous system effects/depression, and respiratory failure. (For a full review of human health risks and necessary precautions, click here.) It may also be harmful to the environment, including aquatic life. Furthermore, after a test flotation conducted by the Company, the concentrate contained additional deleterious elements (e.g., arsenic and fluorine).
In addition to health risks posed to employees during processing, the leftover materials, or *tailings,* raise further environmental challenges. The IFC has not published the Company's tailings management plan, but a 2006 assessment found a *high* risk of seepage from a planned tailings storage facility (TSF) into the adjacent river. (See Table 1.7.)
In the Project area there are sometimes very high natural dust concentrations in the air, and they are generally even higher in areas of overgrazing, vehicle traffic, mineral exploration, and camps. According to IFC observations, dust plumes are clearly visible along the road to China and many other roads used by mining-related vehicles. Although the impacts of additional dust generation from construction activities are expected to be *minor and transient,* IFC notes the potential adverse effect of dust as a nuisance to herders and vegetation and that dust treatment will be required for the Project's roads.
The IFC assessment also notes that the gaseous emissions will be generated by mining equipment, heaters, power generation facilities, and the ore processing plant. A dispersion modeling assessment has been undertaken to predict potential air quality impacts, which predicts that levels of some pollutants could at times exceed ambient air quality standards. With respect to greenhouse gases, IFC expects an upcoming inventory to show that emissions will remain below a level requiring reporting under PS3. (However, this prediction did not appear to take into account the planned construction and operation of a 750-MW coal-fired plant on the Project site.)
Community Health Impacts:
The IFC appraisal team identified a list of the main health and safety risks of the Project:
To mitigate these impacts and others, the Company has developed a Community Health, Safety, and Security Plan, an Air Quality Management Plan, a Hazardous Materials Management Plan, a Transport Management Plan, a Worker Health, Safety and Security Management Plan, and an Emergency Response Plan. (All plans available as part of full ESIA documentation.) However, according to the Spirited Away report, there are only four doctors (including a dentist) and eight nurses in the local hospital in Khanbogd. The health services are already experiencing the additional burden caused by dust creation and road traffic increases; according to the report, health facilities need to be upgraded, the electricity supply to health facilities needs to be improved, and the Company needs to supply Khanbogd doctors with information about the health impacts of mining. Consistent with the predictions of the ESIA and the IFC, Khanbogd's head doctor reportedly believes that the most prevalent ailments among the local community include respiratory illnesses caused by dust and sexually transmitted and urinary diseases (as a result of migration).
Given these considerations, the following survey questions related to the right to health should be raised among communities and individuals affected by Company activities:
+ The other process reagants included in the Integrated Development Technical Report are Aerofine 3418A, Methyl Isobutyl Carbinol, Dowfroth 250, Magnafloc 351, Magnafloc 800 HP, Magnafloc LT510. Of this list, the estimated volume to be stored on-site ranges from 1,000 to 76,000 kg.
Right to Water & Right to Food
Water is one of the most critical aspects of the Project with respect to environmental and social impacts and management. The Company has considered water in a strategic regional context, examining its role in ecosystem services affecting local communities and herders. The IFC states that the Company is committed to working with the local communities for the life of the operation to ensure that they are not negatively impacted by the project's use of water and that improved water management practices are applied by all users. However, over grazing in the area is occurring and thus water resource management must carefully consider influx to the region which would place additional burdens on the carrying capacity of the land.
According to IFC, less than 20% of the available groundwater resources will be consumed by the Project, leaving water for other users in the future. Groundwater present in the upper bedrock has been exploited for mine construction purposes and, as construction is completed, the Company will switch over to the Gunii Hooloi supply. There is shallow groundwater (typically 2-5 m below the ground surface) present in the alluvium within the stream beds in the Project area; typically fresh water and recharged annually, this is the principal source of groundwater used by herders and wildlife and supports groundwater-dependent vegetation. The town of Khanbogd is currently reliant on a few shallow groundwater wells for its water supply, with further groundwater exploitation *limited by a lack of understanding of the local aquifers.* To address these water supply issues, the Company has completed a geophysical appraisal of the local aquifers and is undertaking hydrogeological investigation and detailed assessment of a deeper water resource which is located outside the town. According to the IFC, the Asian Development Bank (ADB) is planning to finance the development of this water resource to provide a piped water supply into the town. OT has installed a network of wells in the deep aquifers of the Gunii Hooloi basin, designed to minimize the drawdown in the basin and subject to on-going improvement and evaluation. Given the hydrological uncertainties, the Company is monitoring groundwater levels in the vicinity of herder wells and springs, and those results (in addition to data gathered during participatory monitoring by herders) are being used to develop a dataset of baseline water levels. According to IFC, based on current monitoring data the water levels across the project area appear stable (with only small fluctuations recorded, which are considered to reflect limited use of the aquifers by the herders and annual recharge by summer rain events).
