Tibet’s mining menace - China Dialogue

Tibet’s mining menace

The Tibetan Plateau holds the key to China’s accelerating demand for heavy metals, say authorities. But this plan is driven by resource nationalism rather than market logic, argues Gabriel Lafitte.

China’s fast growth continues, largely financed by state investment and, until very recently, cheap finance from state-owned banks. Fast growth and massive infrastructure construction require heavy usage of metals, energy and raw materials. Although the two latest Five-Year Plans talk about balancing environmental protection with social needs, as well as the fastest possible growth rate, nothing so far has slowed China’s accelerating consumption of global resources.

Few in China see anything problematic here: China is simply catching up with the rest of the world, and on a per capita basis, its metal consumption is still far behind the richest countries. That may not, however, be true for much longer. Take copper. Not only is China by far the world’s biggest producer of copper, consumption per person is already higher than in Canada, France or Russia and will soon overtake Australia, the European Union and Japan. This is not surprising when one looks at where copper is used: to produce the growing number of cars, household appliances and power cables consumed by the increasingly wealthy Chinese market.

China has also emerged as the world’s second biggest consumer of gold, surpassed only by India, where gold jewellery has long been culturally embedded. With the enthusiasm for gold as an investment as well as for its industrial uses, the World Gold Council confidently expects consumption in China to double within a decade.

But where will the copper and gold come from for all those cars and cables transmitting ultra high voltage electricity across China? Ironically, these heavy metals and the electricity are to come from Tibet.

Both copper and gold are booming and new mines are coming on stream around the world, as prices dipped only briefly during major financial crises, and then rose to even greater heights. This has not been a problem for China’s metals manufacturers, which have ridden the boom. The coastal location of most smelters and their manufacturing customers has helped, giving them ready access to global supplies.

All this is now changing. Global sourcing of raw materials for coastal industries is shifting to domestic sourcing far inland. Manufacturing is moving inwards, encouraged by central policies to soften the extreme inequality between the east coast and the interior. In western China, the new Chongqing-Chengdu industrial hub is fast emerging, preparing itself to export to the world via the Yangtze. It is now as if the coast of China extends 2,000 kilometres inland.

But the Volvo cars made in Chongqing, the Ford cars made in Chengdu, the Hewlett-Packard, Apple iPad and Lenovo computer factories in these two cities, will all need plenty of metals. And the solution, according to central planners, is to tap into sources of copper and gold more remote than China’s current mines in Zambia, Peru, Mongolia, Laos, South Africa and Kazakhstan. The answer to China’s accelerating demand for copper and gold is the Tibetan Plateau.

China has long known of the mineral wealth of the Tibetan Plateau but until now it has been easier and cheaper to buy minerals overseas. Tibet has been too remote, too cold, the air too thin and the infrastructure absent. Small-scale extraction of surface gold from riverbeds has been frequent, and environmentally destructive, with much use of dredges, cyanide and mercury that kill aquatic life and poison streams; but large scale exploitation is new. Publicly, small-scale mining is now banned, but in practice it persists, especially in districts where there are no longer Tibetans on their lands to protect it, having been removed in the name of watershed protection.

Now a new era is under way. The state has paid for the necessary infrastructure of roads, railways, power stations and urban facilities. State geological exploration teams have spent decades mapping known deposits, preparing sites for full-scale extraction. Tibet Autonomous Region (TAR) chairman Pema Choling, reporting on the achievements of 2010, said: “With the focus on opening up to the country’s hinterland region, we have actively merged with the Chengdu-Chongqing economic sphere.”

The biggest copper and gold deposits in Tibet, from west to east, are in Shetongmon, Gyama and Yulong districts, where central planners say there will be many mines, ore crushers, chemical concentrators and smelters. Large-scale industrial mining has arrived. These mines contain silver, lead and zinc as well as copper and gold, although the lead and zinc will go to waste. And all these mines are situated in the watersheds of Asia’s major rivers that support hundreds of millions of people downstream.

Shetongmon mine was the first major project to attract publicity, partly because of its sensitive location so close to the Yarlung Zangbo and Shigatse city, the historic seat of the Panchen Lamas; and partly because it was for some time owned by Canadian investors. By the time the railway to nearby Shigatse is completed in 2014, the mine will be operational.

Its proximity to a major river raises serious environmental concerns, since the steep site will have to securely hold at least 75 out of every 100 tonnes of rock mined and crushed to powder to extract a concentrate that can be sent by rail to a distant smelter. According to recent research by Tibetan scientists, there is already a natural heavy-metal load in the river; any leakage from the hillside dam waste tailings could be disastrous. Not only would downstream India and Bangladesh be affected; if the planned water diversion of Tibetan rivers to the Yellow River includes capturing the Yarlung Zangbo, downstream China’s water purity would be threatened too.

Gyama mine, controlled by Vancouver-based China Gold, is already operational and, located just upstream of Lhasa, poses a threat to the purity of the water in Tibet’s most sacred city. Like most of Tibet, the area is seismically unstable, vulnerable to earthquakes. A study of water quality below the Gyama mine carried out in 2010 revealed that “elevated concentrations of heavy metals in the surface water and streambed at the upper/middle part of the valley pose a considerably high risk to the local environmentand to downstream water users. Environmental changes such as global warming or increased mining activity may increase the mobility of these pools of heavy metals.”

