Oyu Tolgoi Phase 2 - Accountability Counsel

OyuTolgoiPhase2:Plans,IssuesandRisks
AnOverviewofOyuTolgoiPhase2MiningPlansandsomeoftheissuesandrisks
associatedwithblockcaveundergroundmining,internationalmetalpriceuncertainty,
projectpowersupply,andimpactsonwaterresourcesusedbyherders
(SatelliteimageofOyuTolgoiMine,November2015,http://landsatlook.usgs.gov)
Preparedfor
CEEBankwatchNetwork
Prague,CzechRepublic
www.bankwatch.org
and
OTWatch
http://www.minewatch.mn/
January10,2016
PreparedbyPaulRobinson
sricpaul@earthlink.net
ResearchDirector,SouthwestResearchandInformationCenter
Albuquerque,NewMexico87107USA
www.sric.org
TablesofContents
Introduction
2
WhoownstheOyuTolgoi(OT)Mine? 3
WherearetheplansforOTPhase2described?
3
WhatisplannedintheOTPhase2mineexpansion? 4
Whatactionsareneededtocompleteapprovalofthe
OTPhase2expansion? 14
WhatisBlockCaveMining?
16
WhichBlockCavemineshasRioTintooperatedorplanned? 18
WhataretheenvironmentalImpactsofBlockCaveMining? 19
HowlargeistheSubsidenceZoneattheOTHugoNorthLift1
30
undergroundminepredictedtoextend?
WhatareSomeoftheMajorImpactsofOTPhase1and2on
WaterResourcesUsedbyHerders?
36
HowdoInternationalMetalMarketPricesaffectOyuTolgoiPhase242
DevelopmentandFundingPlanandTechnicalReports?
Howmuchhaveinternationalmetalmarketpricesfallensince 43
theOTPhase2TechnicalReport(OTTR2014)wasreleased?
Whataresomeoftheplansandissuesassociatedwithdeveloping46
apowersupplyforOTPhase2?
ArealternativesourcesofpowerpossibleforOTPhase2?49
SourcesCited 51
BriefBiographyoftheAuthor 55
1
Introduction
OyuTolgoi’sPhase2planstomine1.5billiontonsoforearedescribedasthe“Reserve
CaseMine”intheOctober27,2014OyuTolgoiTechnicalReport(OTTR2014),themost
detaileddescriptionofOTPhase2publicallyavailable.OTTR2014waspreparedusingthe
CanadianNationalInstrument43-101“StandardsofDisclosureforMineralProjects,”which
isrequiredforminingcompanieslistedonCanadianStockExchangessuchasTurquoise
HillResources(TRQ),66%ownerofOyuTolgoiLLC).(OTTR2014atP.i)
The“ReserveCase”oretobeprocessedduringPhase2willcomefromtwosources:
1) theSouthernOyuTolgoi(SOT)openpitand
2) ThedeeperHugoNorth“Lift1”ore,minedusingtheundergroundblockcaving
method.
OthermineralresourcesidentifiedattheOyuTolgoisitebutnotproposedforthe“Reserve
Case”mine-“Phase2”-aredescribedaspartofthelong-term“LifeofMineCase”(OTTR
2014).“LifeofMineCase”depositsinclude:HugoNorth“Lift2”–anoredepositbeneath
“Lift1”,theHugoSouth,andtheHerugadeposits.OTTR2014identifiesaseriesofdecision
optionsrelatedtotheminingofthe“LifeofMineCase”depositsduringthenext10years,
andbeyond,thatcouldleadtodevelopmentoftheseadditionaldeposits,including
extractionduringtheminingofthe“ReserveCase”oreintheopenpitandHugoNorthLift
1in“Phase2”thatwouldbecompletedintheyear2055.
DevelopmentandfinancingplansforminingtheOT“ReserveCase”oreisthesubjectofthe
May18,2015OyuTolgoiUndergroundMineDevelopmentandFinancingPlan(OTUMDFP
2015)signedinDubaibyGovernmentofMongoliarepresentativesandOyuTolgoiLLC’s
corporateowners.TheOTUMDFP2015addressesarangeofsubjectsincludingthecostof
constructionofOTPhase2,OTPhase2impactsontheMongolianeconomy,proposed
schedulesforactionondevelopmentofafutureOTpowersupply,aninvestigationofthe
economicviabilityofacoppersmeltertorefinethe30%copperconcentratecurrently
producedatOT,andtaxandfinancialaccountingconsiderations,amongothermatters.
ThisreportsummarizestheminingactivityproposedbyOTinitsPhase2development
plan,describestheblockcavingundergroundminingtechnologyplannedforthelargedeep
orebodytobeminedinPhase2,environmentalimpactsandreclamationpotentialofblock
cavemines,andissuesandrisksassociatedwithafutureOTpowersupply,international
metalmarketpriceuncertainties,andOTPhase1and2impactsonwaterresourcesand
herdersandtheirlivelihoodintheregionsurroundingtheOTminelicensearea.
2
WhoownstheOyuTolgoi(OT)Mine?
TheOyuTolgoicopperandgoldproject(OyuTolgoi)isbeingdevelopedbytheOyuTolgoi
LimitedLiabilityCorporation(OTLLC).
OTLLCis66%ownedbyTurquoiseHillResourcesLtd(TRQ)and34%ownedbyErdenes
OTLLC.RioTintoplc(RioTinto)maintainsacontrollinginterestinthroughitsownership
of51%ofTRQandisthemanageroftheOTproject.TheGovernmentofMongolia(GOM),
throughErdenesOTLLC,owns34%ofOT.(OTUMDFP2015)
WherearetheplansforOTPhase2described?
OTPhase2miningplansaredescribedintheOyuTolgoiTechnicalReportreleased
October27,2014(OTTR2014),a547-pagereportpreparedusingtheCanadianNational
Instrument43-101StandardsofDisclosureforMineralProjects,amineralresource
estimationandreportingregulation.OnAugust,27,2015,OTannouncedithadsubmitted
revisionsoftheschedulesinitsMarch2015FeasibilityStudytotheMongolianMining
Councilthat“align”withtheMay18,2015OTUndergroundMineDevelopmentand
FinancingPlan(OTUMDFP2015)andtheOTTR2014.(TRQ8-2015)
OyuTolgoihasnotmadetheMarch2015OTFeasibilityStudyavailabletoinvestorsorthe
public.ItisnotlistedinSEDAR.comrecordsofCanadiancorporationpublicfilingforOT
alongwithpreviousNI43-101complianttechnicalreports,orontheOTorTRQwebsites.
AsOT’sMarch2015FeasibilityStudyisnotavailablefromtheOTsiteorotherpublicly
availablesources,thisReportreliesontheOTTR2014asthemostcurrentavailable
versionOT’splansforPhase2.OTTR2014isavailableat
http://www.turquoisehill.com/i/pdf/2014-10-27_OyuTolgoiTechReport.pdfand
http://www.turquoisehill.com/s/oyu_tolgoi.asp?ReportID=379189
CompletionofanupdatetotheMarch2015OTFeasibilityStudyisoneoftheobligations
requiredundertheOTUMDFPrequiredbeforefinalapprovalbytheBoardsofDirectorsof
theOTowners.
3
WhatisplannedinOyuTolgoi’sPhase2mineexpansion?
OTPhase2proposestheextractionandprocessingoforefromthecurrentlyoperating
SouthernOyuTolgoiopenpit(SOT)whilealsoconstructingandoperatinganunderground
mineusingtheblockcavingminingmethodtoextractorefromaportionoftheHugoNorth
oredepositcalled“Lift1”throughtheyear2055.
OTTR2014forecastsoverallmineproductionduringPhase2,calledthe“ReserveCase”in
OTTR2014,continuingthrough2055.OTPhase2oreproductionisprojectedtobeaverage
about115,000tonsperday(tpd),equaltoabout40milliontonsperyear,duringthe2020
–2039periodwhentheundergroundHugoNorthLift1blockcavemineisproposedto
operate.FutureOTexpansionthatarenotincludedinOTPhase2couldinvolveadditional
undergroundminingatHugoNorthLift2beneathLift1,andundergroundminingatthe
HugoSouthDepositandtheHerugaDeposits.
OTopenpitoreproductionwouldfallfromthecurrent100,000tonsperdayto20,000
tonsperdayduring2019–2039period,whentheHugoNorthLift1mineisprojectedto
produce95,000tonsoreperday.Thisproposedmixofopenpitandundergroundoreis
wouldkeepthecombinedtonnageofOToreprocessedtoabout115,000tonsperday
between2019whenNorthHugo“Lift1”undergroundorewouldbegintobeextracted,and
2039whenoreextractionfromtheOTPhase2portionoftheHugoNorthunderground
minewouldbecompleted.
OTPhase2plans,schedulesandresourceestimatesareshowninFigures1–9that
provideFiguresfromOTTR2014andanAugust2015OTInvestorandAnalystSiteVisit
Presentation(TRQ8-2015b)withannotationsandcommentarybytheauthor..
4
Figure1-OyuTolgoiandSurroundingLicenses–ProjectLocation
5
Figure2-LocationandDepthofOyuTolgoiDeposits
6
Figure3–OTPhase2RestartMilestones
7
Figure4–OTPhase2ProbableDevelopmentSchedule
8
Figure5–OTPhase2Medium-TermTimeline–2015–2026++
9
Figure6–OTPhase2OreDescriptionandProductionSequence
10
Figure7–OTMultipleDevelopmentOptionsbeyondPhase2
11
Figure8–LocationofOTPhase2andOT“LifeofMineCase”depositsthatmaybeminedin
additiontothePhase2oredepositsinthefuture
12
Figure9–“HugoNorthLift1MineDesignProject”and“Isometric[View]ofMineDesign”
13
WhatactionsareneededtocompleteapprovaloftheOTPhase2expansion?
TheMay18,2015OTUMDFPAgreementbetweentheGovernmentofMongoliaandits
partnersinOTLLC(OTUMDFP2015)identifiesaseriesofstepsneededtocomplete
approvalofOTPhase2.Thesteps“requiredbeforetheaspirationslistedinthatagreement
canbegintoberealized,”atsection4.7onp.6,include:
“[The]Partieswishtoproceedexpeditiouslywiththeconstructionofthe
UndergroundStage.However,thePartiesagreethatconstructionofUnderground
Stagewillcommenceonlyafter:
(a)OTLLChassatisfiedtherequirementstoobtainthirdpartyproject
financetofundtheUndergroundStage(the“UGProjectFinance”);and
(b)TheUndergroundStageisapprovedbyeachoftheBoardsofRioTinto,
TRQandOTLLC”
Atsection5.5.a.atp.6,theMay2015GOM-OTAgreementsays,
“UptoUSD$6billionofexternalfundingwillberaisedthroughthirdpartyproject
financing(includingUGProjectFinance)andotherbankfinance,productoff-take
arrangementsorotherformsoffinancing.”
