FOREIGN MINING COMPANY, ENVIRONMENTAL NGO REPS DISCUSS

UNCLAS SECTION 01 OF 03 ULAANBAATAR 000400

SIPDIS

SENSITIVE
SIPDIS

STATE PASS EPA, EXIMBANK, OPIC, AND PEACE CORPS
STATE FOR EAP/CM AND OES
STATE PASS AID FOR ANE FOR D. WINSTON
MANILA AND LONDON FOR USEDS TO ADB, EBRD

E.O. 12958: N/A
TAGS: PGOV EMIN EINV MG
SUBJECT: FOREIGN MINING COMPANY, ENVIRONMENTAL NGO REPS DISCUSS
"RESPONSIBLE MINING"

SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION.


1. (U) SUMMARY: A June 22 Embassy-organized lunch brought together
environmental and social NGO and mining company representatives
active in Mongolia to discuss issues of transparency and stakeholder
engagement. Participants agreed that responsible mining and
transparency should be encouraged in Mongolia and that a lack of
progress in the implementation and enforcement of environmental laws
is one of the greatest challenges to overcome. END SUMMARY.


2. (U) On June 22, the DCM hosted lunch for representatives of
environmental NGO's and mining companies active in Mongolia to
discuss issues of mutual concern in an informal, non-confrontational
environment. This was the second year that the Embassy has hosted
such an event as part of efforts aimed at supporting continued
dialogue between environmental and mining interests. Attendees
included: Dr. Chimed-Ochir, Mongolian Representative of the World
Wildlife Fund (WWF); Mr. Batbold, Chairman of the Union of Mongolia
Environmental NGOs (UMENGO); Mr. Gansukh, Director of the Community
Conservation and Consulting Network (COCONET); Ms. Sodontogos,
Advisor to the President of Mongolian National Mining Association
(MNMA) and Project Manager of Mine Info Consulting; Mr. Munkhbat,
Legal Advisor to Ivanhoe Mines Mongolia; Mr. Lutaa, Mongolian Chief
of Public Affairs at BHP Billiton; Mr. Bill Infante of The Asia
Foundation; and Mr. Enktuvshin, representative of Phelps Dodge.
Embassy attendees included the DCM, Econ/Coml Chief, EST FSN, and
E/P's Summer Intern (notetaker).


3. (U) To focus the conversation, the topics of discussion were
limited to two of the eight principles outlined in the "Draft
Definition of Responsible Mining," signed at a multi-stakeholder
meeting facilitated by the Asia Foundation in February, those being:
(1) transparency and openness, and (2) ensuring multi-stakeholder
engagement. The discussions demonstrated the existence of common
ground between the mining and environmental concerns on these
issues, and therefore room for continued cooperation.

Transparency: Everyone's Responsibility
--------------


4. (U) A number of participants expressed the view that transparency
should be achieved through capacity-building among the various
actors involved in mining policy, including mining companies, local
environmental activists, civic leaders, and public officials. Ms.
Sodontogos noted that that while mining companies are taking the
issue of transparency seriously, other stakeholders--and
particularly the GOM--should do more to ensure their own
transparency. Mr. Infante cited the need for increased transparency
within the GOM over how it will disperse profits from its own equity
stakes in strategic mines.


5. (U) The DCM noted that it is crucial to all involved in the
mining sector that the government operate transparently, but
wondered how to encourage it as well as mining firms to be more
transparent and to voluntarily share information as well. He
suggested tools such as a Freedom of Information law or increased
vigilance from the press. While Ms. Sondontogos agreed that the
press could play an important role, she worried that journalists
were too young, under-educated, sometimes corrupt and often biased.
Mr. Lutaa summed up the feelings of many at the table, noting that
responsible mining required responsible government and responsible
media. Media need to support, he said, not dilute or distract the
conversation.

