Environmental devastation at a protected site in Mongolia

Canadian company Centerra Gold Inc. developed a gold mine in a forested area near the head of a river valley which, under local law, should have been protected from mineral exploration and mining.

Canadian company Centerra Gold Inc.’s  Gatsuurt site in Mongolia, which is being developed as a gold mine, is located in a forested area near the head of a river valley. The Mongolian Water and Forest Law (2009) prohibits mineral exploration and mining operations at river headwaters and in forested areas.

In March 2012, a consortium of Canadian and Mongolian NGOs, supported by RAID, filed a complaint about Centerra Gold Inc. with the Canadian National Contact Point for the OECD Guidelines for National Enterprises, alleging that exploration and mining at Gatsuurt are illegal. This is the only corporate responsibility instrument to have been adopted by all 34 member countries of the OECD, as well as eleven non-OECD countries.

Background

In 2010, the Mongolian Cabinet issued a list of licences that were to be revoked in the light of the Water and Forest Law, including the one at Gatsuurt. By the end of 2010, Centerra had already completed extensive work on the mine and a 55-km haulage road to Gatsuurt, in what local NGOs saw as an attempt to present the Government with a fait accompli. In July 2011, according to the complaint, representatives of Mongolian NGOs gained entry to the site and recorded evidence that mine construction work was continuing. Satellite images confirm that there has been extensive deforestation.

The complaint further alleges that Centerra is seeking to change the environmental law or to seek an exemption that was not anticipated when the law was passed. Both are activities prohibited under the OECD Guidelines. In a Mongolian television interview in June 2010, John Kazakov, CEO of Centerra Gold Mongolia, confirmed that the company was lobbying to change or neutralise the Water and Forest Law.

Herders complain that the forest cutting and use of explosives have released arsenic and other heavy metals into the Gatsuurt River, which is now too contaminated to be safe to drink. Livestock have developed lesions and local people suffer from skin disorders that they attribute to the company’s activities.

Adjudication

The Canadian NCP accepted that the allegations against Centerra Gold were material. However, in a blow to local residents and environmental organisations, the NCP rejected most of the elements of the case in November 2012. The NCP accepted Centerra’s assurance that it had not developed Gatsuurt since late 2010, and ruled that Centerra’s lobbying on the law was within acceptable limits. Moreover, the NCP concluded that it was not possible to prove that the arsenical contamination had been caused by Centerra’s activities.

Remedy

Although the NCP rejected much of the evidence against Centerra, the complaint did allow a number of important issues to be addressed. While the company denied responsibility for contaminating the watercourses, it indicated that if development at the site went ahead it would repair the existing damage as well as any environmental impacts from its future operations. Centerra has also stated that it is ready to enter into partnerships with interested NGOs to put in place a programme of reforestation and environmental protection, with a view to ensuring that the company delivers a net environmental benefit to the country. Finally, Centerra was advised by the NCP to improve dialogue with the local community and gain a deeper understanding of local sensitivities, for example regarding access to holy sites within the Gatsuurt development.

The future

RAID and other NGOs are monitoring developments closely in order to ensure that Centerra abides by these undertakings and recommendations.