OnDecember14,2015,TurquoiseHillResources(TRQ)announcedthatthesigningofa,
“USD4.4billionprojectfinancingfacility”.(TRQ12-2015).Thefacilityprovidesloans
throughagroupofinternationalfinancialinstitutionsandexportcreditagencies
representingthegovernmentsofCanada,theUnitedStatesandAustralia,alongwith15
commercialbanks.The$4.4billionprojectfinancefacilityOT’sownerssignedprovidesa
setoffourloanswithpaybacktermsof12–15years.TheloansagreedtobyOTLLCand
thelendershaveadebtcapacityof$6.0billionforOyuTolgoi,providingtheoptionforan
additional$1.6billion.
FuturestepstocompletetheloanprocesssummarizedbyTRQinitsDecember14,2015
releaseare:
“TurquoiseHill,RioTintoandOyuTolgoiwillnowcontinuetoworktowards
completingthe2015feasibilitystudy,includingtheupdatedcapitalestimateand
securingallnecessarypermitsforthedevelopmentoftheundergroundmine.
“OncethesestepshavebeencompletedandsubjecttotheboardsofTurquoiseHill,
RioTintoandOyuTolgoiapprovingaformal‘noticetoproceed’,thefull$4.4billion
facilitywillbedrawndownbyOyuTolgoisubjecttosatisfactionofcertain
conditionsprecedenttypicalforafinancingofthisnature.”
TheMay2015OTUMDFPAgreementatsection5.2acknowledgesthat,
“ApprovalofUGProjectFinanceisadecisionfortheBoardsofRioTinto,TRQand
OTLLCandtheShareholdersofOTLLC.OyuTolgoiBoardapprovalofUGProject
FinanceisrequiredbythelendersundertheProjectFinancetobeunanimous.”
14
TheOTUMDFPatP.3identifiestheCapitalCostofOTPhase2as$6.7billionUSD,including
$4.7billioninundergrounddevelopmentcapital,$1.5billioninsustainingand$0.6billion
USDinValueAddedTax(VAT)andDutiesonCapital.
TheOTUMDFP2015andOTTR2014donotincludeplansforeitherasupplementalora
newEnvironmentalandSocialImpactAssessment(ESIA)forOTPhase2.
OTTR2014,atp.446says,“The[2012OT]ESIAaddressesaprojectwitha27-yeardesign
life.”OTPhase2isprojectedfora40-yeardesignlifefromfeasibilitystudiesandfinancial
in2016through2055.OTTR2014,says,
“ItisanticipatedthattheProjectwillcontinueinoperationwellafterthatdate[of
2055],possiblyathigherproductionrates.Suchplansarestillatanearlystage,so
whiletheyarereferredtointheESIA,theyarenotevaluatedintheESIAbecauseof
thelimitedamountofinformationavailable.
“Similarly,anumberoffuturedevelopmentsofproject-associatedfacilitiesarestill
underevaluation,andnocleardecisionhasyetbeenmadeastothepreferred
approachtobeadoptedbytheProject,”includingarailroadlineandapower
supply.
OTPhase2plansprovidethat,
“certainotheractivitiesandfacilitiesareexpectedtobedevelopedovertime,either
aspartoforinsupportoftheproject,whichdonotconstitutepartoftheProjectfor
thepurposesoftheESIA.Theseinclude:
• Projectexpansiontosupportanincreaseinorethroughputfrom100–160ktpd.
• Long-termProjectpowersupply.UnderthetermsoftheIA,OTLLCwillsource
electricityfromwithinMongoliawithinfouryearsofthecommencementof
Projectoperations.OTLLCmaydevelopacoal-firedpowerplantwithintheOyu
TolgoiMineLicenceAreatoprovidetherequiredpowerfromMongolian
sources.
WhiletheimpactsandmanagementofthesefutureProjectelementsarenotdirectly
addressedintheESIA,theyareconsideredinthecumulativeimpactassessment.”
(OTTR2014,P.445)
15
WhatisBlockCaveMining?
The2005OyuTolgoiIntegratedDevelopmentPlan(IDP)ExecutiveSummarydescribesthe
blockcaveundergroundminingmethodthatwillbeusedinOTPhase2toextractorefrom
theHugoNorthLift1undergroundmineas:
“[A]safe,proven,andhighlyproductivemethodforextractingbulkoretonnages
fromundergroundmines.Itinvolvesundercuttingpartoftheorebodyacrossaplan
area,causingtheoverlyingrocktocollapse.The
collapseoftheore,or“cave,”is“bydesign”andisaccomplishedinadeliberate,
controlled,andpredictablemanner.Initially,theoreisundercutandinducedto
cavebyblasting.Thereafter,theblastedorefallsintoanarrayofdrawpoints
beneaththeinitialcaveareaandisremovedbyload-haul-dump(LHD)equipment.
Asbrokenoreisremoved,thepilewithinthecaveslumps,creatingavoid,whichin
turnpromotesfurthercaving.”(IDPES2005)
“Blockcavingisexpectedtoresultinsurfacesubsidence.Topreservethe
integrityofthemineshaftsandprincipalinfrastructure,theshaftsand
infrastructurewillbegroupedtogetherina“farm”approximately1,500mduewest
ofthecentrelineoftheresource.”(IDPES2005P.47)(Emphasisadded)
TheSMEMiningEngineeringHandbook2011(SME2011)describesBlockCavingas,
“[A]massminingsystemthatusestheactionofgravitytofractureablockof
unsupportedore,allowingittobeextractedthroughpreconstructeddrawpoints.By
removingarelativelythinhorizontallayeratthebaseoftheorecolumnsusing
standardminingmethods,theverticalsupportoftheorecolumnaboveisremoved
andtheorethencavesbygravity.Asbrokenoreisremovedfromtheorecolumn,
theoverlyingorecontinuestobreakandcavebygravity.”
“Althoughsomerelativelysmallerblockcaveorebodiesarecavedandminedasa
singleproductionblock,mostexistingandplannedblockcaveminesuseeitherof
thefollowing:
•Anextendedblockcavingsystemthatdividesthedepositintodiscrete
productionblocks;or
•Asinglecavefront(orseriesoffronts,or“panels”)advancingforward
throughtheorebody,continuallyopeningupnewproductionareasastheearlier
cavedareasbecomeexhausted.
“Theblockcavingmethodtypicallyallowsforrelativelylargevolumesofproduction
aftertheminehasbeendevelopedandproductionramp-uphasbeenachieved.The
preproductiondevelopmentperiodcanbesignificant(typically5–10years,
dependingonthelengthoftimetoachievetheinitialaccess).Theup-frontcapital
requiredpriortoanyreturnoninvestmentisveryhighbecausemuchofthe
productionlevelsandinfrastructuremustbeinplacebeforecavingcanbegin.
“Aftertheminehasreacheditssustainedmaximumproductionrate,theoperating
16
costtendstobeverylowwithminimaladditionalinfrastructurerequiredto
maintainthehighproductionvolumes.Blockcavingisgenerallytheleastexpensive
ofallundergroundminingmethods,andcaninsomecasescompetewithopen-pit
miningincost.”(SME2011atP.1356)
NorevisionofOyuTolgoi’s2012EnvironmentalandSocialImpactAssessment(ESIA2012)
isproposedtoaddressOT“Phase2”asdefinedbythe“ReserveCase”inOTTR2014.The
ProjectDescriptionportionoftheESIA2012providesan“OverviewofBlockCaving”that
says,
An“OverviewofBlockCaving”isprovidedintheOTESIA2012-ProjectDescription(A4),
atP.21of77:
“Blockcavingisahigh-tonnageundergroundbulkminingmethodgenerallyapplied
tolargehomogeneousoredeposits.Ideally,theoretobecavedshouldbestructurally
weak,andthewasteoverburdenshouldbeweakenoughtocollapseovertheore
withoutinducementastheoreisextracted.
“Blockcavinginvolvesexcavationofnaturalsupportfrombeneaththeore,
causingthestructureoftheorebodytofailandcollapseintotheexcavatedvoid
undertheforceofgravityandlocalgeo-mechanicalstresses.Thebrokenoreis
thenpulledoutfromunderthecavedsectionthroughadrawpoint
arrangement,subsequentlyremovingsupportfromoreandoverburdenat
increasingheightabovetheinitialexcavation,andeventuallyextendingthe
caveupwardtothesurface.
“Theattractiveaspectofblockcavingisthatonlyarelativelysmallportionoftheore
mustbedrilledandblastedpriortoextraction.Oncethecaveinitiates,production
continueswithoutfurtherprimarydrillingandblastinguntiltheorecolumnaboveis
exhausted.
“Theblockcaveminingsequencebeginswithaccessandinfrastructuredevelopment,
followedbyexcavationoftheextractionlevel,andundercuttingtheore.Thesequence
culminatesinsteady-stateproductionfromindividualdrawpoints.
“Oreinthecolumnisdilutedbymaterialinadjacentcolumnsandultimatelyby
overburdenandadjacentwasterock.Whenthecolumndrawdowniscompleteand
drawpointgradedropsbelowaminimumvalue,thedrawpointisabandoned.Great
careistakeninestablishinguniformdrawpracticesthroughouttheminetomaximise
drawpointlifeandminimisedilutionandstressloadingfromundergroundworkings.
“Blockcavingisacapital-intensiveminingmethod,requiringsignificantinvestment
earlyintheminelifeforinfrastructureandprimarydevelopment.Onceinplace,the
method’shighup-frontcostsareoffsetbyhighproductionratesandlowoperating
costs(relativetootherundergroundmethods)overaconsiderablelengthoftime,
resultinginalowoverallcostpertonne.Blockcaveminingisamongtheleastcostly
ofallundergroundminingmethodspertonneoforeextracted.
17
“Blockcavinghasanumberofpositiveattributesincludingnowasterockstorageon
thesurfaceandnolargeopenpits.Oneconsequenceofblockcavemining,
however,isthepotentialforsurfacesubsidenceorsettling.Surfacesubsidence
iscausedasthematerialabovetheorebodygraduallymovesdownwardto
replacetheorethathasbeenmined”.
WhichBlockCavemineshasRioTintooperatedorplanned?
Fiveexistingandproposedblockcaveminesareorhavebeenownedinwholeorinpartby
RioTinto,currentmajorityowneroftheOyuTolgoi,LLC.Theseinclude:
Closed
-Palaboracoppermine,LimpopoProvince,SouthAfrica–57%RioTinto,26%public,17%
Anglo-American;currentlyclosed.See,forexample,“PalaboraMineClosureFactSheet”at
http://www.palabora.com/documents/factsheet_closure.pdf
Operating
-Northparkescopperandgoldmine,CentralNewSouthWales,Australia–formerly80%
ChinaMolybdenumCo.,Ltd.(acquiredfromRioTintoin2013),20%Sumitomo;See,for
example,
http://www.geovia.com/sites/default/files/Australian_Journal_Mining_Jan2008_LR.pdf
-DeepOreZone(DOZ)blockcavemine,GrasbergMine,Papua,Indonesia–40%RioTinto,
60%PTFreeportIndonesia;See,forexample,GrasbergBlockCave”,at
http://www.infomine.com/publications/docs/InternationalMining/Chadwick2010k.pdf)
Planned
-HugoDummettNorthandSouthdeposits,OyuTolgoigoldandcopperproject,SouthGobi
Region,Mongolia;and
-ResolutionCopperproject,Superior,Arizona,US-55%RioTinto,45%BHPBilliton.See,
forexample,“UndergroundMining”athttp://resolutioncopper.com/theproject/underground-mining/)
18
WhataretheenvironmentalImpactsofBlockCaveMining?