Surface water in the project area of influence is limited by low rainfall. Other than intermittent summer flows in the watercourses, it is restricted to a few springs (in the watercourses and around Khanbogd). The most significant ephemeral watercourse in the project area is the Undai, which is called a river but is dry much of the year. The Southern Oyu excavation area will extend into the Undai, and the planned waste rock dump will lie across the Undai's course, causing loss of the Bor Ovoo spring and consequent impacts on herders and wildlife. To avoid significant impacts on flow, the Undai will be diverted around the operations, and the replacement spring installed downstream will be accessible by herders and wildlife. According to IFC, the diversion design and spring location were discussed with the herders and are intended to provide a sustainable, permanent solution that will protect downstream water users from disrupted water flow without requiring future maintenance.
The Company *recognizes that water in the southern Gobi region is a very valuable and finite resource and is focused on minimizing water use throughout all aspects of the project.* To this end, water recycling will form a key part of water management, including recycling of production water (84%), recycling and treatment of public use water (80%), and re-use of water used for cleaning machinery and equipment (50%). Recycling and other strategies are outlined in the Company's Water Resources Management Plan. However, despite the IFC's assurance that the *Company fully understands and appreciates the critical importance of water to the on-going development of the southern Gobi region* and *is committed to playing a leadership role . . . to develop a model of water use for the region that is as efficient and as sustainable as possible,* OECD Watch reports that OT Watch filed complaints against Ivanhoe and Rio Tinto with OECD's UK and Canadian NCPs in April 2010. The complaints, which alleged breaches of OECD Guidelines, were motivated in large part by stakeholders* water supply and sustainability concerns. The Canadian NCP rejected the consolidated complaint in 2011 after a lengthy initial assessment, but OT Watch responded that the assessment *heavily relied on information provided by Ivanhoe Mines and that the Canadian NCP selectively disregarded other sources of information.*
Given these considerations, the following survey questions related to the rights to water and food should be raised by communities and individuals affected by the Company's activities:
Right to Land and Property
Around 10,500 hectares of land are required for the mine site and ancillary facilities. Land has also been temporarily disturbed during the construction phase for activities such as building of worker's accommodation camps, excavation of borrow pits, and soil stripping along the water pipeline and transmission line corridors. The IFC notes that due to its large-scale land requirements, the Project has had impacts arising from the construction phase. Impacts identified by the IFC include:
The Company conducted comprehensive assessments of these impacts as part of the ESIA and has developed a Resettlement Action Plan (RAP), which covers all activities that have the potential to result in impacts to land use and the physical and economic displacement of people living on and/or using the land required/disturbed by the Project in Khanbogd. In addition, a Herder Livelihood Improvement Program has been developed in collaboration with affected herders and the district government. The process identified the following compensation and livelihood improvement measures preferred by affected herders: job creation; education assistance; training and skills development for herders; business development and income diversification; pastureland improvement and management; and water well building/rehabilitation. Reportedly, after consultation with an independent lawyer and an increase in the total amount of compensation included in the offer, the herders and the Company reached an agreement. However, according to the Spirited Away report, one resettled herder that was interviewed claimed that terms of the resettlement were *nonnegotiable* and were proposed on a take-it-or-leave-it basis. A second resettled herder told interviewers that the Company had *threatened* that the family must move regardless of whether they accepted the Company's resettlement package, and both interviewees expressed a general dissatisfaction with the resettlement experience.
