Tense Standoff in Protest at Foreign Mine

UNCLAS SECTION 01 OF 03 ULAANBAATAR 000461

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E.O. 12958: N/A
TAGS: PGOV EMIN EINV MG
SUBJECT: Tense Standoff in Protest at Foreign Mine


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1. (SBU) SUMMARY: On June 14, 60-year old male
protester died at the Boroo Gold mining site. Protest
leaders claimed this occurred after Boroo security
guards used a stun gun on him. However, mine officials
stated that the elderly protestor apparently died of a
heart attack while trying to climb a steep mine slope,
a view the National Police said was confirmed by an
autopsy. Leading the protesters at the site was a
Cabinet Minister from a small populist party, who
asserted -- almost certainly falsely -- that he had
government authority to shut the mine down. There
reportedly is now a standoff at the site, with the
Minister bringing additional protesters from
Ulaanbaatar, and Boroo Gold seeking strong government
action to expel what it regards as criminal
trespassers. In late afternoon June 14, the government
was considering what actions to take. The death and
standoff come at a sensitive time for foreign mining
interests. DCM weighed in June 15 with the Ministry of
Foreign Affairs and the Prime Minister's office to seek
assurances regarding the safety of Americans employed
by Boroo and to seek clarification regarding the
Minister's claim he was acting on government authority
(both surmised he was expressing personal views). END
SUMMARY.

One Dead in Protest
--------------


2. (SBU) The incident happened after protesters bused
to the site from Ulaanbaatar breached the mine
perimeter, led by Health Minister L. Gundalai.
The National Police later identified the deceased as 60
year-old, Banzragchiin Batsuuri, a Mongolian citizen.
A Boroo Gold official told the Embassy the man had a
heart attack while trying to climb the steep slope that
led into one of the mine's active pits. While a
newspaper reported that the man collapsed after a stun
gun was used on him, National Police officials
confirmed to the Embassy that there were no stun guns
used nor were there any at the site. Efforts by Boroo
staff and its medical center to revive him were
unsuccessful. Police officials said that autopsy
confirmed that the man died of a heart attack.


3. (U) The Boroo Gold mining site is about 70 miles
northwest of Ulaanbaatar, close to the road to Darkhan.
Boroo, which is almost fully owned by Canada's Centerra
Corporation, began gold production in 2004. The
company expects to mine about 180,000 ounces of gold
per year till 2010. The firm is seeking to extend its
processing life in Mongolia by developing other gold
sites.

One Foot in the Government, One in the Street
--------------


4. (SBU) The protest against Boroo Gold was organized
by the Healthy Society Movement (HSM) together with the
People's Party. Health Minister Gundalai, the head of
the People's Party and its sole MP, was at the site
during the protest. A Boroo Gold official (strictly
protect) told the Embassy that Gundalai had incited the
protesters. Before setting out from Ulaanbaatar,
protest leaders had demanded cancellation of Boroo's
stability agreement with the government covering the
mine, raised questions about the whereabouts of US$50
million it said the company had promised to the
government, and had accused the company of
environmental damage. Gundalai also accused Boroo Gold
of failing to pay the government US$50 million it owed
-- a figure apparently obtained by using the "good
will" figure for Boroo from Centerra's annual corporate
report. Gundalai stated that he would shut the mine
down until this "debt" was paid, and asserted at the
site that he had the authority of the government in
making such a statement. Boroo shut the gold mill down
in an effort to quell passions.

Standoff at the Mine

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5. (SBU) On the afternoon of June 15, Boroo officials
told the Embassy that Gundalai is still at the mine,
where he continues to repeat statements the government
has authorized him to shut the mine down. Additional
protesters and tents have arrived from Ulaanbaatar.
Boroo has contacted a range of official -- Prime
Minister, Police head, aimag (province) officials, and
soum (district) officials -- asking the government to
take a stand against what they consider a criminal
action by Gundalai. According to Boroo, the soum
officials and the police head have indicated that they
are working on a plan to support the mine, which may
include efforts to bring in police. Boroo has put
activated its crisis management plan and is briefing
the media on its view of events. Canadian Commercial
Minister Ken Lewis currently visiting from Beijing has
said he will speak of Canada's concerns to the
government. A Boroo official expressed concern to the
Embassy that, if the government does not respond, then
the situation might get out of control. Police sources
told the Embassy at 1500 that the government was then
meeting in a special session to consider how to
proceed.

Just Beginning, or the Beginning of the End?
--------------


6. (SBU) It may take several days for the impact of
the protest and the death to become clear. Boroo wish
the GOM and State Great Hural (SGH, the parliament) to
take a stand against what they consider a criminal
action by Gundalai. (Note: MPs are protected from
arrest, unless the SGH lifts their immunity.) The soum
officials and the police head have indicated that they
are working on a plan to support the mine, which may
include efforts to bring in police from the soum and
UB. Boroo officials, who are in crisis management
mode, have given interviews to TV 25, Eagle TV, and
four papers. Boroo have told the embassy it is
concerned that, if the GOM does not respond, then the
violence and abuse may get out of control. Boroo has
said it will also point out to officials and media that
Mongolia's international reputation and local economy
will suffer if officials abuse their positions.

Major Issues for the Miners
--------------


7. (SBU) The incident comes at a time when Mongolia's
mining industry was already facing tension and
uncertainty. The SGH this week began to examine
amendments to the Mineral Law, with the notional hope
of passing the bill prior to recessing in early July.
Both foreign and domestic mining firms have urged the
issue be deferred, and spoken against the proposed
amendments, which include the government's right to
take a majority stake in "strategic" mineral deposits
(with no mention of compensation). "Strategic" is
broadly but vaguely defined with ample room for
discretion and interpretation and thus corruption. The
SGH will likely pass a tax reform bill before
recessing, and the mining firms are seeking favorable
provisions, and counseling repeal of the windfall
profits tax on copper and gold enacted only a month
ago. The Embassy has urged the government and MPs to
act carefully and with a view toward transparency and
ensuring a stable, predictable, and satisfactory
business environment for foreign and domestic
investors.

MFA, PM's Office Contacted
--------------


8. DCM weighed in the afternoon of June 15 with
Ministry of Foreign Affairs Director General for the
Americas, Middle East African Affairs Jambaldorg and
Foreign Policy Advisor to the Prime Minister Davaasuren
to seek assurances regarding the safety of Americans
employed by Boroo and to seek clarification regarding
Minister Gundalai's claim that he was acting on
government authority. Both said they would check but
surmised Gundalai was expressing personal views and

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those of his party by not the GOM. In late breaking
news, Canadian Commercial Counselor advised DCM that
the Prime Minister had just ordered Minister Gundalai
back to Ulaanbaatar and a police riot squad has been
sent to the Boroo site to "clear out the protestors."
SLUTZ