Large-scalepermanentsurfacesubsidenceabovetheextractionzoneistheprimarylongtermenvironmentaldamageresultingfromblockcavemines. Thesurfacecollapse,
subsidenceandfracturingofthelandsurfaceabovethemineresultingfromextractionof
oreusingtheblockcaveminingmethodsleadstoenvironmentaldamagethatisnot
amenabletotopographicorbiologicalreclamationtoestablishproductivepost-mining
landusesbecausethedamagedlandsurfaceaffectedbytheblockcave-inducedsubsidence
isphysicallyunstable.
Asdescribedin“OreBodyAccess,”MiningMagazine,03May2011says:
“Oneoftheprimarydisadvantagesofblockcavingisthatitremovesmuchof
thesupportingrockfromunderneaththeoverburden,whichoftenleadsto
subsidenceofthesurface.Cavinginducedsubsidencemayendangermine
infrastructureandisamajorconcernforoperationalsafety.”
Changestosurfacelandformsbroughtaboutbysubsidencecanbedramaticand
mayleadtoapronouncedenvironmentalimpact.Therefore,theabilityto
predictsubsidencehasbecomeincreasinglyimportantforoperationalhazard
andenvironmentalimpactassessments.”(emphasisadded)(MiningMag.2011)
Surfacesubsidencecratersareatypicalfeatureatblockcaveminesaroundtheworld.
Thirtyoftheundergroundblockcavingminesaroundtheworldaresummarizedin
“Characterizationandempiricalanalysisofblockcavinginducedsurfacesubsidenceand
macrodeformations,”Woo,K.,etal,ROCKENG09:Proceedingsofthe3rdCANUSRock
MechanicsSymposium,Toronto,May2009,(Woo2009)at:
http://www.geogroup.utoronto.ca/rockeng09/proceedings/innerFrames/PDF/Session19
/4044%20PAPER.pdf.
Woo2009identifiesthreezonesofsurfaceimpactfromblockcaving,aninner“Caved
Zone,”asurrounding“FracturedZone”anda“Subsidence”zonesurroundingtheinnerzone
ofgreatersurfacedeformation.
Figures10–17demonstrateblockcavingminingimpactstothelandsurfaceaboveand
surroundingtheoreextractionzone,including:
- a“cavedzone”directlyabovetheblockcavingminingarea,wherethesurface
collapsesintothevoidbelowthesurfacefromwhichorehasbeenextracted;
- a“fracturedzone”overtheareaaroundthe“cavedzone”affectedbythecollapseover
theorebodywhere“tensioncracks”developatthesurfaceandbelowthesurface;
and
- a“continuoussubsidencezone”affectedbysurfacedisruptionandinstability.
19
Figure10–(IncludedinFigure12)“Definitionofblockcavingsubsidencezonesandits
quantificationwithrespecttoanglesex-tendingfromtheundercut”(Woo2009)
TheillustrationofblockcavingfromWoo2009issimilartotheillustrationofblockcaving
inOyuTolgoi’sIDOP2012showninFigure11.
20
Figure11–(IncludedinFigure12)“DefinitionofSubsidenceZone(afterMMT–
PermissionfromRioTinto)”fromOyuTolgoiIDOP2012,P.325,-Figure16.22
Figure12–22showtheblockcaveminingmethodproposedbyOTandtheassociated
collapseandsubsidencezonesfromOTTR2014andothersourcesidentifiedintheFigures
withannotationsandcommentarybytheauthor.
21
Figure12–“DefinitionofSubsidenceZones”
22
Figure13–BlockCavingandSubsidence–“MostProbablePredictionofSubsidenceforthe
ResolutionCopperMine,aRioTinto-BHPBillitonprojectinArizona,USA
23
Figure14–IllustrationsofOTPhase2“OreFlow”and“CaveMonitoring,”andSurface
SubsidencepredictionatRT-BHPResolutionCopperMine.
24
Figure15–OTHugoNorthLift1SubsidenceZonepredictionsfrom2010and2012
25
Figure16–ComparisonofOTPhase2SubsidenceAreapredictedin2012andCentral
Ulaanbaatar.
26
Figure17–OverlayofOTPhase2SubsidenceZonepredictedin2012onCentral
Ulaanbaatar.
27
Thesurfacesubsidenceresultingfromblockcaveminingleavesapermanentholeinthe
groundabovetheminewherethesurfacecollapsesintothemine,aringofcontinuous
subsidencearoundtheedgeofthecollapsezone,andringoffracturelandaroundtheedge
ofthecontinuoussubsidencezone.
Reclamationtoreestablishtopographicallystablelandscapewithsustainablevegetationis
notpossibleatblockcaveundergroundminesasthelandsurfaceabovetheblockcave
mineisphysicallyunstableandunsafeforoperationofreclamationequipment,andfor
peopleandanimalsenteringthefracturedrockorsubsidencezone.
Theextentofthe“cavedzone”isdefinedbya“caveangle”or“angleofbreak”illustratedin
Figures10,11and12.Theextentofthefracturezoneisdefinedbyan“angleoffracture
initiation,”andtheextentofthecontinuoussubsidencezoneisdefinedbyan“angleof
subsidence.”
Woo2009includes,inadditiontoanoverviewoftheblockcavingminingmethod,
descriptionsandillustrationsoftheopencavezoneandsurroundingsubsidencezoneat
operatingminesat30blockcaveminesaroundtheworld,includingimagesofcollapseand
subsidencezoneat18blockcavingmines.
Figure18below(Woo2009,Figure5),showssatelliteimageryofsurfacesubsidenceat
blockcavemineswheretopographicconditionshaveasmallimpactonthestructureofthe
collapsezone.
28
Figure18–“Macrodeformationpatternsobservedinwhichtopographiceffectsareminor”
atblockcavemines(Woo2009)
TheshapeofthesubsidencezonesintheFigureshow–the“macrodeformationpatterns”–
asidentifiedinWoo2009are:TypeA=circular,TypeB=elliptical,TypeC1=irregularwith
scarps,butwithoutadistinctcollapsezone,andTypeC2=irregularwithadistinctcollapse
structure/gloryhole“wheretopopographiceffectsareminor.”
NoscaleisprovidedfortheimagesinWoo2009.
29
HowlargeistheSubsidenceZoneattheOTHugoNorthLift1undergroundmine
predictedtoextend?
SurfacesubsidencezonepredictionmapsfortheHugoNorthLift1blockcaveminehave
beenincludedintheOTIntegratedDevelopmentPlansfrom2005,2010and2012.The
projectedextentofthelandarealikelytobeaffectedbythecaved,fracturedand
subsidencezoneattheHugoNorthminesiteincreasedsubstantiallyintheIDOP2012from
thatprojectedinIDP2010.
TheIDP2010projectionofthecaved,fractureandsubsidencezonesabovetheHugoNorth
Lift1undergroundminebelowshowsthe“shaftfarm”area–thesiteshaft2–outsidethe
projectedcontinuoussubsidencezone.
Figure19-(AlsoinFigure15)“ProjectedSubsidenceZone”(IDP2010,P.373(Figure
23.89.8)InthisFigure,thegridlinesarespaced500metersapart.
TheprojectedHugoNorthminesubsidencezonepresentedinIDOP2012,showninFigure
20below,hasexpandedmore500meterstothewestresultinginthe“CavedZone”
includingthe“ShaftFarm”areatheShaft2siteandotherinfrastructurefeatureswellinside
theinnerring–theprojected“cavedzone”ofthesubsidencezone–inadditiontoShaft1.
30
Figure20–(AlsoinFigures15-17)ProjectedSubsidenceZonefromIDOP2012:“The
projectionshowninFigure16.33merelyillustratestheextentofsurfaceareathatthe
generalizedsubsidenceprojectionsencompass.Furtherstudyisrequiredtomore
accuratelypredictactualcavepropagation.”(IDOP2012,p.358).
InthisFigure,thegridlinesarespaced1,000metersapart.
Propagationofthe“CavedZone”toincludetheShaftFarmArea–theShaft2,Shaft1and
otherinfrastructurefeaturesisalsoillustratedintheProjectDescriptionportionofthe
ESIA2012,asshowninFigure21,below.
31
Figure21–“ProjectedBlockCaveSubsidenceZone,”
(ESIA2012-ProjectDescriptionFigure4-10p.23of77)
OyuTolgoi’sIDP2010acknowledgedtheseverityoftheimpactofthecavedzoneonShaft
1noting,
“Thesubsidencezonefromtheextractionleveltothesurfaceisprojectedat60o,per
SRK’sRecommendation[Figure3inthisreport](Figure23.8.8).Allplanned
infrastructureisoutsidethiszone,exceptforShaftNo.1.ShaftNo.1islocatedinside
the60osubsidenceareaattheedgeof65osubsidenceline.ItisassumedthatShaft
No.1willbestrippedofallconveyancesoncefullproductionisachievedandwillbe
usedforventilationonly.”
OyuTolgoi’sIDOP2012illustrationoftheprojectcaved,fractured,andsubsidencezones
(Figure20inthisReport),showsthattheextentofthe60osubsidenceareahasexpanded
toincludeShaftNo.2andmostoftheShaftFarmarea.The60osubsidencelineindicatedin
IDOP2012isapproximately500meterswestofthelocationofthe60osubsidencelinein
IDP2010,engulfingtheShaftNo.2site.
NeithertheIDOP2012northeESIA2012addressconsequencesoftheprojectedcave,
fractureandsubsidencezonesonshaftNo.2,ortheotherinfrastructureidentifiedas
withintheprojectedsubsidencezone.WhiletheIDP2010assertedthatallinfrastructure
otherthanShaftNo.1weretobelocatedoutsidethe60oangleofsubsidencezoneto
preventimpactsfromcaving,fracturingandsubsidence,manyOTminefacilitiesareshown
withinthe60oangleofsubsidenceshownforthemineintheIDOP2012.Thesemine
featuresincludeShaftNo.2,andthe“ShaftFarm,”amongotherinfrastructure.Thelackof
32
attentiontotheimpactsofsubsidenceonareaswithinthe60osubsidenceangleas
projectedinIDOP2012appearstobeasignificantdefectinESIA2012.
WhileOTTR2014providesadiscussionofblockcaveminingontheHugoNorthLift1,it
doesnotprovideafigureorotherinformationthatillustratesthefullprojectedsubsidence
zonefromtheOTPhase2,the“ReserveCase”mine.