Stakeholders Must Work With, Not Against, Each Other
-------------- --------------


6. (U) In attempting to define who qualifies as a stakeholder, and
who has an interest in ensuring the practice of responsible mining,
the participants agreed that there are a wide variety of
stakeholders, and that new ones are constantly being identified,
with varying degrees of interest and activity at different stages of
the process. These include, but are not limited to, the government,

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the people of Mongolia, producers and licensers. The participants
agreed that building broad stakeholder consensus on mining issues
was essential. Ms. Sodontogos stated that responsible mining was a
way to guarantee the social license that would allow mining to take
place in Mongolia.


7. (U) Many at the table expressed frustration at the central
government for preventing other concerned parties, such as local
leaders, from greater involvement in mining policy issues. In spite
of last year's revisions to the mining law to provide local
authorities with a greater role in decision-making, participation of
local authorities remains limited, in part because they often lack
the information necessary to make knowledgeable, timely decisions.
Dr. Chimed-Ochir opined this was because companies were hesitant to
share proprietary information with local officials for fear of
corruption. He cited the opinion of both mining company reps and
local authorities that local residents were not informed enough to
understand the complex questions that were attached to mining. Ms.
Sodontogos said this lack of understanding had been exploited by
nationalists with an anti-mining agenda while simultaneously
enabling corruption to exist. She suggested a public awareness
campaign. The DCM said that he hoped such organizations such as the
World Bank or the European Bank for Reconstruction and Development
could offer assistance in this area, as both have extensive
experience and are not viewed as having vested interests.


8. (U) Mr. Munkhbat noted that Ivanhoe's relations with the local
government were excellent, standing in stark contrast to their
generally poor relationship with the central government. Ivanhoe
had worked hard to cultivate good relations locally by building
schools and medical clinics and donating money to rebuild a local
monastery. Mr. Lutaa said that while larger companies had come to
realize the importance of interacting with local communities,
exercising social responsibility and developing best practices,
smaller companies with fewer resources were at a disadvantage.


9. (U) While Mr. Infante expressed his view that radical
environmental groups overlooked the positive benefits of mining, all
participants appeared to agree that implementation of environmental
laws was weak or nonexistent, which generates suspicion against the
government and against mining companies. Mr.Munkhbat said he had
noticed more government efforts to crack down on violations. The
DCM noted there was a tendency to unfairly tar compliant
multinational firms adhering to Mongolian as well as their own tough
environmental standards with the environmental degradation caused
by artisanal and small scale mining operations (largely
Mongolian-owned).

Which Way Forward?
--------------


10. (U) All sides appeared to concur on the need for responsible
mining, but the question is how. Participants agreed that all
stakeholders must work with, rather than against, each other and
that each side must act responsibly. Mining companies must endeavor
to prevent polluting local water resources and acting in ways that
could be seen as reckless by local communities. Ms. Sodontogos
stressed that mining companies were not against the environment, but
could come off as such as they chase after profits.


11. (U) Mr. Infante believed that citizen groups needed to plan
better, working with elected officials to make clear their
expectations of mining companies. He noted, however, that the
expense of such planning made it difficult to achieve. Ms.
Sodontogos offered the Center for Responsible Mining as a good
example of an NGO working to educate the general public on mining
issues. Mr. Infante thought the World Bank could play a role, but
that any mechanism ultimately created to bring stakeholders together
must represent the broad spectrum of stakeholder interests.


12. (SBU) COMMENT: Last year's luncheon put many of the same
players together but the atmosphere then was one of considerable
wariness and distrust. Efforts over the year to put stakeholders

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together have generally helped reduce anxieties and tensions, though
there are still some ruffled feathers in the mining community (Boroo
Gold declined to participate this year, for example, over a tiff
with TAF). "Mineral populism" has subsided somewhat over the past
year and there is a growing but tentative and uneven popular
sentiment that after years of stymied or stalled negotiations and
reams of print about Mongolia's rich natural resources, it's time to
"get on with it" and develop the resources and gain benefits from
them. Finding common ground among potential adversaries and building
trust is pivotal to this process; more so now that Peabody Energy is
actively considering investing and has gained USDOC/USG-approved
advocacy. END COMMENT.

MINTON