Given these considerations and the possibility that physical expansions of the Project will be approved, including a permanent airport and the power plant, the following survey questions related to the rights to land and property should be raised by communities and individuals affected by the Company's activities:
Right to Housing
The IFC noted after appraisal that the Company is still developing its operational phase worker housing plans, but that an Influx Management Plan has been prepared to manage potential adverse impacts of population influx. These potential impacts include overburdening of existing municipal infrastructure, services and facilities, as well as risk of social problems or conflict between native and new populations. Oyu Tolgoi has adopted a number of principles to guide its actions and to provide reassurance to stakeholders that it will undertake this process and implement its worker housing and other influx management activities in a responsible manner consistent with the Investment Agreement, Rio Tinto standards, and international standards.
Given these considerations, and in conjunction with survey questions regarding the right to land and property, the following survey questions related to housing rights should be raised among communities and individuals affected by the Company's activities:
Right to Culture
The IFC notes that the Project area is rich in archaeological and paleontological heritage, including physical artifacts, ritual sites, places of cultural or historical interest, fossil sites and protected landscapes (*tangible* heritage) together with rituals, ceremonies, folklore, music, handicrafts, and traditional knowledge (*intangible* heritage). Ritual sites include ovoos, stone or wooden structures built on historically, culturally or religiously significant places or a particular mountain or hill that is located separately from other mountain ranges, and stupas * religious monuments made of bricks, mud, wood, and other materials. Intangible cultural heritage in the region include rituals and worship performed in local monasteries, and many local crafts and traditions identified as intangible cultural heritage. (The ESIA and IFC note that while the South Gobi culture is unique, the nomadic herders in Mongolia are not considered *indigenous* per IFC's definition under Performance Standard 7.)
The Company has developed measures for minimizing and mitigating impacts, and these are presented in the OT Cultural Heritage Management Plan, which is included in the ESIA. The Oyu Tolgoi LLC Code of Behavior includes cultural heritage sensitivities and observance is ensured through regular refresher training, control by responsible supervisors, and disciplinary measures in case of breaches. For all areas where ground disturbance activities will take place, including the open pit and other excavations, there is a *chance finds* procedure which the Company states has been developed in consultation with Rio Tinto's cultural heritage advisors. The mandatory procedure is designed to ensure the safety, integrity and proper handling of any previously undocumented objects of cultural or historical significance, including archaeological assets and paleontological features. To date, the principal mitigation measure for archaeological impacts has been a number of rescue excavations undertaken by Mongolian universities. The Project website explains that the Company's Cultural Heritage Program *seeks to take practical and reasonable measures to prevent cultural heritage degradation, evaluate and understand cultural change, and promote the preservation and appreciation of cultural heritage.* The program includes an Advisory Committee made up of government and community representatives.
During SIA consultation, stakeholders raised concerns related to cultural impacts of the Project. Both community members and civil society groups expressed concerns about diffusion of cultures that are foreign to local ethnic identities and customs. Civil society groups expressed concerns related to the adequacy of protection of local culture and historically significant heritage, and the herders* way of life. Herders themselves expressed an expectation that the Project would contribute to changing their traditional nomadic herding lifestyle, though according to the ESIA, many of the herders considered this a positive change.
Given these considerations, the following survey questions related to cultural rights should be raised among communities and individuals affected by Oyu Tolgoi LLC's activities:
Estimated projections for total cost of the Project range from $12 to $13 billion. The IFC's proposed investment is a $300 million senior A loan as well as a B loan, the full amount of which could reach $600 million, to be syndicated to international commercial banks. According to IFC, other lenders include EDC, EBRD, Standard Chartered, BNP Paribas, US EXIM, Australian EFIC, and MIGA.
Ivanhoe Mines is an international mining company focused on mineral exploration and development primarily in the Asia Pacific region. In addition to its ownership in OT which is its primary asset, Ivanhoe owns 58% of Mongolian coal producer SouthGobi Resources; 59% of Ivanhoe Australia and 50% of Altynalmas Gold, a private company developing the Kyzyl Gold Project in Kazakhstan. Ivanhoe’s majority shareholder is international mining major Rio Tinto Group (“Rio Tinto”). In 2006 Rio Tinto entered into a strategic partnership with Ivanhoe to develop and fund the Project and, since December 2010, to manage OT LLC. In January 2012 following a series of equity injections used primarily to fund the development of the Project, Rio Tinto became 51% owner of Ivanhoe. Rio Tinto is a diversified multinational mining and resources group with headquarters in London and Melbourne. Rio Tinto is the world’s fifth largest copper supplier and is an industry leader in sustainable mining practice, conservation, land rehabilitation, biodiversity, climate change and water and energy use. Erdenes Oyu Tolgoi LLC is a state-owned holding company established for purpose of representing the Government of Mongolia with regard to its ownership into OT LLC as provided for under an Investment Agreement between the Government, OT LLC, Ivanhoe Mines and Rio Tinto signed in October 2009.