OTTR2014says,
“Thepredictedfracturelimits(determinedasthepointofhavinganotableimpact
onkeyinfrastructuresuchashoistingshafts)bytheendofminingHugoNorthLift1
areshownbytheredoutlineinFigure16.13.Afencewillbeconstructed100m
outsidethisredoutlinetorestrictaccess.Thesubsidenceanglesarepredictedtobe
nearlyverticalatthenorthernandsouthernlimitsofthecave,whereconfinementis
highest,andareapproximately55°intheeastandwest,whereconfinementis
lowest.Allshaftsandpermanentinfrastructureareplannedtobesituatedoutside
thepredictedfracturelimits.
“Shaft1isclosesttothefracturelimits.Shaft1willbeusedasahoistingshaftuntil
theShaft2loadoutandprimarycrusherarecommissionedbyearly2019.
ThereaftertheprimaryfunctionofShaft1isforintakeventilation.Thisprovides
additionalcontingencyagainstanunexpectedlylargercavesubsidencedamage
area,asabaldconcretelinedshaftcanwithstandhighergroundmovementthana
shaftreliantontheclosetolerancesofoperatinghoistinginfrastructure.”
Constructingafence100metersoutsidethesubsidencezone–“theredline”in
Figure22below–istheonlyreclamationmeasure,otherthanmonitoringtheextent
ofsubsidence,identifiedinOTTR2014.
Figure22belowisareproductionofFigure16.31inOTTR2014.Noscaleisprovidedfor
theFigureinOTTR2014toallowcomparisonwiththeIDOP2012andESIA2012Figures
illustratingOT’sprojectedsubsidencezone.TheOTTR2014Figureappearstoprojecta
muchsmallersubsidencezonethan2012IDOPbasedonthelocationofthe“ShaftFarm”in
thelowerleftofFigure22.
NoanalysisisprovidedorcitedfortherevisionoftheOTPhase2subsidencezoneinOTTR
2014fromthatprojectedintheIDOP2012orESIA2012.
33
Figure22 – “Figure16.31SubsidencePredictionsfromModeling”OTTR2014,p.310
AsisclearfromacomparisonofthesubsidencezoneillustrationsfromIDOP2012and
OTTR2014,thefullextentofthesubsidencezoneisnotshownineitherofthedocuments.
As2014OTTRhassolittledetailaboutblockcavingmethodsorconsequencesandnoESIA
updateassociatedwithit,the2012ESIAandsupplementremainthesoleavailable
environmentalimpactassessmentforOyuTolgoi’sopenandundergroundmineplans.
IntheESIA2012,aneightsquarekilometer – 8km2 – caved,fracturedand
subsidencezoneispredictedtodevelopedaboveOyuTolgoi’sHugoNorth
UndergroundBlockCavingMine.
ESIA2012,initsdiscussionofthe“NatureoftheImpact”ofproposedOyuTolgoimine,in
“SECTIONC:IMPACTASSESSMENTCHAPTERC4:TOPOGRAPHY,LANDSCAPE,GEOLOGY&
TOPSOILS(“ESIA2012C4”,filename:ESIA_OT_C4_Topography_EN.pdf)projectsthefull
areaoftheprojectedcaved,fracturedandsubsidencezoneabovetheHugoNorthmineis
projectedasmorethan8squarekilometers.ESIA2012–C4atP.10of18states,
“[T]heremovaloforethroughtheblockcavingislikelytoresultinasubsidence
34
zonelaterintheminelifeasthecavingpropagatestothesurface.Initial
estimatesarethatthissubsidencezonewillcoveranareaofover8km2andbe
characterisedbyadepressionsurroundedbyacircularcliff-likefeaturewithan
overallcliffheightinexcessof20m,whichmightbemanifestasasinglecliffor
multiplesmallercliffs.Dependingonthenatureofthesurfacemanifestationof
thisfeature,theimpactwillbeontopographyandlandscape;andalsoon
hydrogeologyandhydrology(seeESIA2012SectionC5),andpotentially
presentapotentialcommunitysafetyissueifcliffsareunstableonceherders
areallowedbackintotheareafollowingmineclosureandrestoration.”
TheESIA2012addsthat,
“thefullextentofthesubsidencezoneisprojectedtomorethanthreetimesthesize
oftheopenpitmineplannedatthesite,projectedtobetwosquarekilometers(2
km2)”,atESIA2012,C4p.10.
Figure17showstheextentofOTPhase2undergroundblockcavingmineandassociated
collapseandsubsidencezonebasedonthe2012IDOP“ProjectedSubsidenceArea,”by
overlayingtheprojectedOTPhase2subsidencezoneonanGoogleEarthimagesatellite
imageofcentralUlaanbaatar.
OTTR2014doesnotidentifyspecificeffortstocontinueinvestigationstodelineatetheOT
PhasecollapseandsubsidencezonethatwouldrespondtotherecognitioninIDOP2012at
P.358that“furtherstudyisrequiredtomoreaccuratelypredictactualcavepropagation.”
NosupplementalornewESIAisproposedbyOTtoaddresstheblockcavemineplannedin
OTTR2014.
35
WhatareSomeoftheMajorImpactsofOTPhase1and2onWaterResourcesUsed
byHerders?
IssuesrelatedtotheimpactsofOToperationsonwaterresourcesusedbytheherder
familiessurroundingthemineareahavebeenidentifiedin“IndependentEnvironmental
Panel(IEP)Report–ExecutiveSummary”developedfromtheinvestigationofKhanbogd
SoumherdcomplaintsfiledtotheInternationalFinanceCorporation(IFC)Compliance
Advisor-Ombudsman(CAO)andinIndependentAuditReportsavailableat
http://ot.mn/esia-audit-reports/.
TheIndependentExpertPanelReportsummarizedintheExecutiveSummaryhavebeen
preparedpursuanttotwoformalcomplaintsfiledbyherdersandherdersupport
organizationswiththeInternationalFinanceCorporation(IFC)Compliance
Advisor/Ombudsman(CAO)in2012and2013.AsofJanuary2016,onlytheIEPReport
ExecutiveSummary,ratherthanthefullreport,ispublicallyavailable.
IFCisoneofthelenderscommittingfundstoOTPhase2identifiedintheDecember14,
2015announcementoftheOTPhase2multi-bankfundingfacility.Theherdercomplaints
filedwiththeIFCCAOandassociateddocumentsareavailableat:
Mongolia/OyuTolgoi-01/SouthernGobi:
http://www.cao-ombudsman.org/cases/document-links/links-191.aspx
and
Mongolia/OyuTolgoi-02/SouthernGobi:
http://www.cao-ombudsman.org/cases/document-links/links-196.aspx
TheIndependentAuditReports(IARs),preparedperiodicallysinceOctober2013,identify
issuesassociatedwithcompanyperformancetoaddressofnon-conformancewithOT
projectcommitmentsfromtheESIA(SeeIARApril2015,P.18)
OTTR2014doesnotacknowledgeordiscusstheissuesrelatedtonon-conformancewith
OT’scommitmentsaddressedintheIARsortheIEPES2015.The“ENVIRONMENTAL
STUDIES,PERMITTINGANDSOCIALORCOMMUNITYIMPACT”sectionofOTTR2014,
beginningatP.441,summarizesthetypesofimpactsidentifiedinESIA2012andDraft
ESIAspreparedtoaddressOToperations.ThatsectionoftheOTTR2014doesnotprovide
anassessmentofthenature,extentofseverityofimpactsofOToperationstodateorany
changestopreviousESIAsnecessarytoaddressimpactsthathaveoccurred.
Similarly,OTTR2014doesnotincorporaterecentlycompiledinformationonwater
resourceimpactsofcurrentOToperationsorprojecthowtheimpactsidentifiedinthe
IARs,IEPES2015andthefullIEPReportwillbeaddressedinthefuture,suchasanESIA
forOTPhase2.
36
Figure23–“WaterImpactsonHerderssurroundingOThavebeensignificantandare
growing”
37
TheinformationgatheredintheIARandIEPreviewsarecriticaltothepublicandinvestor
awarenessofOT’simpactsonandriskstolocalwaterresources,socio-economicand
culturalheritageconditionssincethemineoperationsbegan.Updatingwaterresource,
socio-economicandculturalheritageconditionsisnecessarytoaddressdeficienciesor
inaccuraciesinbaselinedatacompiledpriortoOTstart-up.Updatingtheassessmentof
impactstothesecriticallyimportantelementsofthelivesofherdersandtheirfamilies
surroundingOTisessentialtodeterminingarewhetherimpactshaveoccurredas
predictedoraremoreorlessseverethatthanpredictedintheESIA2012.
TheIndependentExpertPanel(IEP)foundimpactsonherderwaterresourcesthataffect
herdersocio-economicandculturalconditionssignificantlyandmoreseverelythan
previouslyidentified.IEPES2015reportsthat:
“ThedirecteffectoftherelocationoftheBorOvoospringontheherders’accessto
waterandwaterqualityisthecompletelossofthespring.Thetemporary
replacementwatersourceattheSouthernfencelineoftheMLAdeliverswater,
howeveritdoesnotreplicatethefunctionsforlivestockherdingneitherthe
ecologicalfunctionsofwildlifehabitatofBorOvoospring.
“ThelossoftheoriginalBorOvoospringhascausedlongerdistancesforherdersto
accesswateratthecurrentwateroutletofthediversionpipe;withthe
establishmentofthelatestfencelinealongtheMLAborder,thishasbecomeeven
morepronounced.”
and
“Thelossofaccesstosummerpastureandlossofwatersourcesduetowatershed
wideimpactsbytheOTmineandinfrastructuredevelopment(includingcoalroad)
hasresultedinfarreachingandirreversibledisturbancetotraditionalnomadic
livestockhusbandryinKhanbogdSoum,especiallyinJavkhalantBageffectingthe
wholeherdingcommunity.Thesearchforwaterandpastureandinabilitytolet
winterpasturesrest,isdegradingremainingpastures;withtheeffectsof
fragmentation,mechanicaldisturbance,dustandlitteralonginfrastructure
corridors,thecumulativeimpactsaresevereandwillcontinuetoincreaseasmine
developmentproceeds.”(IEPES2015)
OTTR2014assertsthatOThasnot,“seen…anyconnectionbetweenthedeepaquiferand
theshallowherders’wellsinnear-surfacestreambedaquifers,”atP.413,failingto
acknowledgeorignoringthe“interaquiferflow”betweenshallowherders’wellsandthe
deepaquifercausedbypoorboreholeconstructionidentifiedintheIARs.