Local Tibetans have protested and sent a petition to Chinese authorities demanding the closure of the mine. The mining operation has reportedly dried up spring waters, poisoned drinking water, killed 1,000 domestic animals and destroyed flora and fauna in the region. Despite this, in August 2011, China Gold announced that it had boosted the resources of the mine by over 400% and will proceed with a major expansion of the project.

The Gyama mine has already operated for many years on a smaller scale, under various owners who lacked capital to invest in sufficient health and safety practices. Of particular concern for human health, especially for the growing brains of the children of Lhasa, is the lead content of the Gyama deposit, which will not be recovered, and so lie forever in waste dumps below the mine.

But this is the first highly profitable project in Tibet, both for the mining company, which will have sales of 45.6 billion yuan (US$7.2 billion) over the mine’s life, and for China’s central government, which will earn 4.9 billion yuan (US$767 million) in revenue from taxes. These figures are based on 2010 copper and gold prices. If mid-2011 prices are used, profit will be a lot higher.

The Gyama deposit contains less than one million tonnes of copper metal, but nearby, also upriver from Lhasa, is Chulong, a much bigger copper deposit (seven million tonnes) and commercially attractive molybdenum metal as well. The recently discovered Chulong deposit is in a mountain chain that drains northwards to the great Ganden monastery and southwards to Samye, location of the first Buddhist monastery built, over 12 centuries ago, and thus deeply venerated. Heavy metals escaping from Chulong to air and water would be an even greater threat to all these places in one of the most densely populated parts of Tibet.

Yulong is one of a cluster of copper and gold deposits in eastern Tibet, in a remote and rugged area between the watersheds of the Yangtze and Mekong rivers. Electricity sufficient to power a smelter will be supplied by hydropower dams that central planners have announced will be built on these great rivers and their major tributaries, causing massive interruptions to wild mountain rivers.

These mines are planned to add hundreds of thousands of tonnes of copper each year to China’s supply, which is both a lot and not very much. For Tibet it is a lot, signifying nothing less than the remote region’s integration into the Chinese industrial economy. It is also a lot for Tibetans who, even after the mines are exhausted and closed, will have to bear the environmental costs, but are not permitted to establish NGOs to give voice to environmental concerns. Nor will Tibetan communities receive royalties from these projects.

Yet these mines will do little to reduce China’s reliance on global sources for raw materials. China’s copper-smelting capacity is just over four million tonnes a year, with a further 600,000 tonnes due to begin production soon. But China’s copper consumption is now seven million tonnes a year. The difference is made up by imports. Even if the new mines meet production targets, despite several recent delays, China’s imports of copper and gold will continue to rise.

Although Chinese state-owned mining companies are now adept at operating and raising capital globally, they are also good at drumming up resource nationalism. The reality is that the Tibetan deposits being turned into mines are hardly world scale. The biggest copper deposits in the world hold over 100 million tonnes of actual copper each; and have the capacity to produce, on average, a 345,000 tonnes of metal a year, and none produce less than 200,000 tonnes. Even the biggest deposit in Tibet, Yulong, is only a small fraction of the size of the largest mined deposits worldwide. It currently produces 10,000 tonnes of copper a year, but according to officials this might reach 100,000 tonnes by 2015. But these deposits are currently the biggest in China, a fact strongly emphasised by their corporate owners, keen to elicit state subsidies.

While patriotic Chinese netizens might presume it is better to source copper from Tibet than Peru or Zambia, China’s mining companies would seldom invest abroad in copper deposits of only a few million tonnes, especially if bigger deposits are on the market. So why are remote Tibetan mines going ahead, if they cannot be justified on market economy grounds? Commercial considerations are only part of the picture.

The mining companies benefit from state financing of railways, power stations and much other infrastructure, as well as receiving finance at concessional rates to corporate borrowers, tax holidays, minimal environmental standards and costs, no royalty payments to local communities and subsidised rail freight rates to get concentrates to smelters or metal to markets. It is these state subsidies that tip the balance towards medium-scale mines in several Tibetan locations, rather than one more big Chinese copper mine overseas.

The Shetongmon mine was originally scheduled to begin production in 2010, but the operational date has been put back to when a rail line connecting via Lhasa to inland Chinese smelters and markets can be completed. The same is true of the Gyama mine, which is on the route of another new rail line from Lhasa to Nyingtri in southern Tibet. And the Yulong mine has been slow to develop beyond a modest scale, while awaiting the completion, at state expense, of hydropower dams and a rail line, still some years away.

A further reason for delay is the difficulty – given the steep terrain draining both the Yangtze and Mekong  of guaranteeing no leakage of toxic metals into rivers. The Qinghai-based Western Mining and Zijin, China’s biggest gold producer, own Yulong mine. In early 2011, Zijin was found guilty of a toxic spill in Fujian province that poisoned fish and polluted the drinking water of tens of thousands of people last year. In March 2011 Xinhua reported that “after a short period of trial operation, the Yulong project was suspended due to environmental issues. It is unclear when the project will be continued.” However, Zijin is too influential a company for the project to be long delayed.

China’s 12th Five-Year Plan says Tibet will become a “non-ferrous metals base” for inland heavy manufacturing concentrated in Chongqing and Chengdu. If this is to happen, it will not be driven by market economy logic, but by a nation-building agenda subsidised by the centre.

Gabriel Lafitte is an environmental policy consultant who has worked with Tibetans for over 30 years.

Homepage image by Preston Rhea