The riches under Mongolia's Turquoise Hill

By Justin Rowlatt
BBC News, Mongolia

image source, Getty Images

Beneath the Gobi desert lie enormous reserves of gold, silver and copper - but exploiting them is proving to be a tricky balancing act for the Mongolian authorities.

I am sure he would blush at the suggestion, but Samand Sanjdorj is quite possibly the most influential Mongolian since Genghis Khan.

Sanj, as he is known, is from a modest background. Like most Mongolians, he grew up in a ger - one of the round felt tents common in Central Asia. He is from a family of nomadic herders from the west of Mongolia, but he did well at school and managed to wangle himself a place on a geophysics course at a university in Russia.

Now you might imagine the work of a geophysicist would be a bit dull, but I challenge you not to be drawn in by Sanj's story.

In the late 1990s, an international mining company sent him deep into the Gobi desert as part of a team investigating what he described as "an interesting extrusion". To you and me, that is a great fist of rock punching out from the dusty desert scrubland.

Sanj and his fellow geologists were by no means the first prospectors there. The local name for this "extrusion" is Oyu Tolgoi, or Turquoise Hill. The green stains that gave it its name are a clue to the minerals within.

But first the Soviet teams and then, more recently, those Western mining companies that examined it, dismissed the deposit as too small to warrant commercial exploitation.

Sanj's work told a very different story. His results, he says, rapidly suggested a very unusual geological formation.

"Every day our data showed the potential ore body was bigger and bigger," he told me.

"I couldn't wait to get up the next day and explore further. We were pretty confident we'd found something important."

They could hardly have imagined how important it would be. What Sanj and his colleagues had discovered is reckoned to be the greatest unexploited reserve of copper, gold and silver on the planet.

A decade and a half later, Sanj is showing me around the vast, blue processing plant that rises up out of the sand where once he and his fellow geologists camped.

The $6bn (£4bn) that the Anglo-Australian mining giant Rio Tinto spent building this place was enough to help power Mongolia to the top of the list of the fastest-growing economies on earth.

The company is predicting that the Oyu Tolgoi mine will generate more than $8bn every year for the next 40 or 50 years. It is an astonishing windfall for a country with fewer than three million people.

And it comes at a time when other forces are also reshaping the nation.

Mongolia has always suffered the occasional extreme winter - they are known as dzuds - but local people say they are becoming more frequent. In recent years they have killed many millions of the double-humped Bactrian camels, yaks, sheep, cashmere goats and cows on which the nation's herders depend.

That has helped drive a great exodus of traditional nomads from the countryside and the growth of the most extraordinary shanty town I have ever seen.

image source, Getty Images

The herders have brought their gers - or tents - to town and have set up home in the hills around the capital.

Over the course of a single decade, a quarter of the entire Mongolian population has given up the lifestyle that has sustained their families for millennia and moved to this sprawling slum.

And, of course, everyone who lives here is well aware of Sanj's great discovery down in the Gobi. Naturally enough, they want a share of it.

And that is where the problem lies.

The first ore - a rather modest mound of black powder - was produced during the couple of days I was there earlier this year. In time it should grow into a mountain, but the Mongolian government wants cash now and it is asking Rio Tinto for hundreds of millions of pounds more than was agreed for this year.

The head of the mining company's operations in Mongolia hinted darkly to me that countries that change the rules like this risk killing the goose before it has laid any golden - or, for that matter, copper - eggs.

"Is that a threat?" I asked.

"Oh, no, no, no," he replied.

Yet the two parties have been locked in "discussions" for over a month now.

Back at the mine in the Gobi, however, Sanj seems unperturbed by the dispute.

image captionSamand Sanjdorj's confidence in the geological formation has paid off

One senses he has been in the business long enough to know that squabbles over how the Mongolian government and Rio Tinto divide the spoils may delay the project but it will not end it.

He knows that a prize this valuable will eventually be exploited.

But that leaves the really big question unanswered. Can the government ensure that every Mongolian benefits from Sanj's extraordinary discovery?

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