TheApril2015IndependentAuditReportisdescribedbyitsauthorsasa“DesktopAudit”
asitwas“conductedasadesk-topreviewofthedocumentationprovidedand
teleconferenceswithOTsitepersonnel”withoutsupportingfieldobservations,or
interviewswithareaherdersandotherauthorities.(IAR4-2015,P.18)
WaterandWasteManagementNon-ConformanceIssuesidentifiedintheApril2015IAR
addresscontinuingproblemsassociatedwiththeUndaiRiverDiversion(IssueM1.1)and
38
InterconnectedHydrologicUnits(IssueM1.5)associatedwith“cascadingwells.”(See
Schneider2013,Bale2014amongothersources)
RegardingtheUndaiRiverDiversion,theIAR4-2015,atP.19,identifiesthecontinuing
concernthat,
“TheUndaiRiverDiversionhasnotbeencompletedinaccordancewiththeESIAdue
toadelayinissuanceofaLandUsePermit.Atemporaryapproach(theUndaiRiver
PartialAdjustmentandProtectionProject)hasbeencompletedtodivertsurface
flowandtocaptureandre-routegroundwaterflowfromtheUndaiRiverand
aroundthezoneofinfluenceoftheopenpit.ThecurrentUndaiRiverPartial
AdjustmentandProtectionProjectdoesnotfullymeetthedesignrequirementsas
specifiedintheESIA.”
CommentsonthisissueintheIAP4-2015asaresultoftheDesktopAuditinclude,
“TheUndaiRiverDiversionhasnotbeencompletedinaccordancewiththeESIAdue
toadelayinissuanceofaLandUsePermit.Atemporaryapproach(theUndaiRiver
PartialAdjustmentandProtectionProject)hasbeencompletedtodivertsurface
flowandtocaptureandre-routegroundwaterflowfromtheUndaiRiverand
aroundthezoneofinfluenceoftheopenpit.ThecurrentUndaiRiverPartial
AdjustmentandProtectionProjectdoesnotfullymeetthedesignrequirementsas
specifiedintheESIA.”
AtP.20,theIAP4-2015identifiesthecontinuingconcernthat,
“Mitigationsarerequiredintheeventofinterconnectionofhydrogeologicalunits.
Thesemitigationshavenotyetbeenimplementedinallinstances.OTisprogressing
effortstoabandonorconverttoproductiveusetheseinterconnectingbores.”
CommentsonthisissueintheIAP4-2015asaresultoftheDesktopAuditinclude,
“Evidenceexistsofexplorationboresinterconnectinghydrogeologicalunitswithin
theGuniiHooloiborefield,intheGalbynGobiregion,andwithintheMLA.Future
dispositionofthesewellsiscurrentlyunderevaluationbyaworkgroupestablished
withtheKhanbogdsoum.Therearesomerequestsforconversionofthewellsfor
communityuse;thisrequesthasbeenforwardedtothecommunities’team.
“BesteffortsarebeingmadebyOTtoprogressthesealingofinterconnectingbores
withinandoutsideoftheMLA,howevertheissueisoutstanding.Perrequestfrom
theworkgroupOThasprovidedboringlogsforallinterconnectingbores.”
OTTR2014,atp.24,says,
“Althoughithasarequirementtomakeitsself-discoveredwaterresourcesavailable
tobeusedforhouseholdpurposes,itisconfirmedinthe[OTInvestment
Agreement]IAthatOTLLCholdsthesolerightstousethesewaterresourcesforthe
Project.OTLLChastherightundertheIAforawateruserightfortheperiodofits
mininglicence.”
39
OTTR2014,atP.52says,
“OTLLCwillmakeitsself-discoveredwaterresourcesavailabletobeusedfor
householdpurposes,herderfamilies,andagriculturalactivitiesofthelocalsoum
communities.”
NeithertheIARorOTTR2014describethe“bestefforts”thatOTisreportedtobemaking
toaddresstheinterconnectedaquiferproblemsaffectingshallowwellsusedbyherders
resultingfromOTwellconstruction,orhowtheperformanceofthosebesteffortswithbe
evaluated.
OTTR2014doesnotidentifywhether,when,how,andinwhatamount,OTwould“makeits
self-discoveredwaterresourcesavailabletobeusedforhouseholdpurposes,herder
families,andagriculturalactivitiesofthelocalsoumcommunities”throughthelifeofthe
OToperation,orhowOTself-discoveredwaterresourceswillbeusedtoaddress
replacementofandcompensationforlossestoherderwaterresourcesintheUndaiRiver
watershedorareasofaquiferinterconnectionresultingfromfaultyboreholeconstruction.
OThasnotyetproposedaplanforuseof“itsself-discoveredwaterresourcesavailableto
beusedforhouseholdpurposes,herderfamilies,andagriculturalactivitiesofthelocal
soumcommunities”throughthelifeoftheOToperation.
Herdershavebeenimpactedbyboreholesconnectingshallowanddeepaquifers –
“cascadingwells” – formanyyears.Cascadingwellswerefirstidentifiedbyherdersin
2004.Herders’livestockmanagementandculturalpatternshavebeenseverelydisrupted
bytheineffectivenessoftheUndaiRiverDiversionandtheReplacementBorOvoospring
since2013whenthecurrentUndaiDiversionconstructionworkswerecompleted.
Developmentandimplementationofplansto“makeitsself-discoveredwaterresources
availabletobeusedforhouseholdpurposes,herderfamilies,andagriculturalactivitiesof
thelocalsoumcommunities”throughthelifeoftheOToperationwouldbeappropriateto
address:
“OTLLC....obligationswithregardtowaterutilisation:[including]
-Notreduc[ing]fromthecurrentlevelthequalityandquantityoftheexisting
potableandlivestockwatersuppliesusedbyexistingusersatthedateoftheIA[OT
InvestmentAgreement2009]withinthewaterresourcesareadefinedintheDEIA
Reports.”(OTTR2014P.53)
BoththeIARconsultantsandIFCCAOOyuTolgoi-01andOyuTolgoi-02Complaintfiles
acknowledgethataJune8,2015MemorandumofUnderstandingtoformaTri-Partite
CounciltohasbeenagreedtobyKhanbogdSoumadministration,Representativesof
HerdersofKhanbogdSoumandOTLLCtoaddresstheHerderComplaintsfiledwiththeIFC
CAO.TheCouncilprovidesanimportantnewvenuewherethepartiescan,
“consider,address,resolve,exchangeinformationabout,makeproposalsand
recommendationsinrespectof,implementandrelaytotheappropriatelevels,any
40
issuesrelatingtoherders,pastureandwaterandanyotherrelevantissues…”
associatedwiththeHerders’IFCCAOComplaints.”
MongolianandEnglishlanguageversionsoftheJune8,2015MoUareavailableontheIFC
CAOpagesfortheOTComplaintsat:http://www.cao-ombudsman.org/cases/documentlinks/links-191.aspxandhttp://www.cao-ombudsman.org/cases/document-links/links196.aspx
Thisrecentdevelopmentmayprovideaeffectivevenueforairingandresolvingherders
andSoumGovernmentcomplaintsregardingOTimpactsiffundedadequatelytoprovide
sufficientsupportforsustainedparticipationbyherderandSoumrepresentatives
includingtheirtimeandtravelandsustainedprofessionaltechnicalsupport.
41
HowdoInternationalMetalMarketPricesaffectOyuTolgoiPhase2Development
andFundingPlanandTechnicalReports?
AllprojectionsofthefuturevalueandeconomicimpactsofOTPhase2presentedinthe
May18,2015OyuTolgoiUndergroundMineDevelopmentandFinancingPlan(OTUMDFP
2015)arebasedontheinternationalmarketpricesforthecopper,goldandsilverthat
wouldbeextracted.
December1,2015marketpricesforcopper,goldandsilveraresignificantlylowerthanthe
pricesusedinthedevelopmentofOTPhase2expansionplansforcopper,gold,andsilver,
thethreemetalcommoditiesbeingproducedatOT.
Aslongaslowermetalpriceslast,thevalueofOTcopper,goldandsilverproductionwillbe
reducedbelowtheestimatedOTPhase2incomeandvaluewhichwerebasedonhigher
projectedprices.Incomederivedfromthemineandgovernmentpaymentsassociatedwith
CurrentOTPhase1operationsthatreflectthevalueofmineproductionwillalsobe
reducedduetolowermetalpricesthanthoseprojectedintheOTTR2014.
Thecentralroleofinternationalmarketpricesintheassumptionsregardingthefuture
valueandeconomicimpactofOTPhase2asprojectedinOTUMDFP2015,signedbyOT’s
ownershiponMay18,2015inDubai,isshownatP.4inthetableof“Impactsonthe
DomesticEconomy”thatare,“basedonanumberofassumptionsrelatingtoscope,costs,
schedule,technicalaspectsandmarketconditions.”
TheOTUMDFP2015isanagreementbetweenthe“GovernmentofMongoliathrough
ErdenesOyuTolgoiLLC”(“EOT”–thecorporateentitycreatedbytheGovernmentof
Mongoliatorepresentits34%shareintheOyuTolgoi)andOyuTolgoi’scorporateowners
oftheremaining66%oftheOyuTolgoiMine:TurquoiseHillResourcesLimited,THROyu
TolgoiLtdandOyuTolgoiNetherlandsB.V.,(together“TRQ”)andRioTintoInternational
HoldingsLimited(“RioTinto”)andOyuTolgoiLLC(“OTLLC”).RioTintocontrolsthe
majorityofsharesinOyuTolgoithroughitsownershipof51%ofTurquoiseHillResources
Limited.
TheOTUMDFP2015listsagreements“inprinciple”amongOT’sownersandnotes,atP.5,
thattheactualcost–usingtheword“quantum”fortheestimated“actualamount”–“of
fundingrequirementswillbedeterminedbyanumberoffactorsincludingthebusiness
performanceofOTLLCandvariancesinthecopperandgoldprices.”
TheDubaiAgreementsaysatP.5,thatformal“Approvalof[OTPhase2financing]isa
decisionfortheBoardsofRioTinto,TRQandOTLLCandtheShareholdersofOTLLC.Oyu
TolgoiBoardapprovalof[OTPhasefinancing]isrequiredbythelenders…tobe
unanimous.”
Inadditiontooutliningagreementsinprincipleandtheactionsnecessaryforformal
approvalofprojectfinancingtostartOTPhase2,theOTUMDFP2015includes
42
commitmentsrelatedtoprogressonanOTpowersupply,researchonafutureOTcopper
smelter,andfinancialreportingandtaxconsiderationsandotheractivities.
Uncertaintyregardingfuturepricesforcopper,goldandsilverandothercommodities
reflectstheglobalmarketuncertaintyaboutwhetherthesteepfallinpricesforthose
metalssince2010willbealong-termorshort-termtrend.Ascopperisthesourceofmore
than75%ofthevalueofOyuTolgoiPhase2,thisuncertaintyfocusesonquestions
regardingfuturecopperprice.
HowmuchhaveinternationalmetalmarketpricesfallensincetheOTPhase2
TechnicalReport(OTTR2014)wasreleased?
December2015internationalmarketpricesforcopper,goldandsilveraresignificantly:
20–30%lowerthanthoseusedinOTTR2014resourceevaluationsandeconomicprojects
forOTPhase2.