As noted, Oyu Tolgoi LLC is owned jointly by the Mongolian government (34%) and Turquoise Hill Resources (66%).
The Project is managed on behalf of Oyu Tolgoi LLC by Turquoise Hill's parent company, British-Australian mining giant Rio Tinto, which signed a 30-year comprehensive Investment Agreement with the government of Mongolia in 2009. (Rio Tinto assumed full control in 2012 upon its acquisition of a majority stake in Ivanhoe Mines, which was later renamed Turquoise Hill). The Investment Agreement also established the Southern Gobi Regional Development Council (SGRDC), a broad stakeholder group charged with the coordination and management of regional and community development issues and impacts associated with the Project, and members of which include representatives from the national government, local governance organizations, private entities, civil society, potential aid donors, and international financial institutions. The Company serves as a member of the SGRDC governing board.
According to the Company's integrated development plan, procurement and construction will also involve the participation of Western engineering contractors, heavy industrial work by Chinese contractors, and components of the infrastructure by Mongolian and Chinese contractors. As of 2012, reported contractors include Fluor (program and construction management), Redpath (primary mine development), AMEC (feasibility studies), SGS (on-site laboratory work), GRD Minproc Limited (open pit mine design), SRK Consulting (geotechnical engineering), McIntosh Engineering (block cave design), MinnovEX Technologies (testwork and modeling), AMMTEC (testwork), Knight Piesold (design and road-building), Aquaterra Consulting (hydrogeology work and borefield design), Eco-Trade Co. Ltd. (baseline environmental study; EIA), Sustainability Pty. Ltd. (coordination of environmental, archaeological, and socioeconomic assessments), and Teshmont LP Consultants (power supply study).
PAST IFC FUNDING:
Oyu Tolgoi LLC was created in 2011 specifically to carry out this Project; as such, the joint venture has not received any IFC investments before this instance. However, Rio Tinto has sponsored projects that received IFC investment in the past:
"In 2006, IFC approved an equity investment (5%) of $5 million for the Simandou Iron Ore ('Simandou I') project in Guinea. The project involves exploration of high-grade iron ore resource targets in the Simandou Mountain Range in eastern Guinea. The Mining Convention covering the concession area is held by a locally incorporated Rio Tinto subsidiary, SIMFER S.A. Simandou I was classified as a Category B project.
ALLEGATIONS OF PAST ENVIRONMENTAL & HUMAN RIGHTS ABUSE:
Oyu Tolgoi LLC
Monnis Tower, Chinggis Avenue 15 Sukhbaatar District, 14240 Ulaanbaatar, Mongolia
Tel: +976-11-331880 (ext. 3374)
All of the Project's components, including the transportation and infrastructure corridor between the Project and the border, are located within the administrative district of Khanbogd in the mngovi province. However, because the Project will undoubtedly have indirect effects on other areas, stakeholders from additional districts were included in some rounds of community consultation. For consultation purposes, "affected parties" include herders who have been physically or economically displaced, local residents and businesses, and Company employees. "Other interested parties" include residents from adjacent districts (Manlai, Bayan-Ovoo, and Dalanzadgad), NGOs/civil society, business owners throughout Mongolia, and the Government of Mongolia.
The Company reports it conducted several rounds of consultation with herders and other stakeholders during ESIA:
ACCOUNTABILITY MECHANISM OF IFC
The Compliance Advisor Ombudsman (CAO) is the independent complaint mechanism and fact-finding body for people who believe they are likely to be, or have been, adversely affected by an IFC or MIGA- financed project. If you submit a complaint to the CAO, they may assist you in resolving a dispute with the company and/or investigate to assess whether the IFC is following its own policies and procedures for preventing harm to people or the environment. If you want to submit a complaint electronically, you can email the CAO at CAO@worldbankgroup.org. You can learn more about the CAO and how to file a complaint at http://www.cao-ombudsman.org/