Copper,goldandsilverpriceshavebeendroppingsteadysincetheOctober2014releaseof
OTTR2014,whichtheMay2015OTOTUMDFPand2015OTFeasibilityStudy(not
disclosedtothepublic)havebeen“aligned”with(THR2015).The“ReserveCase”isthe
termintheOTTR2014fortheOTPhase2expansion.OT’s2014“ReserveCase”summary
(OTTR2014atP.4)projectstheminingof1.5billiontonsoforeatcoppergrade
(“content”)of0.83%,goldgradeof0.32gramspertonandsilvergradeof1.94gramsper
tons.OTPhase2oreisestimatedtocontain24.9billionpoundsofcopper,11.9million
ouncesofgoldand78.0millionouncesofsilver.
ThevalueofrecoveredmetalfromOTPhase2usedinOTTR2014are:
“[f]ormineplanning…themetalpricesused…werecopperat$3.01/lb,goldat
$1,250/ozandsilverat$20.37/ozand….costfortheundergroundminearebased
on$15.32/t.”(OTTR2014atP.20).
Atthoseprices,thetotalvalueofthemetalrecoveredfromOTPhase2wouldbeabout
$88.4billiondollars,ofwhichmorethan82%–$74.7billion–wouldcomefromcopper
sales.
SinceOTTR2014wasreleased,copper,goldandsilverprices(andothercommoditiesthat
areimportanttotheMongolianeconomy)havefallensignificantly.IfDecember1,2015
internationalmarketpricesforcopper-$2.11/lb,gold-$1,065/oz,andsilver-$14.21/oz,
areusedtocalculatethevalueoftheoreproposedforminingatOTPhase2,thetotalvalue
ofthemetaltoberecoveredwouldfallmorethan$22billion,from$88.4billionto$66.1
billion,withthecoppervaluefallingfrom$74.7billionto$52.4billion,alsomorethan$20
billion.
Figure24–“MarketPriceUncertainty”including“5YearCopperSpot”–included5-year
trendincopperspotmarketpricesshowscoppersportmarketpricesbetweenNovember
2010andDecember2015.
43
MarketPriceUncertainty-Marketpricesforthecopper,goldandsilverhavefalleninvalue
sinceOTPhase2mineplanswerereportedinOTTR2014where“metalpricesused…were
copperat$3.01/lb,goldat$1,250/ozandsilverat$20.37/oz”(OTTR2014P.20).Atthose
prices,thetotalvalueofthemetalrecoveredfromOTPhase2wouldbeabout$88.4billion
dollars,ofwhichmorethan82%-$74.7billion-wouldcomefromcoppersales.
Metalmarket
pricesfrom
www.kitco.com
Copperprices,aswellasgoldandsilverprices,havefallensteadyformorethan5years.
Current,December2015,marketpricesforcopper,goldandsilverarewellbelowthoseused
forOTPhase2mineplanninginOTTR2014.IfDecember1,2015interna4onalmarketprices
forcopper-$2.11/lb,gold-$1,065/oz,andsilver-$14.21/oz,wereusedtocalculatethe
valuetoberecoveredfromOTPhase2ore,thevalueofOTPhase2produc4onwouldfall
from$88.4billionto$66.1billion-adropofmorethan25%;withthecoppervaluefalling
19
from$74.7billionto$52.4billion–adropof30%
Source: The source for the “5 year Copper Spot Chart” www.kitco.com, is alsothesourceusedforcommodity
metalpricesontheTurquoiseHillResourceswebsiteat
http://www.turquoisehill.com/s/commodity_metal_prices.asp.
TheDecember1,2015copperpriceof$2.11/poundis30%lessthantheOTTR2014
planningpriceforcopperof$3.01.
TheDecember1,2015goldpriceof$1,065/ozis15%lessthantheOTTR2014planning
priceforgoldof$1,250/oz.(seewww.kitco.com forgoldpricecharts)
TheDecember1,2015silverpriceof$14.21/pzis30%lessthantheOTTR2014planning
priceforsilver.(seewww.kitco.com forsilverpricecharts)
ThereductionintotalmetalvalueforOTPhase2usingDecember1,2015metalprices
insteadofOTTR2014metalplanningpricesisabout25%,withthetotalvalueofthe
coppertobeminedintheOTPhase2falling30%.
Howlongthecurrentdepressioninmetalcommoditypricesrelativetopeakpricesin2010
and2011willlastisnotpredictablewithanycertaintyandisthefocusofintense
speculationbycopperproducers,investors,banksandcopperconsumers.
44
Metalmarketpriceuncertaintymayinfluencetheultimatedesign,costandcorporate
boardapprovalofOTPhase2,allofwhicharenecessarybeforeacceptanceofthemultibankloanfacilityofferedtoOTbyaconsortiumofbanksDecember14,2015.
OTmanagementrecognizesthechangeinmetalpricesduringtherecentyearsaffectthe
projectedvalueofOT.TurquoiseHill,RioTintoandOTmanagementcontinuetobe
optimisticthatinvestmentinOTexpansionwillgeneratecopper,goldandsilverthatwill
findanimproved,higherprice,market,whentheOTPhase2expansioniscompleted.
RioTintomanagement’sviewontheeffectsoftherecentfallinthecopperpriceonOTare
summarizedinaNovember26,2015articletitled,“CopperpricesmayweighonRioTinto’s
loomingdecisiononOyuTolgoiexpansion,”thatreportsRioTinto’schiefexecutivefor
copperandcoalJean-SebastienJacques’sandRioTinto’sbeliefthat“thecoppermarketis
facingtwoorthreeyearsmoreofpain,itistheonecommoditytheyexpecttorecoverthe
fastest.”(Mining2015)
Similarly,Mr.Jacqueswasreportedtohavesaidthat, “"Weareprettybullishaboutthe
coppermarketinthelongtermandthereasonisweexpecta6to8milliontonneshortfall
[ofcopper]inthenext10years,”hesaid.“OyuTolgoiwillbepartofthesolutiontoprovide
thecopperthatisrequiredinChinaoranypartoftheworldatthatpointintime.”(INVEZZ
2016).
Forperspective,OTPhase2,the24.9billionpoundsofcopperOTPhase2isprojectedto
produceisequalto1,250,000tonsofcopperallowingforanaverageof31,250tonsper
yearfor40years.ThecopperproducedbyOTPhase2willbeintheformofcopper
concentrate,about100,000tonsperyearcontainingabout33%copper,unlessanduntila
coppersmelterorothercopperrefineryisconstructedtofurtherprocesstheOTcopper
concentrate.Whileavery,verylargemine,OT’sannualcopperproductionislessthan1%
ofthe6-8millionton“shortfall”incoppersupplyprojectedbyMr.Jacques.
OTPhase1producescopper,gold,andsilverfrom100,000tonsoforeperday.OTPhase2
willproduce115,000tonsperdayofore–95,000tonsfromtheNorthHugoLift1
UndergroundMineoncefullproductionisreached.FullproductionatNorthHugoLift1is
projectedtobeachievedintheearly2020s–about5-7yearsaway.OTmanagement
projectsthatthelowpriceconditionsinthecoppermarketwillendafteracouplemore
years,beforeOTPhase2hasreachedfullproductionlevels.
45
Whataresomeoftheplansandissuesassociatedwithdevelopingapowersourcefor
OTPhase2?
ApowersupplysourcetooperateOTPhase2atfullcapacityhasnotyetbeenbuilt.OTTR
2014discussionofthepowersupplyneedsfocusondevelopmentofan“Independent
PowerProject”[IPP]includingacoal-firedpowerplantusingcoalfromtheTavanTolgoi
depositwestofOT.PowersupplyneedsforOTareprojectedtogrowfrom145Megawatts
atstart,to246MWwhenundergroundminedevelopmentiscompleted.
DevelopmentofaTavanTolgoiIPPintimetomeetOTPhase2demandbythe2020-2022
periodasprojectedinOTTR2014facesmanyobstaclesincludingfundingchallenges,
mixedpoliticalsupportandoperatingissues.
AlternativesourcessuchaswindpowermaybeabletobeconstructedintimetomeetOT
Phase2powerdemandandatlowercost,asatleastfiveutilityscalewindprojectsare
involvedinpermittingorconstructingmorethan350megawattsinSouthernorEastern
Mongolia.
OTPhase2“OperatingAssumptions,”asprovidedinOTTR2014atp.24,include,
“Thesupplyofpowerhasbeenrecognisedasbeingcriticaltotheprojectexecution
ofOyuTolgoiinthe2009InvestmentAgreement].OTLLChasbeengiventheright
toimportpowerinitiallybutmustsecurepowerfromsourceswithinMongoliafrom
thefourthyearofoperation.SigningofaPSCAwiththeGOMinAugust2014has
resetthefouryearsobligationwhiletheopportunityfortheestablishmentofanIPP
atTavanTolgoiisstudied.OTLLChasretainedtherighttoconstructapower
stationatOyuTolgoi.“(OTTR2014,P.24)
OTTR2014recognizesthat,
“TheOyuTolgoiProjectisenergy-intensive,withrequirementsofapeakof145MW
sincestart-up,increasingto246MWinthelongertermaftercompletionofthe
undergrounddevelopment.Areliableandstablepowersupplyisessentialfor
operationsandsafety.”(OTTR2014,P.383)
Initsdiscussionof“Power”atP30,OTTR2014says,
“OTLLChasaPowerPurchaseAgreementwiththeInnerMongoliaPower
CorporationtosupplypowertoOyuTolgoi.Thetermofthisagreementcoversthe
commissioningofthebusinessplustheinitialfouryearsofcommercialoperations.
“InAugust2014,OTLLCsignedaPowerSectorCooperationAgreement(PSCA)with
theGOMfortheexplorationofaTavanTolgoi-basedindependentpowerproducer
(IPP).TheaimofthePSCAistolayoutaframeworkforlong-termstrategic
cooperationbetweentheGOMandOTLLCforacomprehensiveenergyplanforthe
SouthGobiregion.ParticipationinthePSCAmeetsOTLLC’sobligationintheIAto
establishalong-termpowersupplywithinMongoliawithinfouryearsfromthe
commencementofcommercialproduction.SigningofaPSCAhasresetthefour
46
yearsobligationwhiletheopportunityfortheestablishmentofanIPPatTavan
Tolgoiisstudied.
“ThePSCAprovidesaframeworkforabroadrangeofpower-relatedissues,
includingtheestablishmentofapowergenerationsource,transmissionlines,and
powerimports.ThecentrepieceofthePSCAisanopen,internationaltenderprocess
toidentifyandselectanIPPtoprivatelyfund,construct,own,andoperateapower
planttosupplyelectricity,withOyuTolgoiastheprimaryconsumer.
“FullevaluationoftheIPPoptionisexpectedtotake9–12months.OTLLCplansto
activelyparticipateintheprocessesofthePSCAtoensurethatthereisatimelyand
reliablepowersupplysolutionforOyuTolgoiandthisapproachisendorsed.”
OTTR2014,atP.53recognizesthat,
“ThePowerPlantProjectwillimplementtheenvironmentalprotectionprovisionsof
theIAasdescribedintheESIA(July2012).ASupplementalESIAspecificallyforthe
PowerPlantProjectisforthcoming.”
TheOTTR2014discussionofaTavanTolgoiPowerPlantforOTPhase2donot
acknowledgethemanychallengescurrentlythefacingdevelopmentoftheTavanTolgoi
PowerPlantandtheoperationoftheassociatedcoalmineneededtofeedtheplant.
SomeofthesechallengeshavebeenrecognizedbyErdenesMongolseniormanagement,
theofficersoftheGovernmentofMongoliacorporationthatholdsa34%shareofOTLLC.
InAugust,2015,threemonthsaftertheMay18,2015OTUMDFP,Mr.Ch.Otgochuluu,
ErdenesMongolsenioreconomist,said,“TurquoiseHillhasissuedafinancialguarantee
worthonebillionUSdollarsfortheconstructionofTavantolgoiPowerPlant.The
Governmenthasgivendirectionstoassociatedofficialstolaunchdevelopmentoftheplant
fromspringof2016.”
AsnofeasibilitystudyfortheTavanTolgoiPowerPlant,oranyalternativepowersupply
forOTPhasehasbeenreleased,itisuncleariftheUSDonebillionfinancialguaranteefrom
TurquoiseHillissufficientfortheconstructionof246-megawattpowersourceOTsaysit
needsfromTavanTolgoi.AtacostofUSDonebillion,the246-megawattplantwouldcost
about$4.06/watttoconstruct.
Mr.OtgochuluunotedthatfullcostoftheOTPhase2projectislikelytorisesignificantly,
notingthat“[t]hefirstestimationofrequiredinvestmentforundergrounddevelopmentis
likelytoincreasefrom5.7billionto7-8billionUSdollars.”
IfMr.Otgochuluuestimatesareaccurate,projectedOTPhase2costswouldriseto17–33%
morethantheUSD6billionmaximumvalueofthemulti-bankloansforannounced
December18,2015.
47
Developmentoftheupdated2015OTPhase2feasibilitystudyandrevisedconstruction
costsarecriticalstepsthatarerequiredtobecompletedpriortotheconsiderationoffinal
OTPhase2projectapprovaloftheBoardsofalloftheOTLCCpartnersasrequiredbythe
OTUMDFP2015.
SignificantadditionalpowerbeyondOTPhase2demandwillbenecessaryforoperating
anycopperrefiningsmelterconsideredbyOTLLCoranyfutureexpansionbeyondPhase2.
AninvestigationoftheeconomicviabilityofaddingacoppersmeltertotheOTcomplexis
requiredbySeptember2016intheOTUMDFP2015.Acoppersmelterwouldbeusedto
upgradeconcentrategradecoppercurrentlyproducedatOTwithabout33%copper
contenttorefinedcoppermetalwith95–99%+coppercontent-dependingonthe
specificsmelting,refiningand/orconvertingprocessesselected.Currentlytheupgradingof
OTconcentratestothemorevaluable99%+coppermetalproductisconductedatsmelters
inChina.
DevelopmentofcoalproductioncapacityattheTavanTolgoidepositthatwouldfeeda
TavanTolgoiPowerPlantisalsofacingsignificantdifficultiesandmaybestalledforan
extendedperiod.InearlySeptember2015,Forbesmagazinereportedthat,
“MongolianMinisterMendsaikhanEnkhsaikhansaidthatthelong-delayed$4billion
TavanTolgoicoalmineprojectwasunlikelytogoahead,accordingtotheBusiness
Mongolianewsite,partlyduetoChina’sslowinggrowth.“It’snotonlybecauseof
parliament[wheretheprojecthasfacedopposition],butalsobecauseoftheChinese
situation,”Mendsaikhansaid.ThenewsletternotesthatMongoliareliesonChinato
buy“nearlyallofitsmineralsandpetroleum,”whichaccountedfor86percentof
exportsinthefirsthalfof2015.”(FORBES2015)
Justweekslater,thefailuretosecureloanstooperatetheTavanTolgoicoalminewas
confirmed,castingashadowoverthelikelihoodofdevelopmentofTavanTolgoidepositon
alargeenoughscaletopowerOTPhase2whenthatpowerisneeded.
LaterinSeptember2015,www.mining.comreported,
“Mongoliastrugglestodevelopitslargestcoalminingproject,TavanTolgoi,with
reservesof7.4billiontonnesofcoal,aftertheMongolianGovernmentfailedto
secure$4billioninfunds.Developmentofthemine,haltedbypoliticsandweak
governmentinstitutions,reflectstheresourcecurseasMongolia’sParliamentfailed
totransferownershipofthecoalmine.Thetransferofownershiptoaconsortiumof
ChineseandJapanesecompanies,waspartofMongolia’splantoincreaseinvestors’
stakeholdingsin2015and2016.
“Mongolia’scontinuouslydevelopingminingsectorandvastresourcescause
obstaclesinmanagingMongolia’sresources.ThedevelopmentofOyuTolgoiand
TavanTolgoirepresentaminingboomthatcouldbeshort-lastingasthecountry
experiencesboom-bustcyclesinlinewithinternationaldemandandinternational
commoditymarketprices.Mongolia’sdouble-digitgrowthofthelastfewyearsand
in2014slowedto7.8%.In2011,therewas17.3%GDPgrowth.”(Mining9-2015)
48
Thecurrentdownturnincopperpricingisacauseofadownturninoperationsofmany
copperminesaroundtheworldthoughRioTintomanagementcontinuetoinvestmentin
OTinanticipationofaupturnincopperpricesinthenext2-3years.(TRQ8-2015)
ArealternativesourcesofpowerpossibleforOTPhase2?
WhileOTTR2014atP.438notesthat,“Copperdemandwillalsobenefitfromagreater
long-termfocusonrenewablesourcesofenergyandenergy-efficienttechnologiessuchas
windturbinesandelectric/hybridvehicles,whichareofcopper-intensivefabrication,”
OTTR2014offersnorenewableenergyoptionsfortheOTpowersupply.
AtthesametimethatForbes2015wasreportingonthelong-termobstaclesfacingTavan
Tolgoicoalproduction,itwasalsoreportingonenergyproductiontrendsinChinamoving
awayfromcoaltorenewableenergyproduction.InSeptember2015Forbesalsoreported
that,
“RenewableenergyisalsokeytoChina’stransitionawayfromcoal.Chinainvested
$90billioninclean-techinvestmentslastyear,accordingtoBloombergNewEnergy
Finance,farmorethantheU.S.Non-fossilfuelsources–solar,wind,hydroand
nuclear–areexpectedtomakeup20%ofChina’senergymixin15years.China
alreadyhasmorewind-generatingcapacitythananycountryintheworldanditis
likelythisyeartoovertakeGermanyastheworld’slargestsolarcountry,measured
byinstalledcapacity.By2030,China’snon-fossil-fuelenergybasealonewillbe
almostequivalenttothetotalelectricalcapacityoftheU.S.today.”(FORBES92015b)
OptionsforwindpowerproductioninMongoliaattheindustrialscaleneededbyOTare
identifiedinthe“ScalingUpRenewableEnergyinMongoliaInvestmentPlan”summarized
attheMongoliaNationalRenewableEnergyCenter’swebpageat:
http://www.nrec.mn/web/data/main/main1441093417.pdf.
TA-8757MONScalingUpRenewableEnergyinMongolia(InvestmentPlan),28August
2015(NREC2015)
The“ScalingUpRenewableEnergyinMongoliaInvestmentPlan”(NREC2015)identifies
fiveactivewindpowerdevelopmentprojects,withpotentialtogenerateatotalof350MW,
asfollows:
–OyuTolgoiWindPowerProjectbyQleantechLLC,102MW
–SainshandWindPark,SainshandWindParkLLC,52MW
–ChoirWindFarm,AydinerGlobalLLC,50.4MW
–TsetsiiWindFarm,CleanEnergyAsiaLLC,50MWand
-ABSolarWind,ABSolarWindLLC,100MW
NREC2015saysthat,“Allhavegovernmentapprovalandtheirreadinessallows
constructiontostartin2016.”
49
OT’sownershipshouldconsiderinvestmentinrenewableenergysourcesforthemine’s
futurepowersupply.Thewindprojectslistedhavepotentialtocomeonlinebeforea
TavanTolgoicoal–firedpowerplantfedbyTavanTolgoicoalandatpotentiallylowercost.
ProgressontheSainshandWindProjectthroughMarch,2015,includedanannouncement
byFerrostaalIndustrialProjectsGmbHthatitwill
beginconstructionofitsSainshandWindFarminApril,slatedtobeMongolia’ssecondand
largestwhenitiscompletedin2016.The$115millionparkwillhave27towersandan
installedcapacityof54megawatts.Itwilldeliver54megawattstoMongolia’selectrical
grid,OliverSchnorr,directorofSainshandWindParkLLC,saidinatextmessage.
(BLOOMBERG3-2015)
TheSainshandprojectwouldbethesecondutilityscalewindprojecttobeconstructedin
Mongolia.Thefirst,the50-MWSalkhitWindFarmbeganoperationsin2013.
Ifthe$115millioncostfor54megawattSainshandwindprojectisaccurate,thecostper
wattfortheprojectwillbe$2.12/watt.EuropeanBankforReconstructionand
Development(EBRD)reportsthatcostdesignandconstructionofthe50megawattSalkhit
WindProject,theonlyoperatingindustrialscalefindfarminMongolia,was$123million,a
costof$2.46/watt.(EBRD2013)
TheprojectcostofSainshandwindprojectwouldbeonly53%perwattoftheprojected
costofa246-megawattTavanTolgoiPowerPlantifitwouldcost$1billion,acostof
$4.06/watt.IfthemoreconservativecostoftheSalkhitWindFarmwereusedfor
comparison,thecostofwindpowerforOTPhase2wouldbe40%lessthatthecostper
whatforTavanTolgoipowerat$4.06/watt.
InApril2015,NewcomLLC,developeroftheSalkhitwithfundingfromtheEuropeanbank
forReconstructionandDevelopment(EBRD)amongothersourcesannounced“The$100
millionTsetsiiplantreceiveditspermitfromtheNationalDispatchingCenter,which
managesMongolia’sgrid.”NewcomChiefExecutiveBolorJargalsaikhansaid,“Thewind
farmisthefirstprojectofCleanEnergyAsiaLLC,whichis51percentownedby
Ulaanbaatar-basedNewcomand49percentbyJapan’sSBEnergy,whichisSoftBankCorp.’s
energyarm.Theoperatorsplantoexpandpowercapacityfrom50to250megawatts
within10years.”(BLOOMBERG4-2015)
50
SOURCESCITED
BALE2014 “MassiveMongolianMineEndangersNomadsWater,WayofLife”,Rachel
Bale,September30,2014,
https://www.revealnews.org/article-legacy/massive-mongolian-mineendangers-nomads-water-way-of-life/
BLOOMBERG3-2015
“FerrostaalsettobeginworkonMongolia'sbiggestwind
farm”,MichaelKohn,BloombergNews,March17,2015,
http://www.bloomberg.com/news/articles/2015-03-17/ferrostaal-set-tobegin-work-on-mongolia-s-biggest-wind-farm
BLOOMBERG4-2015
“Newcom,SBEnergyWinpermitfor50-MWWindFarmin
Mongolia”,MichaelKohn,BloombergNews,April,30,2015,
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CAOIEP2015
Mongolia/OyuTolgoi-01/SouthernGobi–withdocumentsavailable
at:
http://www.cao-ombudsman.org/cases/document-links/links-191.aspxand
Mongolia/OyuTolgoi-02/SouthernGobi-withdocumentsavailableat:
http://www.cao-ombudsman.org/cases/document-links/links-196.aspx
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http://www.ebrd.com/downloads/news/treasury-development-salkhit.pdf
ESIA2012 “EnvironmentalandSocialImpactAssessment”,2012,Allsectionsavailable
athttp://ot.mn/environmental-social-impact-assessment/
FORBES9-2015b “China’sEconomicSlowdown:WeMayHaveSeenPeakCoal”,Mark
Clifford,ForbesMagazine,September3,2015,
http://www.forbes.com/sites/mclifford/2015/09/03/chinas-economicslowdown-we-may-have-seen-peak-coal/
IAR4-2015 ReportoftheIndependentEnvironmentandSocialConsultants–OyuTolgoi
Project;InterimReportApril2015,preparedbyD’Appolonia,S.p.A.,
http://ot.mn/media/ot/content/esiaaudits/OT_ESIA_Audit_report_Apr_2015_EN.pdf
IEPES2015 “IEPExecutiveSummary”–(CAOIndependentExpertPanelReport–
ExecutiveSummary),January30,2015,http://www.caoombudsman.org/cases/documentlinks/documents/ExecutiveSummary_edit_Jan_30_2015-ENG.pdf
51
INVEZZ2016
“RioTintoshareprice:Mineragrees$4.4bnMongoliaminefinancing”,
VeselinValchevValchev,January4,2016at
http://invezz.com/news/equities/21694-Rio-Tinto-share-price-Mineragrees-4-4bn-Mongolia-mine-financing
IDPES2005 “OyuTolgoiProject,Mongolia-IntegratedDevelopmentPlan-Executive
Summary”,preparedbyAMECAusencoJointVenture,August2005,Revision
1,http://www.turquoisehill.com/i/pdf/IDP_ExecutiveSummary.pdf
IDP2010
“OyuTolgoiProjectJune2010TechnicalReport,preparedbyAMECMinproc,
http://www.turquoisehill.com/i/pdf/IDP10_June062010.PDF
IDOP2012 OyuTolgoiProjectIDOP[IntegratedDevelopmentandOperatingPlan]
TechnicalReport,preparedbyAMCConsultants,March12,2012at
http://www.turquoisehill.com/i/pdf/IDOP_2012Mar29_Tech_Rpt.pdf
Mining11-2015
“CopperpricesweighonRioTinto’sloomingdecisiononOyuTolgoi
Expansion”,CeceliaJamasmie,November26,2015at
http://www.mining.com/copper-prices-weigh-on-rio-tintos-loomingdecision-on-oyu-tolgoi-expansion/
MINING9-2015
“MongoliastrugglestodevelopTavanTolgoicoalmine”,Samantha
Brletich,www.mining.com,September21,2015,
http://www.mining.com/web/mongolia-struggles-to-develop-tavan-tolgoicoal-mine/
MININGMAG2011 “OreBodyAccess,”MiningMagazine,03May2011at
http://www.miningmagazine.com/equipment/orebody-access)
MONTSAME2015 “OTUndergroundMinefundingtobesettlednextmonth,”B.
Amarsaikhan,MontsameNews,October27,2015,
http://en.montsame.mn/mining/ot-underground-mine-developmentfunding-be-settled-next-month-0
NREC2015 “ScalingUpRenewableEnergyInvestmentPlan”summarizedattheMongolia
RenewableEnergyCenter’swebpageat:
http://www.nrec.mn/web/data/main/main1441093417.pdf.
TA-8757MONScalingUpRenewableEnergyinMongolia(InvestmentPlan),
28August2015
OTTR2014
OyuTolgoi2014TechnicalReport,preparedforOTLLCbyOreWin
Consultants,October27,2014http://www.turquoisehill.com/i/pdf/201410-27_OyuTolgoiTechReport.pdf
OTUMDFP2015
May2015OyuTolgoiUndergroundMineDevelopmentandFinancing
52
Plan,http://www.turquoisehill.com/i/pdf/2015-05-18_OTUMDAFP.pdf
TRQ8-2015 “OyuTolgoifilesrevisedschedulesfor2015feasibilitystudywith
MongolianMineralsCouncil,”TRQ,PressRelease,August27,2015,
http://www.turquoisehill.com/s/news_releases.asp?ReportID=720655
[submittalofrevisionstoaMarch2015Phase2FeasibilityStudyfor
approvalbytheMongolianMiningCouncilthat“aligns”the2015Feasibility
StudywithboththeOTUMDFP2015andOTTR2014]
SCHNEIDER2013 “MongoliaCopperMineatOyuTolgoiTestsWaterSupplyandYoung
Democracy”,KeithSchneider,November5,2013,
http://www.circleofblue.org/waternews/2013/world/mongolia-coppermine-oyu-tolgoi-tests-water-supply-young-democracy/
SME2011 “SMEMiningEngineeringHandbookThirdEdition,SocietyforMining,
MetallurgyandExploration,2011,Darling,P.ed.,availableat
http://app.knovel.com/web/toc.v/cid:kpSMEMEHE5/viewerType:toc/root_s
lug:sme-mining-engineering
TRQ8-2015“OyuTolgoifilesrevisedschedulesfor2015FeasibilityStudywith
MongolianMineralsCouncil”,August27,2015corporatepressrelease
availableat:
http://www.turquoisehill.com/s/news_releases.asp?ReportID=720655.
Includes: “TurquoiseHillResourcestodayannouncedthatOyuTolgoihasfiled
revisedschedulesforthe2015OyuTolgoiFeasibilityStudy(OTFS2015)
withtheMongolianMineralsCouncil(MMC).ThefilingalsoalignedOTFS
2015withtheOyuTolgoiUndergroundMineDevelopmentandFinancing
Plan(UndergroundPlan),whichwassignedinMay2015.
TheMMChasalreadytentativelyacceptedOTFS2015,originallyfiledin
March2015,pendingarevisionofschedulesandalignmentwiththe
UndergroundPlan.OTFS2015isbasedonthesamefeasibilitystudyand
alignswiththe2014OyuTolgoiTechnicalReport,whichwasdisclosedin
October2014.”
TRQ8-2015b“AnalystandInvestorMineVisit”Presentation,August25-27,2015
http://www.turquoisehill.com/i/pdf/ppt/TRQ-SiteVisit-Aug2015.pdf
TRQ12-2015“OyuTolgoisigns$4.4billionprojectfinancemarkinghistoricmilestone
towardrecommencementofundergrounddevelopment”,TRQPressRelease,
December14,2015,http://www.turquoisehill.com/i/pdf/news/2015-1214_NR_TRQ_YFb2vv.pdf
Woo2009 “Characterizationandempiricalanalysisofblockcavinginducedsurface
subsidenceandmacrodeformations,”Woo,K.,etal,ROCKENG09:
Proceedingsofthe3rdCANUSRockMechanicsSymposium,Toronto,May
53
2009,(Woo2009)at:
http://www.geogroup.utoronto.ca/rockeng09/proceedings/innerFrames/P
DF/Session19/4044%20PAPER.pdf.
5YearCopperSpotMarketPriceChart
Informationoninternationalmarketpricesandtrendsiscompiledfrom:www.kitco.com,
thesourceusedforcommoditymetalpricesontheTurquoiseHillResourceswebsiteat
http://www.turquoisehill.com/s/commodity_metal_prices.asp.
54
BriefBiographyof
PaulRobinson
sricpaul@earthlink.net
ResearchDirector
SouthwestResearchandInformationCenter
POBox4524
Albuquerque,NewMexicoUSA87107
www.sric.org
William“Paul”RobinsonworksasResearchDirectoratSouthwestResearchandInformationCenter
inAlbuquerque,NewMexico,ascientificandeducationalorganizationworkingtopromotethehealth
of people and communities, protect natural resources, ensure citizen participation, and secure
environmentalandsocialjusticenowandforfuturegenerations,wherehehasemployedsince1976.
Paulhaspreparedpeerreviewedtechnicalpapers,contractpublications,andeducationalmaterials
andexperttestimonyrelatedtomines,mills,andmineraldevelopmentpolicythroughouthis37-year
career.Hisconsultingclientshaveincludedlocalandinternationalnon-governmentalorganizations,
law firms, industry trade associations, project developers, Native American Tribes in The US, First
NationsBandsinCanada,andgovernmentregulatoryandforeignassistanceagencies.
PaulearnedhisMastersinCommunityandRegionalPlanning(aterminaldegree)withanemphasis
onNaturalResourceManagementfromUniversityofNewMexico(UNM)in1992andaBAfromthe
Technology Assessment Program at Washington University, St. Louis, Missouri in 1974. The
professionalprojectforhisMastersaddressed“PlanningforReclamationoftheUraniumWasteSites
intheFormerEastGermany.”
Paul’s peer reviewed professional papers have been published by; British Columbia Chamber of
Mines, NM Bureau of Mining and Mineral Resources, CO School of Mines, Freiberg Technical
Institute–GermanyandEuropeanUnion–ScienceandTechnologyDirectorate..Paulhascoordinated
three-country - Mongolia, Russia and US – educational and scientific exchanges addressing mine
reclamation,waterandrenewableenergyannuallysince2007.
Paul’stechnicalreviewsofenvironmentalanalysesandmineoperatingplansinMongoliasupportof
civilsocietyorganizationsinvolvementinmulti-lateralbankloanapplicationshaveaddressedtheBig
Bend, Boroo and Gatsuurt gold mines and Oyu Tolgoi copper-gold mine. Paul provided an invited
presentation on “Social and Environmental Responsibility in Mining: International Experience and
Lessons Learned Regarding Accumulated Damage from Abandoned Mines, and Long-term Risks
Associated with Waste Management, and Renewable Energy Use” at Conference on Social and
Environmental Responsibility in the Mineral Industry in Russia” in Moscow in October 2012
available at http://www.wwf.ru/about/what_we_do/mining/conference. With co-author Galina
Anosova,Paulpreparedapeer-reviewpublicationon“MiningandMineralDevelopmentPolicyinthe
SelengeRiverWatershed”forScienceforWatershedConservation:MultidisciplinaryApproachesfor
Natural Resource Management Conference, Convened by United States Geological Survey (USGS),
Institute of General and Experimental Biology, Siberian Division-Russian Academy of Sciences, and
Mongolian
Academy
of
Sciences,
September,
2004,
available
at:
http://www.sric.org/mining/docs/USGS-siberia.pdf.HepreparedtechnicalreviewsaspartofPublic
ExpertizaCommitteereportsinRussiafortheDybycksagoldmine,AginskoeAutonomousOkrugand
theKhiagdauraniummine,BuryatRepublic.
Afullresumeisavailableuponrequest.